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.
Department of Health and Human Services
Centers for Medicare and Medicaid Services
For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR Chapter IV by adding part 425 to read as follows:
SUBCHAPTER B–MEDICARE PROGRAM
PART 425–MEDICARE SHARED SAVINGS PROGRAM
Subpart A–General Provisions
§425.2 Basis and scope.
(a) Basis. This part implements section 1899 of the Act by establishing a shared savings program that promotes accountability for a patient population, coordinates items and services under parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient services. Under this program, groups of providers of services and suppliers meeting criteria specified by the Secretary may work to together to manage and coordinate care for Medicare fee-for-service beneficiaries through an accountable care organization (ACO). ACOs that meet quality performance standards established by the Secretary are eligible to receive payments for shared savings. During years in which the ACO is participating in a two-sided model, the ACO may be required to share losses.
(b) Scope. This part sets forth the following:
(1) The eligibility requirements for an ACO to participate in the Medicare Shared Savings Program (Shared Savings Program).
(2) Program requirements, including quality and other reporting requirements.
(3) The method for assigning Medicare fee-for-service beneficiaries to ACOs.
(4) Payment criteria and methodologies (one-sided model and two-sided model).
(5) Compliance monitoring and sanctions for noncompliance.
(6) Reconsideration of adverse determinations.
Proposed rule (429 pages):
Accountable care organization (ACO) is a concept that grew out of concerns over excessive levels of spending for health care that is often only mediocre. It was thought that health care professionals and facilities could organize themselves into integrated organizations through which they would become accountable for both the cost and the quality of health care.
The Affordable Care Act established the Medicare Shared Savings Program which would use ACOs to achieve savings in the Medicare fee-for-service program, and the savings would be split between the ACOs and the government. The proposed rule for ACOs has now been released. I’ll try to reduce the 429 pages down into a few salient comments.
* The ACO would be composed of professionals arranged in networks or in group practices, and may partner with or be employed by hospitals.
* The ACO is accountable for the quality, cost, and overall care of the Medicare fee-for-service (FFS) beneficiaries assigned to it.
* The ACO shall include primary care ACO professionals that are sufficient for the Medicare FFS beneficiaries assigned to the ACO (minimum 5000 beneficiaries).
* The ACO shall have in place a leadership and management structure that includes clinical and administrative systems.
* The ACO shall define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.
* A benchmark will be established based on recent spending in the fee-for-service Medicare program.
* If spending for patients assigned to the ACO falls below the benchmark, the ACO will be rewarded with a portion of the amount saved, and the government keeps the rest.
* If spending for patients assigned to the ACO is more than the benchmark, then the ACO must pay a penalty of a portion of the excess (with a maximum two-year exemption for ACOs participating as a “one-sided” model with lower rewards but no penalty).
* The ACO must meet detailed quality requirements to qualify for the shared savings, but also may be terminated for failure to meet minimum standards.
* Patients will have free choice of any physician at all times, but will be assigned to an ACO based on plurality use of primary care services, for the purpose of assigning accountability for savings and quality. The ACO, which theoretically controls cost and quality for the patient assigned to it and will be rewarded or punished for the results, will have no control of the cost and quality of care delivered outside of the ACO.
* And over 400 pages of etc., etc.
Under the proposed rules, ACOs are not simple organizations formed on just a handshake. They require a formal legal structure with management, a specified governance board, a medical director, a quality assurance program, and more. They must implement evidence-based clinical guidelines. The required documentation of quality is particularly onerous. They must have an infrastructure, such as information technology, to collect and evaluate data, and provide feedback. They must comply with extensive legal, business, and clinical documentation requirements. Since ACOs often involve consolidation within the health care delivery system, they must coordinate with antitrust agencies.
Obviously, considerable time, effort and expense is involved, so the reward must be worthwhile. And what is that reward? If they can improve their productivity while meeting quality standards, the financial benefit accrues to the government, but the reward is that the government lets them have a fraction of their productivity gains, providing that they are compliant with the complex set of rules. Since it’s almost impossible to continue to improve productivity in health care year after year, the reward would dry up soon.
With the trend of increasing frequency and intensity of services, there is a risk that the ACO may exceed the benchmark and have to pay back to the government a portion of the higher spending as a penalty.
What would happen if a group of professionals who were considering forming an ACO decided not to? First, they wouldn’t have all of the extra expenses and effort that establishing an ACO would require. They certainly would not have an incentive to reduce Medicare’s spending (i.e., reduce their income) since they would keep all revenues and not have to share them with the government. And if their spending for Medicare exceeded the benchmark? They would still keep it all, and wouldn’t have to pay a penalty.
