Beware of “Commercial ACOs”

Posted by on Monday, Feb 28, 2011

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 HMO in Your Future

By John Goodman
National Center for Policy Analysis, John Goodman’s Health Policy Blog
February 28, 2011

(Brief excerpts only)

… you are likely to be in an ACO (accountable care organization) at some point in the future and it’s probably going to happen sooner than you think.

ACOs are sometimes said to be the brain child of Elliott Fisher, who heads the Dartmouth Atlas Project. But as Uwe Reinhardt pointed out the other day, the idea is actually an old idea. It’s called Kaiser Permanente.

… the non-evidence based approach of the Obama administration will force everybody into the same model.

So how do we explain the administration’s commitment to ACOs? Whether they raise or lower costs, whether they raise or lower quality, there is one thing that ACOs will indisputably accomplish. They will drive doctors into organizations where their behavior can be controlled. For the first time in our history, both the practice of medicine and the way money is spent on medical care will fall under federal control.

ACOs are the portal through which we will all march toward a truly nationalized health care system.

Use this link to access John Goodman’s full blog entry:
http://healthblog.ncpa.org/the-hmo-in-your-future/

Will accountable care organizations (ACOs) provide the portal that will lead us to a nationalized health care system?

There is a sharp contrast between ACOs as defined under the Medicare Shared Savings Program in the Affordable Care Act (ACA) and the commercial ACOs that already exist or are being formed throughout the nation.

Commercial ACOs are primarily an extension of private sector managed care models of health care financing and delivery, except with the hope of less regulatory oversight of the market concentration that they hope to gain. These organizations are largely entrepreneurial in nature (even if non-profit) with the primary goal of making money. Since virtually all stakeholders are driven by profits, these will be the predominant models of ACOs.

The government version of Medicare shared savings ACOs is merely a model to discount Medicare services and then split the savings between the providers and the government (i.e., half of a discount). Who in their right mind would want to corner that market? The government version will be a dud.

It is not the federal government through the Affordable Car Act that is going to bring us ACOs. It is the private sector. This is hardly a portal to nationalized health care, but it is a reincarnation – on steroids – of the models from the age of managed care that caused us so much distress in the fairly recent past. Any hope of cost containment will vanish as these organizations drive prices ever higher.

Our only hope to slow our outrageous health care cost escalation is to do what all other industrialized nations have done. We need to establish some form of a public monopsony through the application of a universal social insurance program. A publicly-financed and publicly-administered single payer system would be the most efficient and most equitable model.

Comment originally posted at John Goodman’s Health Policy Blog: http://healthblog.ncpa.org/the-hmo-in-your-future/comment-page-1/#comment-86801

Sec. Sebelius promotes consumer-directed health plans

Posted by on Friday, Feb 25, 2011

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.

Letter from Secretary Kathleen Sebelius replying to Republican governors

U.S. Department of Health and Human Services
February 24, 2011

As a former governor, I can appreciate your interest in having flexibility to establish an exchange that meets the unique needs of your state and its residents.

Your letter identified four areas for greater state flexibility. Specifically, you called for the ability to (1) exercise maximum flexibility to operate exchanges, and in particular to select the insurers that will participate in the exchange, (2) give states authority to determine essential health benefits that participating plans must offer, (3) waive provisions that might inhibit the availability of consumer-driven plans and health savings accounts (HSAs), and (4) enroll Medicaid beneficiaries into private plans without HHS approval. In each of these areas, the Affordable Care Act offers better opportunities than the current marketplace and gives governors and legislatures broad flexibility to capitalize on those opportunities in reshaping state marketplaces for the 21st century.

*  Selection of Qualified Plans in the Exchanges. In a majority of states today, a small number of health insurance issuers dominate the market, sometimes offering only a single plan or product. In implementing their exchanges, states have the option to allow all insurers to participate in the exchanges (the Utah model), or they can be more active purchasers in shaping available choices (the Massachusetts model). Either way, the exchanges will stimulate broader competition, and consumers will end up with more and better choices.

*  Essential Health Benefits. In today’s market, many individuals and families have limited health insurance options available to them. The number and quality of options typically depend on applicants’ age and health status, and employees of small businesses often have only a single choice. Exchanges will expand consumer choice and give consumers the information they need to comparison shop among their expanded choices. All plans in the individual and small group markets – inside or outside of the exchanges – will provide essential health benefits, which, by law, will be modeled after what a typical employer currently provides today in the private sector. But the law and how states implement it allow a diversity of plan types and benefit designs in exchanges, and states continue to have the option to require coverage of specific, additional benefits.