Since most people with any business sense would never participate in such a scheme, why is it that there seems to be such a rush to form ACOs? In my opinion, they are not looking for the Medicare fee-for-service business. They are forming commercial ACOs in the private sector, looking for the private insurance business that will expand greatly in the new insurance exchanges. They are taking advantage of the prevailing attitude that we must back off on enforcing antitrust regulations in order to provide flexibility for the ACOs. They are consolidating to gain greater market control. Many are using “accountable care organization” as a deceptive label for expanded managed care oligopolies and monopolies.
The notion of accountable care organization was originated as a well meaning, altruistic, aspirational concept by individuals who really care about the health care that all of us receive. To be successful in improving quality and reducing costs the concept would have to be dependent on patients and health care professionals and administrators who were determined to do the right thing regardless of pecuniary or other self-interests. Yet health care, as the business that it is – like it or not – cannot afford to embrace altruism, for it would fail in its business responsibilities to maximize market opportunities.
Does it have to be this way? Do we really need to depend upon private stewards devoted to the amoral business ethic to administer the financing of health care? Well, when you think about it, a single payer system is an automated system of financing health care that does not depend on the altruism of its players. That’s because the single payer model is structured as an altruistic, aspirational system that, quite automatically, actually does, in itself, improve quality and control costs. It just works.
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 Synthesis Project, Policy Brief No.20
Robert Wood Johnson Foundation
Cost-sharing: Effects on spending and outcomes
By Sarah Goodell, M.A. and Katherine Swartz, Ph.D., based on a research synthesis by Swartz
This brief examines how cost-sharing affects the use of services, whether some patients are more sensitive to cost-sharing than others, and whether reduced use of services as a result of cost-sharing has an effect on health outcomes. All of these issues factor into whether and how cost-sharing could be used to reduce the rate of growth of health care spending.
Recent studies of patient cost-sharing confirm the primary conclusion of the HIE — demand for most health care services is price sensitive. When people have to pay more, they reduce their use of health care. The HIE’s exclusion of the elderly, the increase in the prevalence of chronic conditions, and changes to medical care and insurance design since the 1970s, however, make it important to re-examine the role of cost-sharing. Findings from more recent research highlight important implications for policy-makers, including:
* Patient cost-sharing is not necessarily an effective mechanism for significantly slowing health care spending. Most people are healthy and cost-sharing would only modestly affect their health care spending. People who are very sick or who have serious chronic health conditions are typically deferring to their physicians rather than making choices about medical care based on cost-sharing. Moreover, by itself, cost-sharing is highly unlikely to slow the growth in spending unless the expected increases in the costs of appropriate care for the very sick also slow.
* Cost-sharing is not well-targeted on low-value services. Patient cost-sharing generally has been organized in broad categories (e.g., outpatient care, inpatient care, emergency department care). These broad categorizations do not help people distinguish between essential and nonessential services. Comparative effectiveness research could help insurers and government programs better target cost-sharing to improve value.
* Caution should be used when increasing cost-sharing for low-income populations or the chronically ill. Not only are low-income populations disproportionately affected by increased cost-sharing, but they also are more price sensitive than other income groups. Unless the cost-sharing increases are concentrated on services that are ineffective or unnecessary, low-income groups may avoid necessary medical care as a result. Increased cost-sharing for people with chronic conditions may result in higher expenditures for hospitalizations and other adverse outcomes if necessary care is reduced.
Full Research Synthesis Report by Katherine Swartz, Ph.D. (40 pages):
This is a very important report. Let me tell you why.
Conservatives have framed the problem of our very high health care costs as being due to a lack of sensitivity of health care prices by patient-consumers who are simply demanding too much care. This is been repeated so many times that moderates and liberals are now parroting the same message. They profess that patients must face large deductibles, co-payments and coinsurance if we are ever going to get our health care costs under control.
It is true that these forms of cost-sharing do reduce health care spending, but is the savings significant? And is there any downside, any unintended consequences, to applying these price sensitizers to health care shopping?
Too much care?
When is the last time that you went to your health care professional and demanded too much care? If it isn’t you who is guilty of this transgression, then who is? I didn’t see these people in my very busy practice. Sure, you can find a few anecdotes, but most people simply are not motivated to use their time and money to seek out care that they don’t need.
Reduction in spending
The healthier one-half of our population uses only three percent of health care. They may be price sensitive shoppers when they have significant cost-sharing, but even if they reduced spending by ten percent, the savings of three-tenths of one-percent would represent only a negligible decline in our national health expenditures.
Twenty percent of us use eighty percent of the nation’s health care. These are people with very significant problems who are preoccupied with accessing the health care that they need, and are no longer concerned about the deductibles that they’ve already gone through. Cost-sharing is not intended to apply to individuals with significant illnesses or injuries anyway. So cost-sharing has very little impact on eighty percent of our national health expenditures.
The remaining thirty percent of us use about sixteen percent of health care. Some of this is urgent care, over which we have little choice, so price shopping isn’t an issue. But suppose that we could actually reduce spending in this group by about ten percent; that would still be only about 1.6 percent of our national spending. Combined with the 0.3 percent above, that’s still under two percent.
If you read the report, you will find that it is common for people to make unwise decisions as to which care they decline because of the out-of-pocket costs involved. These studies show that the net costs are sometimes higher because forgoing treatment can result in a greater incidence of emergency department visits and hospitalizations, and can sometimes intensify their chronic problems, making them more expensive to manage. Much of the relatively paltry savings from creating price sensitivity is lost due to the offset of the higher costs of deferred medical management.
As this report states, “cost-sharing is highly unlikely to slow the growth in spending unless the expected increases in the costs of appropriate care for the very sick also slow.” We need to consider more effective options than cost-sharing if we want to tame health care costs.
Cost-sharing has been demonstrated to result in adverse outcomes in two particularly vulnerable groups: low-income individuals and families, and individuals with chronic disease.
Although Medicaid selectively covers the low-income sector with more generous benefits and usually without significant cost-sharing, as a chronically underfunded welfare program, access is often impaired because of a lack of willing providers. Also, as states struggle with their budgets, some are introducing more cost-sharing into their Medicaid programs in order to reduce spending.
For those with incomes just above the level at which they would qualify for Medicaid, the standard plan in the exchanges will have an actuarial value of only 70 percent, which can be achieved only by including cost-sharing in the plan design.
Creating financial barriers to care for this vulnerable sector clearly reduces their access to beneficial health care services – the opposite of what a well functioning health care system should be doing.
The same applies to the chronically ill. The health care financing system should be designed to help them get the care that they need. Cost-sharing does the opposite. Also it is in this sector that cost sharing has often been shown to result in the opposite of its intent. Instead of reducing health care spending, the financial barriers of cost sharing have often resulted in higher costs because of more expensive emergency department and in-hospital care that must be rendered due to the financial barriers that result in inadequate chronic disease management.
Prevention of financial hardship
A prevalent concept is that the purpose of insurance is to protect against catastrophic loss, but individuals should be personally responsible for routine medical expenses. That has been repeated so often that it is widely accepted. Yet many studies have confirmed that so-called routine expenses can be very burdensome financially. When medical debt contributes to personal bankruptcy, the routine expenses of cost-sharing have defeated this purpose of preventing catastrophic loss since the necessity of filing bankruptcy is, in itself, catastrophic.
We need to abandon the glib definition of insurance as being only for the purpose of covering catastrophic loss, and replace it with the definition that a health care financing system is for the purpose of removing financial barriers to the care that a patient should have. Cost-sharing does the opposite by creating financial barriers that should be removed.
Another prevalent attitude is that the government should stay out of our lives, and we should each tend to our own needs. As an abstraction, that concept has a certain appeal, and, consequently, a wide following. But there are very few of us who are not offended when we hear real-life stories of people who suffer when they fail to receive the medical care that they should have. We are particularly offended when we hear that the individuals’ insurance failed them in their times of need.
Insurance should be designed to help people get the care they need. Yet, as we all know, it is frequently designed to reduce spending on health care for the business purposes of keeping insurance premiums competitive and enhancing profits. One of the most important tools used by the insurers is cost-sharing. At times it seems as if they are a business set up more for the purpose reducing health care spending than helping us get health care.
Traditional private insurance has represented a form of social solidarity in which we join together to pool our risks so that none of us would have to suffer financial hardship in the face of medical need. But the interests of private insurers are very different from the interests of patients. The tool of cost-sharing serves the interests of the private insurers very well, but it fractures the solidarity that was intended to bring those with needs the health care that they need.
Other nations have expressed solidarity in a more effective manner. The people join together, through their governments, to finance their universal pools to serve as a resource for funds to pay for health care that people need. Many of those nations have rejected the concept of cost-sharing because of its perversities. They provide first dollar coverage for health care.
Those nations that do eliminate the barriers of cost-sharing still provide comprehensive benefits for everyone at a cost much lower than what we spend here in the United States. That’s the kind of solidarity that we need and that we would have if people weren’t confused by prevailing misperceptions that our goal should be to stop people from demanding too much care, and that we can do that by assessing the penalties of cost-sharing on people who attempt to access the care that they need.
You should consider downloading the RWJF brief for future use. We need to change the national discourse from that of using the consumer-directed tools of cost-sharing – tools that save very little money and impair outcomes – that are being used to address the alleged but fictional excess patient demand for care. Instead we need to have a national dialogue on how we can improve access to the care that patients need, and do it in an affordable manner (i.e., single payer).