*  Consumer-Driven Plans. Low-cost, high-deductible plans, including those coupled with HSAs, are growing in popularity. The cost sharing limits required by the essential health benefits package mirror the current out-of-pocket maximum for HSAs under the Internal Revenue Code. Exchanges will offer new choices for consumers because health insurance issuers may offer a variety of plans with broad parameters; consumers who are willing to accept higher cost-sharing in exchange for lower premiums may purchase different levels of coverage. The “bronze” plans and catastrophic coverage for young adults will provide opportunities for expanding enrollment in consumer-driven plans coupled with HSAs. At the same time, exchanges will also improve consumer awareness of options by making it easier to compare plans.

*  Medicaid Flexibility. The Affordable Care Act expands and simplifies Medicaid coverage and provides states with more opportunities to align Medicaid with private health insurance. More specifically, the law permits states to restructure Medicaid coverage to look more like typical private employer coverage, as Medicaid managed care organizations and commercial insurers move into each other’s markets and create new opportunities to enhance continuity of care across Medicaid and commercial populations.

http://www.kaiserhealthnews.org/Stories/2011/February/25/~/media/Files/2011/HHS%20Gov%20Letter%20Feb%2024.pdf?wpisrc=nl_wonk

And…

NOTE TO: Medicare Advantage Organizations, Prescription Drug Plan Sponsors, and Other Interested Parties

Centers for Medicare and Medicaid Services
February 18, 2011

Section H. End of Medicare Advantage Medical Savings Account (MSA) Plan Demonstration Program

In a July 13, 2006, Federal Register Notice (CMS-4123-N) we announced the availability of an opportunity to participate in an MA MSA demonstration project. In the Federal Register notice we said that waivers provided under our demonstration authority would allow interested entities to offer products that more closely resemble high deductible health plans that are offered in conjunction with health savings accounts to the non-Medicare population. We initially established a deadline of July 21, 2006, for applicants that wanted to participate in the MA MSA demonstration program for 2007. We also asked applicants that wanted to participate in the program in 2008 to submit a notice of intent to us as soon as possible.

Overall we had one applicant that participated in the MSA demonstration program in calendar year 2007. There has been no activity under this demonstration program since then. We are not seeking extension of this demonstration program and will not accept applications for participation in this program for plan years 2012 and thereafter.

http://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/Advance2012.pdf

And…

Nearly Half Of Families In High-Deductible Health Plans Whose Members Have Chronic Conditions Face Substantial Financial Burden

By Alison A. Galbraith1, Dennis Ross-Degnan, Stephen B. Soumerai, Meredith B. Rosenthal, Charlene Gay and Tracy A. Lieu
Health Affairs
February 2011

High-deductible health plans — typically with deductibles of at least $1,000 per individual and $2,000 per family — require greater enrollee cost sharing than traditional plans. But they also may provide more affordable premiums and may be the lowest-cost, or only, coverage option for many families with members who are chronically ill. We surveyed families with chronic conditions in high-deductible plans and families in traditional plans to compare health care–related financial burden — such as experiencing difficulty paying medical or basic bills or having to set up payment plans. Almost half (48 percent) of the families with chronic conditions in high-deductible plans reported health care–related financial burden, compared to 21 percent of families in traditional plans.

http://content.healthaffairs.org/content/30/2/322.abstract

To appease the Republican governors, HHS Secretary Kathleen Sebelius has attempted to reassure them that they will have considerable flexibility in qualifying insurance plans for the exchanges, in defining optional benefits for the plans, and in privatizing Medicaid. Perhaps the most alarming flexibility being granted to the governors is the ability to offer consumer-driven plans within the exchanges. Why is that a problem?

In her letter, Kathleen Sebelius offers up the bronze plans in the exchanges and the catastrophic plans for young adults as providing opportunities for expanding enrollment in consumer-driven plans. The bronze plans have an actuarial value of only 60 percent, meaning that an average of 40 percent of health care costs must be paid out of pocket. (The inadequate subsidies for silver plans is another topic not addressed here.) The way that both bronze plans and catastrophic plans achieve lower premiums is by requiring very high deductibles. That is a serious problem.