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.
Blue Cross investigation is expanded
The Baltimore Sun
March 29, 2011
A probe of alleged anti-competitive agreements between Blue Cross Blue Shield companies and hospitals has been expanded by the U.S. Justice Department beyond Michigan, where an antitrust lawsuit that alleged the agreements raised hospital prices was filed last year.
CareFirst BlueCross BlueShield, Maryland’s largest insurer, confirmed to the Wall Street Journal that it received a civil investigative demand from the Justice Department but declined to comment further.
Federal and state investigators also have sent civil subpoenas to Blue Cross Blue Shield units in Kansas, Missouri, Ohio, West Virginia, North Carolina, South Carolina and the District of Columbia, a person familiar with the matter said.
The expansion of the Blue Cross Blue Shield investigation is important because “they’re using exclusionary practices to hold competitors at bay,” said David Balto, an antitrust attorney and senior fellow at the Center for American Progress, a Washington-based policy group that generally favors Democratic initiatives.
The department’s Michigan complaint said Blue Cross negotiated contracts with 70 of the state’s 131 general acute- care hospitals that led to higher prices for the insurer’s competitors. In some cases, the hospitals charged rivals 30 percent to 40 percent more than Blue Cross, the department said at the time.
One state’s hospital cost solution: regulated prices
By Christine Vestal
The Pew Center on the States
March 29, 2011
The new federal health law has created a flurry of hospital mergers as the industry prepares for major changes in financing and delivery of care. Some worry that the resulting behemoths will have too much price-setting power.
In one state, however, monopoly pricing won’t be a problem. The state sets the prices.
For more than 30 years, Maryland has regulated the rates hospitals can charge, while all 49 other states have relied on market mechanisms to keep prices in check. For the most part, it has worked. The urban hospitals that serve large numbers of uninsured Maryland patients are financially strong, instead of nearly bankrupt like most inner-city hospitals. And everyone — private insurers, the uninsured, and those on Medicaid and Medicare—is charged the same amount.
Maryland has the lowest price in the country for average hospital cases — a little more than $13,000, compared to a national average of $32,500. The cost of health insurance in Maryland is second lowest in the nation as a percentage of median income.
Whether other states will emulate Maryland’s system is an open question. Any attempt to invoke cost regulation relies heavily on the people involved and the voluntary cooperation of the state’s hospitals. That is not always easy to achieve. In the end, however, (Maryland’s chief regulator Robert) Murray insists that the regulatory approach relies on a simple concept: “It’s no surprise that when people try to stick to a budget, they tend to limit their needs. Hospitals are no different.”
Because of market dominance, Blue Cross Blue Shield plans have been able to negotiate lower hospital prices in many regions throughout the nation. Hospitals, in turn, have been able to negotiate higher prices for insurers that do not dominate the markets, resulting in higher premiums and consequently less ability for the smaller insurers to penetrate these markets. The U.S. Justice Department quite appropriately is investigating these agreements.
The Blue Cross Blue Shield plans competing unfairly in the private market have proven once again that private insurers are not capable of providing equitable financing of our health care.
If instead of using market dynamics to price hospital services, what would happen if the government regulated the rates? We have an example of that in Maryland which uses an “all-payer” system. The state sets the prices. All insurers, including Medicare and Medicaid, pay the same.
How well has that worked? Maryland’s hospital prices are the lowest in the nation – only 40 percent of the national average. That has resulted in insurance premiums that also are amongst the lowest in the nation.
Although the all-payer system has had a very favorable impact on pricing, there are still many other inefficiencies and inequities in a financing system that depends on private insurers. A single payer system would eliminate the private insurers and establish global budgets for hospitals – funding them just as you would police, fire, libraries, and other public or quasi-public institutions.
As Maryland’s chief regulator stated, “It’s no surprise that when people try to stick to a budget, they tend to limit their needs. Hospitals are no different.”
Given that we have a finite though generous amount of funds available to pay for health care, we can get the best value if we do that within a government budget, administered efficiently through a single payer system.
Healthcare Spending and Preventive Care in High-Deductible and Consumer-Directed Health Plans
By Melinda Beeuwkes Buntin, PhD; Amelia M. Haviland, PhD; Roland McDevitt, PhD; and Neeraj Sood, PhD
The American Journal of Managed Care
The effect of enrollment in high-deductible health plans (HDHPs) or consumer-directed health plans (CDHPs) on healthcare spending and on the use of preventive care was assessed across multiple employers, insurance carriers, and plans in a 2-year retrospective study.
* Families enrolling in HDHPs or CDHPs and firms offering HDHPs or CDHPs spent less on healthcare.
* Significant savings were realized only for enrollees in plans with deductibles of at least $1000, and savings decreased with generous employer contributions to healthcare accounts.