The current issue of Health Affairs has yet one more article adding to the great body of policy studies on high-deductible plans showing, once again, why they are an inappropriate method of financing health care. This study demonstrates that half of families with chronic conditions in high-deductible plans report health care related financial burdens.

The fact that these plans can be offered with a health savings account (HSA) does not improve the individual’s financial security since these funds still must come from the individual who either funds the HSA to draw on later, or draws the funds from other savings, or, more likely, simply doesn’t have the funds when needed to pay the deductible. An unfunded or depleted HSA is of no value.

Although Republicans have been supportive of the consumer-directed approach of high-deductible plans with HSAs, there is almost unbelievable irony when we look at another favorite of theirs – the privatized Medicare Advantage plans that replace traditional Medicare coverage. Under the Bush administration a Medicare Advantage Medical Savings Account demonstration project was established, duplicating this consumer-directed approach within the Medicare program. Last week HHS announced that this program was being terminated because of a lack of activity. Obviously consumer-directed does not equate with consumer-demanded.

High-deductible plans are under-insurance products that create financial hardships for people who develop health care needs. It is disappointing that Secretary Sebelius is presenting them as an “opportunity.” They’re an opportunity to lose your shirt if you get sick.

We could have done so much better… and still can.

Solving health care riddle

Posted by on Friday, Feb 25, 2011

Originally published in the Berkshire Eagle.

Let me pose two riddles I will answer at the end of this column. Which health care reform program for Massachusetts won a non-binding referendum last November? Which health care reform legislation is co-sponsored by all five Berkshire County legislators?

We are now at the time of year when businesses, towns and families are faced with sticker shock as they pay their health insurance premiums for 2011. Town employees find they will have to pay a larger percentage of their health insurance as municipalities deal with escalating costs and limited budgets. There is a push for towns to join the GIC (the Group Insurance Commission) to attempt to reduce town expenses by limiting the choice of private insurance policies and increasing out-of pocket costs for employees.

Businesses are also being forced to require increased cost sharing from their employees. Individuals have to buy insurance plans that cover less even as they cost more, for high deductible plans with larger co-payments for both medical services and prescription drugs.

But there is a solution to these runaway costs: a single-payer health insurance program. In Massachusetts, single-payer legislation, the “Medicare for All Massachusetts Bill,” has been filed for 2011. This legislation guarantees first class, comprehensive coverage for every Massachusetts resident, while reducing costs to the state, towns, businesses and individuals.

Under this legislation, residents of Massachusetts would have a health insurance card to present whenever they received medical care, dental care or prescription drugs. They would pay nothing out-of-pocket, and receive no medical bills.

Businesses would pay a stable payroll tax of 7.5-8 percent instead of rising premiums. Towns would pay the same payroll tax for their employees. Middle and low-income employees would pay a 2.5 percent payroll tax, and take home 7.3-15 percent more income than with their current health insurance program.

In addition to saving money for businesses, towns and families, a single-payer health care program would save money for the state, money needed for other services like education, police and fire protection. Insurance companies, with their high profits and administrative costs, would be supplanted by a “single-payer” that would administer the health care money at a much lower cost than the many private insurance companies. By eliminating the insurance middlemen who provide no health care services, Massachusetts would save $9.7 billion per year. Administrative costs would also decrease for doctors and hospitals with a single-payer program.

The covered benefits would include:

* Prevention, diagnosis and treatment of medical injury and illness, both inpatient and outpatient, laboratory and radiology services, mental health care, dental care, acupuncture, physical therapy, and chiropractic and podiatric services.

* Rehabilitation treatment

* Prenatal and maternity services.

* Home health care.

* Long term care.

* Hospice care.

* Medical transportation.

* Vision and hearing treatment.

* Medical equipment.

* Prescription drugs.

There would be no deductibles, co-payments or co-insurance. Patients would have free choice of health care providers. And an added benefit would be the long term care insurance, especially important for baby boomers now coming of an age where they may need that benefit.

The current Massachusetts health care bill has not been able to control costs, nor do private health insurance policies provide adequate coverage for health care. People want health care reform that works.

So here are the answers to the riddles.

Fourteen districts in Massachusetts voted in favor of a non-binding referendum for a single payer health program in the November election.

All five state legislators in the Berkshires have signed on to co-sponsor the Medicare for All Massachusetts Bill. We praise their leadership, vision, commitment and caring: Senator Benjamin Downing and Representatives Gail Cariddi, Paul Mark, “Smitty” Pignatelli and Chris Speranzo. Our Berkshire delegation is leading the way: no other county in Massachusetts has the support of all their legislators for single-payer health care.

It is time for everyone who supports the Medicare for All Massachusetts Bill to become even more active for the establishment of a state health insurance program that works for everyone, at a cost that is affordable for the state, towns, businesses and families.

Call or write our governor. In his heart, he may be a secret single-payer supporter.

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

Personal data breaches for 4.9 million patients

Posted by on Thursday, Feb 24, 2011

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.

Massachusetts General Hospital settles potential HIPAA violations

U.S. Department of Health and Human Services
February 24, 2011

The General Hospital Corporation and Massachusetts General Physicians Organization Inc. (Mass General) has agreed to pay the U.S. government $1,000,000 to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule, the U.S. Department of Health and Human Services (HHS) announced today.

http://www.hhs.gov/news/press/2011pres/02/20110224b.html

And…

Report details health care reform theft

By Susan R. Miller
South Florida Business Journal
February 23, 2011

As the nation moves toward growing use of electronic medical records, data vulnerability becomes increasingly evident.

A new report released on Wednesday by Kaufman, Rossin & Co., showed 4.9 million patients had their personal health information compromised as a result of 166 data breaches that occurred during the first year of the Health Information Technology for Economic and Clinical Health (HITECH) Act.

All of the breaches occurred between Sept. 21, 2009 and Sept. 21 2010, the first year when breach incidents were publicly reported to the Secretary of the Department of Health and Human Services.

http://www.bizjournals.com/southflorida/news/2011/02/23/report-details-health-care-reform-theft.html

And…

athenahealth

An increasing majority of physicians finds that EHRs slow them down during the exam.

Sixty percent of physicians agree with the statement that the EMR/EHR “slows down the doctor during patient exams.”

http://www.athenahealth.com/index.php?open=26

Although Congress gave up on trying to provide health insurance coverage for everyone, they did try to deliver on the promises of higher quality, fewer errors, greater efficiency, increased security of patient health information, and lower costs through measures designed to expand the use of IT (information technology), especially through EMRs (electronic medical records). Are these promises being fulfilled?

Before delivering on the other promises, a health IT system must first, above all, ensure confidentiality of patient information. Today the Department of Health and Human Services released a report confirming that perhaps the most prestigious medical institution in the nation – Massachusetts General Hospital – is being fined $1,000,000 for violation of patient privacy rules. The documents were left on a subway train. Though this was not directly an IT breach, read on.

Yesterday a report was released by Kaufman, Rossin & Co., an accounting firm, that showed that, in the last year alone, almost five million patients had their personal health information compromised due to various other unrelated data breaches.

In this age of cloud computing, personal electronic data can easily be transmitted into cyberspace for all the world to see forever. Sure, the various vendors and stewards of the systems can show you their great security safeguards so there is no need to be concerned. Then how in the… did these 4.9 million patients have their personal health information compromised?

And the other IT promises? We covered this in a qotd last month (Jan. 21) in reviewing an article from PLoS Medicine. Quoting from that article:

“Our systematic review of systematic reviews on the impact of eHealth has demonstrated that many of the clinical claims made about the most commonly deployed eHealth technologies cannot be substantiated by the empirical evidence. Overall, the evidence base in support of these technologies is weak and inconsistent, which highlights the need for more considered claims, particularly in relation to the patient-level benefits, associated with these technologies. Also of note is that we found virtually no evidence in support of the cost-effectiveness claims.”

The highly touted accountable care organizations (ACOs) called for in the Patient Protection and Affordable Care Act are a variety of ill-defined health delivery organizations having only one thing in common: an integrated IT system using EMRs. Not only are these systems expensive and vulnerable to security breaches, the report from athenahealth shows that EMRs also slow down patient care. Why are we placing all our bets on ACOs?

This has all been a distraction that has diverted us from doing what we really need to do – establish affordability and universality through an improved Medicare that covers everyone. Can’t we get on with that task now?

Massachusetts’ Medicaid director comments on single payer

Posted by on Wednesday, Feb 23, 2011

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.

Medicaid chief: Single payer may be better than ‘devil-may-be’ market

By Kyle Cheney
Boston Herald
February 20, 2011

A senior Patrick administration health care official said Friday that a single payer system may work more effectively and efficiently than Massachusetts’s existing insurance market, a high-profile endorsement that raised eyebrows at a legislative hearing.