* Enrollment in HDHPs or CDHPs was associated with moderate reductions in the use of preventive care, despite the fact that these plans waived the deductible for preventive care.
The Affordable Care Act has established silver or bronze plans, with low actuarial values of 70 or 60 percent respectively, as the new standard for plans to be offered in the insurance exchanges. Since the plans will have to provide a mandated basic level of benefits, it is inevitable that they will have to include high deductibles since an average of 30 to 40 percent of the costs of health care will to be shifted to the patients to pay out of pocket. Is the wholesale adoption of high-deductible health plans a wise policy decision?
This new RAND study of over 800,000 families with employer-sponsored health plans showed that deductibles of $1000 or more do result in lower total spending, but also result in lower use of important preventive services, specifically immunizations and cancer screening. (As an aside, this study also shows how commonplace high-deductible plans have become in the employer-sponsored market as well.)
This study does have limitations. It was a two year study of the healthy workforce and their young healthy families during a healthy period in their lives. It was too short to measure differences in outcomes, and no attempt was made to do so. For our purposes, we can assume that the reduction in the use of preventive services serves as a proxy for what might be predicted when patients are not taking full advantage of the health care opportunities available to them.
The landmark RAND Health Insurance Experiment (RAND HIE) had previously shown that cost sharing resulted in a decline of both beneficial services and services of questionable value. In a press release announcing this new RAND study, co-author Amelia Haviland stated, “We discovered that costs go down dramatically during the first year people are enrolled in high-deductible health plans, as long as the deductible is at least $1,000 per person. But we also found concerning reductions in use of preventive care. This suggests people are cutting both necessary and unnecessary care.”
We do need to be concerned about costs, but there are many different policies that can control costs. Any policy that reduces spending by reducing beneficial services that patients should be receiving is bad policy. High-deductible health plans represent bad policy. They should be eliminated.
It is particularly annoying to hear policy experts say that we can’t control costs unless we put patients in charge of spending their own health care dollars, as if that were the only cost reduction tool available. Here’s what the authors of this study have to say:
“Employers often make contributions to personal medical accounts to provide incentives to employees to switch to high-deductible plans, as high enrollments are necessary to capture substantial cost savings. Some have posited that such contributions would reduce the cost savings of HDHPs (high-deductible health plans) or CDHPs (consumer-directed health plans which are HDHPs with health savings accounts) by undermining consumer cost sensitivity. However, this was not the case for HDHPs or CDHPs with moderate employer contributions. These HDHPs or CDHPs seem to reduce spending as much as plans with similar deductibles but no employer account contribution.” (High employer contributions also reduced spending, but not as much.)
Instead of erecting financial barriers to beneficial health care services, we need to erect a financing infrastructure that blocks spending on wasteful administrative excesses and non-beneficial services, while promoting access to appropriate health care. The single payer model is designed specifically to get patients the care that they need while eliminating wasteful spending.
I belong to the Public Employees Federation, AFL-CIO, the union that organizes and represents public employees who perform scientific, professional and technical services for New York. About 56,000 people belong to our union and statewide we perform literally thousands of essential roles.
When I was hired at my present position I welcomed the opportunity to join PEF. Our union provides an important way to stand up for our communities, our environment, our patients and each other. For example, thanks to unions, ours with others, registered nurses in New York are no longer subject to mandatory overtime, something proven to be vital for patient safety.
We need to nurture our society and our environment toward health and with science. This is the proper role for all public employees, from hospital caregiving to environmental conservation to engineering to taxation and finance to schools to the maintenance and development of our infrastructure.
With these things in mind I ran for union office, first as a steward. Then, when our Council Leader retired last year, I decided to seek the role of leader of the stewards for our division. This year I was also elected a member of the statewide Executive Board of PEF.
What a time to take up the union cause!
We now face the bared fangs of a major political offensive against public employees.
The offensive is really a defense. A defense of the indefensible.
It is a defense of three decades of tax cuts for the wealthy, with steep tax breaks and huge taxpayer subsidies for profitable corporations during a period of accelerating income inequality, a time of spectacular concentration of great wealth, a time in which the poor have grown even poorer.
Thirty years ago the wealthiest 1 percent of New Yorkers won about 10 percent of total income. Today the wealthiest 1 percent take more than 35 percent of the total income in New York state. In New York City they take 45 percent of the total.
In 1980 the “poorer” one half of New Yorkers had an average income of $16,074. By 2007 this figure declined to $14,045! (Both figures in 2007 dollars: see the report by economist James Parrott.)
Not only have the rich gotten richer and the poor poorer, such yawning income inequality leads to poor health for the state as a whole. Convincing epidemiology shows that states and nations with greater income inequality are less healthy and have more social problems than those with more income equality. (See The Equality Trust.)