“I like the market, but the more and more I stay in it, the more and more I think that maybe a single payer would be better,” said Terry Dougherty, director of MassHealth – the state-run Medicaid plan that insures nearly 1.3 million Massachusetts residents – when lawmakers asked for his “personal view” on a single payer system.

Dougherty noted that MassHealth, by far the largest program in state government, spends just 1.5 percent of its $10-billion-a-year budget on administrative costs – compared to about 9.5 percent by the private market, according to studies by the state Division of Health Care Finance and Policy. That figure won plaudits from several lawmakers on the panel, including some who have supported implementing a statewide single payer system.

After his remarks, Dougherty told the News Service that he’s learned to appreciate “elements of single payer” during his 30 years in health care.

“It’s got to be better than this devil-may-be marketplace,” he said. “We don’t build big buildings. We don’t have high salaries. We don’t have a lot of marketing, which makes, to some extent, some of the things that we do easier and less costly than some things that happen in the marketplace. Overall, my point is, we have individuals who work in state government in MassHealth … who are just as smart, just as tactile, just as creative as people who work in the private sector, but they work for a lot less money.”

http://news.bostonherald.com/news/politics/view/20110220medicaid_chief_single_payer_may_be_better_than_devil-may-be_market/

It is no surprise that so many individuals are suggesting that we may be heading toward a single payer system. It is becoming more obvious that the federal reform effort and the Massachusetts plan on which it was based have proven to be the most expensive model of reform while falling short on the goals of universality, efficiency and equity, as was predicted by those of us at PNHP and others. But these words from Terry Dougherty, director of the Medicaid program for Massachusetts, are of paramount significance since he has first hand experience with one of the cornerstones of reform – expansion of the Medicaid program.

When someone who really knows what we’re actually doing within this expensive, dysfunctional model of reform says that single payer has “got to be better,” we should listen. Listen, and then act.

Legislative committees approve copays for Medi-Cal

Posted by on Tuesday, Feb 22, 2011

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.

Calif. Assembly, Senate Budget Committees Pass Spending Plans

California Healthline
February 22, 2011

On Friday, California’s Assembly Committee on Budget and Senate Budget and Fiscal Review Committee passed nearly identical state budget plans.

Changes to Medi-Cal

Both budget committees approved a plan to establish mandatory copayments for Medi-Cal beneficiaries, which would reduce state spending by about $584 million, according to a Senate analysis.

The plan calls for copays of:
$3 and $5 for some prescription drugs;
$5 for physician and dentist visits;
$50 for emergency department visits; and
A maximum of $200 for hospital stays.

The plan also calls for the state to reduce Medi-Cal payments to health care providers by the amount of the copays.

Health care providers have expressed concern that they will face higher costs if Medi-Cal beneficiaries are unable to afford the higher copays.

http://www.sacbee.com/2011/02/20/3416369/browns-countdown-day-42-medi-cal.html

Although California has been at the bottom of the states in Medicaid payment rates, the state legislative committees recently passed another 10 percent cut in those rates. Now they have also approved legislation to reduce rates further by the amount of these copayments, amounts that will surely be absorbed by the providers since the Medicaid population lives in poverty or near-poverty and will not be able to pay these copayments. That’s understandable when you consider that the federal poverty level for 2011 is an annual income of $10,890 for an individual.

Yet the Patient Protection and Affordable Care Act will greatly expand the Medicaid population. The losses faced in the Medi-Cal program cannot be made up by an increase in volume. The additional load displaces privately insured patients, and the losses to the providers increase. The physicians who refuse to see Medi-Cal patients thrive, whereas those overloaded with Medi-Cal patients are threatened with insolvency. Let me emphasize that, based on my own personal experience, this is no exaggeration.

As a welfare program representing a population without an adequate political voice, Medicaid will always be underfunded. Simple common decency dictates that we should eliminate this program and replace it and the rest of the dysfunctional financing system with an improved Medicare for all program that serves everyone well.

Krauthammer backs into single payer

Posted by on Monday, Feb 21, 2011

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.

Krauthammer on health care, trains, Mideast

By Susan Taylor Martin
St. Petersburg Times
February 20, 2011

Susan Martin: Besides being a commentator, you are a medical doctor who criticized health care reform as a “2,000-page bill that will generate tens of thousands of pages of regulations.” Isn’t that a great argument for the simplicity of Canadian-style universal health care?