This month Forbes reported that New York is home to 68 billionaires.
New York is NOT broke!
Yet to close the state budget deficit our elected leaders have taken aim not at billionaires but at public employees. They blame the public sector for a crisis it did not create and have launched an assault upon public education, safety and health.
Will cutbacks and layoffs nurture a better future? Layoffs in the public sector will cause layoffs in the private sector. Will layoffs, closures and cuts strengthen or weaken our frayed social safety net, our weather-beaten infrastructure, our schools, our already-weakened environmental protections and our beleaguered economy?
We have experienced a time when the rich have grown so much richer than ever, especially here in New York. During the same period the wealthy have received tax break after tax break after tax break, with billions and billions of dollars in state revenue forfeited annually.
It is now time to tax the rich. But alas, not for our leading politicians. Their mission is to defend the millionaires’ and billionaires’ money, the bankers’ bonuses and the corporations’ profits from taxation.
Against the defense of the indefensible, and in the interest of community health and social medicine, I’m sticking to the union.
The Model of the Future?
By Avery Johnson
The Wall Street Journal
March 28, 2011
The 2010 health-care law encourages the development of accountable-care organizations as a way to improve care and reduce costs.
So what exactly are accountable-care organizations, anyway?
In broad outline, these entities propose to unite doctors and clinics or hospitals in groups that pool their resources with the goal of trimming spending while boosting the quality of care. When the group can show that it is improving care and delivers it for less than the cost projected—arrived at by crunching historical patient data for that market—a share of the savings goes to the ACO’s bottom line.
ACOs exist more on paper than in reality, for now.
“An ACO is like a unicorn; everyone thinks they know what one is, but no one has ever seen one,” says Gene Lindsey, president and chief executive of Atrius Health.
Elliott Fisher, the Dartmouth Medical School professor who helped coin the term ACO, and who worked with members of Congress to draft the ACO concept into the health-care law, concedes that “there are some really important questions about whether this will work.”
But, Dr. Fisher adds: “I think it’s the best hope we have.”
Cost control the next step for Massachusetts health reform
By Tanya Albert Henry
American Medical News
March 28, 2011
In February, Massachusetts Gov. Deval Patrick unveiled his cost-containment plan to follow up on the landmark 2006 coverage expansions. If approved by legislators, it would define and encourage accountable care organizations within the state; give the state insurance commissioner the ability to scrutinize insurers’ rates, including underlying physician pay, and disapprove rates that are excessive; and revamp the medical liability system to try to resolve disputes more quickly and curb defensive medicine.
Accountable care organizations
* Mandates that ACOs provide patient-centered primary care coordination and referral services.
* Requires ACOs to share financial risk, distribute savings and meet quality measures.
* Expects ACOs to be competent in population health management, financial and contract management, quality measurements, and communication.
* Charges ACOs with providing behavioral health services, either internally or by contract.
* Makes physician participation voluntary.
* Allows primary care physicians to belong to only one ACO but places no limits on specialists.
* Requires MassHealth, the Group Insurance Commission, the Commonwealth Connector and all other state-funded insurance programs to implement ACOs and alternative payments by January 2014.
Accountable care organizations (ACOs) began as an abstract concept of integrating health care providers into a not-yet-defined entity that would be rewarded for improving quality and reducing costs. Without knowing what they were, Congress included them in the Affordable Care Act (ACA). Dartmouth’s Elliott Fisher, who was one of the first to promote the concept, now says that “there are some really important questions about whether this will work.”
Nevertheless, Massachusetts, which is serving as a prototype for the now-enacted ACA, is intending to move forward with its version of ACOs. Their model not only measures quality and distributes savings, but it also shares financial risk. Also it includes exclusive primary care networks, limiting patient choices. The intent of Dr. Fisher and his colleagues is very noble, but it appears that we may be opening up the process to enable a return to the worst of the managed care era.
Quoting from a personal communication from Steffie Woolhandler and David Himmelstein, “Universal, geographically-based, non-profit ACOs are called a national health service, a reform we would heartily endorse. Unfortunately, the ACOs actually being pursued are profit-driven recreations of full-risk capitated HMOs.”
Very soon HHS will be releasing their guidelines for ACOs. The question we need to ask then is will these organizations be designed specifically to provide patients higher quality care at more reasonable costs, as Dr. Fisher envisions, or will they be designed by businessmen to… well, you know.
Ultrasound at $59,490 Spurs Aetna Outrage in Suit Naming Doctors
By Peter Waldman
March 23, 2011
Aetna Inc. (AET) is suing six New Jersey doctors over medical bills it calls “unconscionable,” including $56,980 for a bedside consultation and $59,490 for an ultrasound that typically costs $74.