Charles Krauthammer: It is. But it seems to me there are two choices. We have the best medical care in world but it is the most expensive and we waste a lot. What you need to do is reduce the complexity and inefficiency. If we can’t get it right, we’re eventually going to a single-payer system. At least it doesn’t have this incredible, absurd complexity of ObamaCare. It’s the worst of the worst. It has the complexity of our (present) system and doesn’t give the universal coverage of single payer.

http://www.tampabay.com/news/perspective/article1152425.ece

Charles Krauthammer may be a conservative columnist, but he is very bright, having been awarded a Pulitzer Prize, and, as a Harvard-trained physician, he can speak knowledgeably about our health care system. His conclusions? Our health care system is the most expensive and wastes a lot due to its complexity and inefficiency, while Obamacare has brought us this incredible, absurd, worst-of-the-worst complexity which would not only be reduced by single payer, but single payer would also provide us with universal coverage.

We hear it over and over again from informed individuals: Since costs are out of control and too many individuals will remain uninsured or under-insured, a single payer system may be inevitable. But there has been a shift. We used to hear this from informed liberals, but now we hear it primarily from informed conservatives (with a few notable exceptions such as Bernie Sanders).

It’s not that we don’t understand the efficiency and effectiveness of single payer; we clearly do. The opposition has been primarily from those who, on an ideological basis, oppose any role of government in health care, other than as a safety net for the indigent. But even their icon of liberty, Friedrich Hayek, stated in his classic, The Road to Serfdom, “Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

The logic for single payer is there, and there is no longer any reason to perpetuate the ideological divide. The conservatives need to revisit Friedrich Hayek, and the liberals need to review again the tenets of social justice, perhaps beginning with Article 25 of The Universal Declaration of Human Rights. Once we get our respective camps in order, we should find that we have a common meeting ground.

“The Road to Serfdom” by F.A. Hayek:
http://www.press.uchicago.edu/ucp/books/book/chicago/R/bo4138549.html

“The Universal Declaration of Human Rights”
http://www.un.org/en/documents/udhr/index.shtml

Medical malpractice insurance loss ratios

Posted by on Friday, Feb 18, 2011

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.

Calif. insurance commissioner seeks lower medical malpractice rates

By Kathy Robertson
Sacramento Business Journal
February 17, 2011

California Insurance Commissioner Dave Jones, already at loggerheads with health plans over high rates and excessive rate increases, is turning his attention to medical malpractice companies.

Jones expressed concerns about high medical malpractice rates Thursday and said he’s asked companies that do business in California to reduce them.

The Doctors Company, the largest medical malpractice insurer in California, had a 10.1 percent loss ration for 2009, according to department figures posted on its website.

That means for every $1 of premiums collected, 10-cents was paid out in claims.

Norcal Mutual Insurance Co, the second-largest medical malpractice insurer in California, had a loss ratio of 29.72 percent in 2009, and the Medical Insurance Exchange of California, No. 3 in the state, had a loss ratio of 25.34 percent.The nonprofit Consumer Watchdog applauded Jones’ call for rate reductions.

The group pointed to data from the National Association of Insurance Commissioners that shows for every $1,000 in premiums paid in 2009 in California, $222 went to pay claims of injured patients, $243 to pay insurance company adjusters and defense lawyers and more than $280 to profit, not including additional investment income earned or taxes paid.

http://www.bizjournals.com/sacramento/news/2011/02/17/jones-seeks-lower-malpractice-rates.html

National Association of Insurance Commissioners – Countrywide Summary of Medical Malpractice Insurance (37 pages):
http://www.naic.org/documents/research_stats_medical_malpractice.pdf

And…

Medical-liability bill approved by House committee

By Jessica Zigmond
ModernHealthcare.com
February 17, 2011

Members of the House Judiciary Committee on Wednesday voted 18-15 to approve the medical liability reform bill that physician Phil Gingrey (R-Ga.) introduced late last month.

Ultimately, the law would limit non-economic damages to $250,000 and makes each party liable only for the amount of damages that is directly proportional to that party’s percentage of responsibility.

http://www.modernhealthcare.com/article/20110217/NEWS/302179959/

California has a combined medical malpractice loss ratio of 22 percent. That is, of the very expensive malpractice insurance premiums being paid, 78 percent does not end up compensating those experiencing medical injuries but is diverted to the insurers and defense lawyers. This is yet one more of a multitude of reasons why our tort system is serving these injured individuals so poorly.