One defendant billed $30,000 for a Caesarean birth, and another raised his fee for seeing a critically ill patient in a hospital to $9,000 in 2008 from $500 the year before, the insurer alleges in the suits. The Caesarean price was more than 10 times the in-network amount Aetna quotes on its website.
The lawsuits could help determine what pricing limits insurers can impose on “out-of-network” physicians who don’t have contracts with health plans that spell out how much a service or procedure can cost.
The insurer paid some of the large charges because of state regulations mandating timely payments and to prevent doctors from sending patients big bills, (Aetna spokeswoman Cynthia) Michener said.
In April 2010, Aetna said, (cardiologist Benyamin) Hannallah asked for $54,600 for a heart catheterization, up from $5,500 for the same procedure in 2007. When the insurer gave him $2,000 — a sum it deemed “usual and customary” for the procedure — Hannallah complained, and Aetna paid in full to prevent him from billing the patient for the remainder, Michener said.
Aetna tried in 2007 to impose caps on some out-of-network payments, prompting doctor complaints to the New Jersey Department of Banking and Insurance. The agency sided with the doctors, fined the company $2.5 million, and ordered it to pay out-of-network practitioners enough so that patients wouldn’t be asked to pay balances other than co-pays.
In 2009, Aetna, UnitedHealth Group Inc. (UNH), Cigna Corp. (CI) and WellPoint Inc. (WLP) were accused by the New York attorney general of underpaying out-of-network physicians by manipulating a database used to calculate payments. They paid a total of $90 million in settlements without admitting wrongdoing. UnitedHealthcare agreed that year to pay $350 million to settle a lawsuit by the American Medical Association over the same issues. Similar AMA lawsuits against Aetna, Cigna and Wellpoint are pending.
The most important innovation in coverage established during the managed care revolution was that private insurers could contract with physicians and hospitals to establish networks of providers with agreed-upon payment rates. Part of the backlash against managed care was that patients wanted the freedom to choose care outside of the networks, and they wanted their plans to pay for that care. So what did the insurers do to control fees and prices for services rendered by providers who had no contractual obligation to the insurers?
Insurers simply included in their plans some version of language to the effect that they would pay usual and customary fees in plans that covered out-of-network providers. Ingenix (founded by UnitedHealth Group) developed a data base of customary fees that led to a standard for payment of out-of-network care that was used by most major insurers. Discovery during the lawsuits that were later filed confirmed that the database was manipulated to produce an artificially low standard for customary fees. Either the providers were underpaid, or the patients had to pay excessive amounts for the balances that were billed.
Between pressure from the regulators and dissatisfaction from their own clients, the insurers were in a bind as to how they would keep the out-of-network providers from billing the patients for more than the deductibles and coinsurance.
Some physicians took advantage of this situation. They revoked their contracts with the insurers, and then charged whatever fees they thought that they could get away with. They knew that the insurers wouldn’t pressure their own clients to pay the balances, so they were basically able to extort the insurers for these outrageous fees. Now Aetna is pushing back by filing a lawsuit against these physicians for violating New Jersey Board of Medical Examiners rules against excessive fees.
Obviously, we have a problem with the way we pay for health care. The Affordable Care Act (ACA) will only perpetuate the abuses of the private insurers and the unscrupulous providers who take advantage of the system.
Fraud and abuse will always be a problem. You hear about it all the time with Medicare. That is because a single public administrator can identify fraud and expose it much more readily than a fragmented, private system that protects its proprietary information by not exposing the abuses. In fact, under ACA, the private insurers have incentives to pay outrageous fees and to pay for fraud because they get to keep 15 to 20 percent of the entire kitty. The more fraud and price gouging there is, the greater their revenues.
A single payer financing system automatically prevents gouging, and also has more effective tools to ferret out fraud. As the pain inflicted by the outrageous costs of our health care system continues to grow, the nation will welcome a single payer system, once the concept is better understood.
Tapping the Unmet Potential of Health Information Technology
By Ann S. O’Malley, M.D., M.P.H.
The New England Journal of Medicine
March 23, 2011
Although EHRs laudably provide immediate access to patient data and electronic messaging functions, clinicians have been frustrated by the difficulty of using them to support care delivery and coordination. Transforming EHRs into effective clinical tools rather than a means of capturing information primarily for documentation and billing purposes will require progress on multiple fronts.
Continued research on clinical care processes, the design and use of HIT, and payment reform, as well as ongoing support for clinicians, will be key to the effective and meaningful use of HIT. Today’s EHRs do not sufficiently support aspects of care delivery that are vital to improving care and controlling costs.
What is the current state of the development of health information technology (HIT) and electronic health records (EHRs)? Quoting from this NEJM article, “Today’s EHRs do not sufficiently support aspects of care delivery that are vital to improving care and controlling costs.”