Reforming the system has continued to be an elusive goal. The Republicans have now cleared a malpractice reform bill through the House Judiciary Committee. The legislation is similar to that passed many years ago in California, yet obviously the California approach is not working well.

We do need malpractice reform, but not because it will save money; it won’t. We need to replace the system with a non-adversarial dispute resolution process designed to provide compensation for medical injury. Since most individuals suffering medical injury currently do not sue, the probability is that expanding compensation for which patients are entitled will cost more than any savings recovered by a reduction in defensive medicine.

There is some question as to how much defensive medicine could be eliminated anyway since, presumably, tests to prevent lawsuits are tests that could identify an important problem that would otherwise be missed. Just because a test has a low yield doesn’t mean that it shouldn’t be done.

We need to strengthen the relationships between patients and their health care professionals. They need to work together as a team, even when inevitable cases of medical injury occur. That is why we need malpractice reform that, above all, places the interests of patients first.

Tax day surprise for some exchange participants

Posted by on Thursday, Feb 17, 2011

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 Slippery Slope To Defunding The Health Law

By Timothy Jost
Kaiser Health News
February 15, 2011

A key provision of the health law that will provide 19 million consumers with tax credits to help afford their health insurance has been raided once. Now, Republicans are planning to raid it again.

Here’s the background: In late December Congress was looking for money to help pay for a plan to stop dramatic scheduled cuts in doctors’ Medicare reimbursements. As a temporary fix, the lame duck Congress changed a part of the new health law so that some consumers will have to pay back a hefty chunk of their tax credits. That change is expected to save the government $16 billion over 10 years.

Now Congress is again looking for money – this time to offset the funds lost with the repeal an unpopular health law provision that involves 1099 tax reporting requirements. Republicans are proposing another increase in the liability of tax credit recipients to raise the necessary revenue.

To understand why the proposal is worrisome, it is necessary to understand the function of the new tax credits. They are designed to help finance insurance premiums beginning in 2014, and are, perhaps, the most important provision in the new law for making health care affordable to middle-class Americans. They will be available on a sliding scale to families with incomes up to 400 percent of the federal poverty level. This is $88,200 for a family of four, but most of the money will go to families with far less income.

Here’s how they work. The amount of the tax credit for which people are eligible is based on annual income for the year the credits are received. But, because people will likely need help paying their insurance premiums during that tax year, the law provides for advance payments of the credits. These payments are made directly to the insurer on a monthly basis. The insurance exchanges, through which individuals will purchase health coverage, will determine eligibility for tax credits based on a taxpayer’s prior year tax return. (Taxpayers can provide more recent information if their income or family circumstances have changed.) At the time taxpayers file their annual tax return, the advance payments will be reconciled against the tax credit for which the taxpayers are eligible using their annual income reported on their return. If the advance payments are greater than the final tax credit, the taxpayer will get a bill from the Internal Revenue Service.

Excess advance payments can happen easily and will happen often. The income of hourly-wage lower and middle-income Americans often fluctuates from week to week and is difficult to predict. Dependents may leave or return home. Family members may become eligible for Medicaid or CHIP. Taxpayers may be eligible for a premium tax credit in the early months of the year while unemployed but then get a job with coverage and no longer need premium assistance. Or they may lose a job part way through the year and face dramatically reduced income, even though their full year reported income remains high.

All these changes will affect the subsidy calculation. It will be difficult for the exchanges to keep up with changes in family circumstances and for families to know what changes they should report and to whom. It is inevitable that there will be some inconsistency between advance payments based on estimated income for the year and the final credit determined at tax time.

Originally, when the health overhaul was signed into law, the amount the government could recover was capped at $400 for families with incomes below 400 percent of poverty. The amendment adopted in December increases the amount families will owe on a sliding-scale basis. Under the December amendment families with incomes at 200 percent of poverty will have to pay back as much as $1,000; families with incomes at 400 percent will have to pay back up to up to $2,500. It also, however, puts some limits on overpayments for families up to 500 percent of poverty.

The “1099 fix” legislation, which is likely to be considered this week by the House Ways and Means Committee, would require families at 200 percent of poverty to pay $1,500, and families earning a dollar more than 400 percent of poverty to pay back their entire tax credit.

It is important to understand what is at stake here.