We should continue with efforts to improve this technology, but, at this time, it is still too early to force universal adoption through government policies.
Originally published in the Berkshire Eagle.
Writing about the Massachusetts health care reform program in a 2009 issue of the Wall Street Journal, Governor Deval Patrick stated, “Because of our reform, families are less likely to be forced into bankruptcy by medical costs.” Both Governor Patrick and President Obama have used the benchmark of medical bankruptcy as a key measure to prove the success of their health insurance reforms.
Unfortunately, according to a study this month from Harvard University by Dr. David Himmelstein and associates, the absolute number of medical bankruptcies in Massachusetts increased between 2007 and 2009, the years after health care reform had been enacted. Dr. Himmelstein commented, “Massachusetts health reform, like the national law modeled after it, takes many of the uninsured and makes them under-insured, typically giving them a skimpy defective policy that’s like an umbrella that melts in the rain. The protection’s not there when you need it.”
For example, in Boston, the least expensive individual coverage available to a 56-year-old carries an annual premium of $5,616 and a deductible of $2,000, and even then only covers 80 percent of the next $15,000 cost for covered services. Therefore, someone with a chronic condition like diabetes could have to pay $10,000 annually out of pocket, in addition to the premium.
The current Massachusetts heath care reform, on which President Obama has based his national reform legislation, is not adequate. Massachusetts reform has not ended medical bankruptcies in our state, a finding that strongly suggests that national reform won’t reduce medical bankruptcies nationwide.
While individuals, small businesses and towns struggle to pay for inadequate health care insurance, CEOs of non-profit health insurance companies continue to walk away with obscene amounts of our hard-earned dollars. Blue Cross /Blue Shield’s former chief executive, Cleve L. Killingsworth recently received an $11 million payout, while Blue Cross board members individually received up to $89,000 to rubber stamp Killingsworth’s compensation.
As many states and congressional Republicans look for ways to roll back President Obama’s signature health care law, Vermont is moving in a different direction. During his inaugural address, Governor Peter Shumlin proposed guaranteeing health insurance to all Vermonters, noting that current health care costs “[represent] an enormous hidden tax on families and small businesses across our state. If left untethered, the rising cost of health insurance will cripple us.” Shumlin has proposed the creation of a single-payer system for Vermont in which private delivery of healthcare would continue, but the government would act as everyone’s health insurer.
This “Expanded and Improved Medicare-for-all” option was barred from the national health reform debate by special interest groups. By choosing a single-payer program, Vermonters would divorce health insurance coverage from employment, and eliminate the administrative waste of private insurance companies, including outrageous CEO salaries.
Dr. William Hsiao, an international expert on health care reform at the Harvard School of Public Health, was commissioned by the Vermont Legislature to conduct a study about the best way to provide universal coverage, reduce the rate of cost increases, and create a primary care-focused, integrated delivery system. Hsiao stated, “The system capable of producing the greatest potential savings and achieving universal coverage was a single-payer system — one insurance fund that covers everyone with a standard benefit package, paying uniform rates to all providers through a single payment mechanism and claims-processing system. Our analysis showed that Vermont could quickly save almost 8 percent in health care expenditures through administrative simplification and consolidation, plus another 5 percent by reducing fraud and abuse. . . All told, we estimated that Vermont could save 25 percent in health care expenditures over 10 years.”
In the national health reform debate, Vermont, not Massachusetts, now leads the way.
Susanne L. King, M.D., is a Lenox-based practitioner.
A not very happy birthday
March 17, 2011
As for costs, Mr Obama’s reforms deserve praise for expanding coverage, but they do this by adding millions of people to an unsupportably expensive system. Analysts estimate that America’s health spending will continue to soar under the reforms. That is a point hotly contested by Mr Obama’s team, who usually point to theoretical future efficiency gains and innovations that will save pots of money.
So it came as a shock when Deval Patrick, the governor of Massachusetts and one of Mr Obama’s closest friends, took a different tack. Asked recently about the pioneering health reforms in his state, which served as a model for the national reforms, he first gave a backhanded compliment to Mitt Romney. Mr Patrick then revealed the dirty little secret of Obamacare: “What these folks did in Massachusetts is frankly the same thing that the Congress did, which is to take on access first, and come to cost-control next.” In other words, America will soon have no choice but to come to grips with costs. Whatever one thinks of Mr Obama’s reforms, there is no denying that they have brought that day of reckoning closer.
The Economist joins the chorus of those who say that “America’s health spending will continue to soar under the reforms.” Many have contended that it was a mistake to have expanded coverage without first controlling costs. The real mistake was not in reversing the order of coverage expansion and cost containment, rather it was in the failure to do both simultaneously through the adoption of a national single payer program.
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