Fear of potential end-of-year liability could be a substantial deterrent to participation in the advance premium tax credit program. It was estimated that the December amendment increased the likely number of uninsured after 2014 by about 200,000 people, who would rather be uninsured than face substantial repayments. Millions more consumers will face unanticipated financial burdens. This is likely to create a powerful backlash, as Americans who thought they were receiving a tax credit to help them purchase insurance find out it was in fact only a loan, and that they owe the IRS a substantial debt.

http://www.kaiserhealthnews.org/columns/2011/February/021511jost.aspx

Update:  Today (Feb. 17) the House Ways and Means Committee approved the 1099 repeal bill, including the requirement for “consumers earning more than 400 percent of the poverty line to pay back the subsidy.”

http://thehill.com/blogs/healthwatch/health-reform-implementation/144847-1099-repeal-gets-trickier-with-house-bill

In choosing to base reform on private insurance plans, our policy makers introduced an administrative complexity that that would have been totally unnecessary had they selected instead a universal risk pool funded equitably through taxes. The private insurance model requires that a specific premium be assigned to each individual or family, even though those premiums are no longer affordable for the majority of us. Thus they had to devise a very complex system of subsidies to lessen the financial burden of premiums (though still unaffordable for many even with the subsidies).

These subsidies, of course, are based on the current year’s income, but the advance payments made directly to the insurers are based on the previous year’s income. Because income levels change frequently for many individuals and families, many will be receiving incorrect subsidies. The Internal Revenue Service determines the corrected subsidies, based on actual income, when the tax return is filed the following year.

If income increases, it is likely that excessive premium subsidies will have been credited since the payment to the insurers is semi-automatic. Under the Affordable Care Act (ACA) as originally enacted, once the tax return is filed, the individual or couple is billed for overpayments of the subsidies, up to a maximum of $250 for an individual or $400 for a family. Since this is an additional tax bill added to full income taxes already being paid, it was felt that amounts above these limits would be a hardship for most individuals and families.

That has changed. The newly enacted “doc fix” (postponing scheduled sharp reductions in physicians’ reimbursements for Medicare) was paid for partly by raising the reimbursement requirement up to $2500. There are very few families that would not have difficulty paying this tax day surprise, added to their full income taxes.

Today the bill eliminating the burdensome 1099 requirement for small businesses cleared its first hurdle by a party-line vote in the House Ways and Means Committee. The lost revenues would be offset by a further increase in the subsidy repayment requirement – up to a full refund for those over 400 percent of the federal poverty level. Thus a family of four with an income of just one dollar over $89,400 (400% FPL for 2011) could be hit with a bill from the IRS for nearly a full year’s premium – on top of their full income taxes – if their subsidies had been based on a very low income the prior year. Now that’s a tax day surprise that would be devastating for any of us.

Admittedly, this is only a minor technicality, but try to tell that to those who will receive massive tax day bills from the IRS.

This is not only unfair, it is so unnecessary. We can fix this by funding a single national risk pool that covers everyone, using equitable progressive tax policies.

No longer would we have to link individuals and families to premiums in the private insurance market. We don’t need the private insurers at all (and we certainly wouldn’t need to give them 15 to 20 percent of the premiums for their own intrinsic purposes).  The system will have already been paid for through taxes, and people would simply receive the care that they need, when they need it.

Simpler. Cheaper. And better. Taking care of us all. Why don’t they get it?

Justin Bieber’s bodyguard

Posted by on Wednesday, Feb 16, 2011

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.

Justin Bieber Talks Sex, Politics, Music and Puberty In New ‘Rolling Stone’ Cover Story

Rolling Stone
February 16, 2011

The Canadian-born (Justin) Bieber never plans on becoming an American citizen. “You guys are evil,” he jokes. “Canada’s the best country in the world.” He adds, “We go to the doctor and we don’t need to worry about paying him, but here, your whole life, you’re broke because of medical bills. My bodyguard’s baby was premature, and now he has to pay for it. In Canada, if your baby’s premature, he stays in the hospital as long as he needs to, and then you go home.”

http://www.rollingstone.com/music/news/justin-bieber-talks-sex-politics-music-and-puberty-in-new-rolling-stone-cover-story-20110216

They say that you should not use anecdotes to make policy, but when the policy science we know supports the millions of anecdotes Americans have regarding our “evil” ways in health care, it is time to use them to make policy. Just ask Justin Bieber’s bodyguard.

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