Why pay for performance may be incompatible with quality improvement

Posted by on Thursday, Aug 16, 2012

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.

Journal editorial: Pay-for-performance a faulty policy in medicine

By Chelsea Conaboy
The Boston Globe, August 15, 2012

Programs that reward doctors and hospitals for hitting certain quality targets are being rolled out in Massachusetts and across the country. A major focus of the health care law signed by Governor Deval Patrick last week is that doctors should be paid for keeping patients healthy, rather than for the volume of tests or treatments they order. Yet, several recent publications question whether pay-for-performance systems actually lead to better care for patients.

The programs are meant to push doctors to think about a patient’s overall care and to consistently do things that are thought to improve health outcomes, such as give appropriate counseling to people with heart conditions or timely antibiotic treatment to people with pneumonia.

A review of seven studies of primary care programs that paid doctors extra for meeting certain targets, published by the Cochrane Collaboration in September, was inconclusive about the effect on quality of care. “Implementation should proceed with caution,” the authors wrote.

A study published in March in the New England Journal of Medicine found that a large Medicare pilot program that paid providers more if they met certain process targets — and docked pay for those who did poorly — did not reduce short-term patient mortality rates. A version of the program is being rolled out nationally. The authors of the paper called the results “sobering.”

In an editorial published Tuesday in BMJ, formerly known as the British Medical Journal, two public health professors and a best-selling author in the field of behavior economics explain why they think paying doctors more based on quality metrics is inherently problematic.

Hospitals and doctors can easily change their reporting practices to improve their quality scores, they wrote. And financial incentives can undermine doctors’ intrinsic desire to help their patients, Drs. David Himmelstein and Steffie Woolhandler, both professors at City University of New York and visiting professors at Harvard, and Duke University Professor Dan Ariely wrote.

Himmelstein and Woolhandler are long-time advocates for a national health system. Ariely is an author of several books, including The (Honest) Truth about Dishonesty.

“Incentives may mutate honesty into legal trickery; gaming can so thoroughly distort reality that rewards become uncoupled from performance,” they wrote.

The idea that people will be motivated to do better if they are paid more as a result may seem like common sense, but medicine is complex, Himmelstein said. Often the measures used to determine success do not match the conditions of care or patient outcomes the program is meant to address, he said. The editorial points to trouble the government has faced in accurately measuring avoidable readmissions, when patients return to the hospital soon after being discharged because they do not receive the appropriate follow-up care.

Himmelstein said other fields have struggled with pay-for-performance programs. Under national education policy, schools that score poorly on standardized tests receive less funding.

“They’re the ones who need it most,” Himmelstein said. “Is the right reaction to poor quality that those institutions need fewer resources, not more?”



Editorial: Why pay for performance may be incompatible with quality improvement

By Steffie Woolhandler, Dan Ariely and David U. Himmelstein
BMJ, August 14, 2012

Beyond the simple criticism that pay for performance can’t operate on an extended time frame and that years may elapse between treatment and outcome, the concept of pay for performance in healthcare rests on flawed assumptions about medicine, measurement, and motivation. Performance based pay may increase output for straightforward manual tasks. However, a growing body of evidence from behavioral economics and social psychology indicates that rewards can undermine motivation and worsen performance on complex cognitive tasks, especially when motivation is high to begin with.

BMJ editorial ($30 fee for access):


Intuitively, it seems that basing pay on performance, quality, outcomes, or other desirable results would be an improvement that we should look at as we address the very high costs of our health care system. But is this really an answer to our high costs?

Many claim that we should no longer pay for the volume or intensity of services, but pay for good outcomes instead. What is this “instead”? Good medicine requires a lot of intensive labor. The work will have to be done if we expect optimal outcomes.

When we measure performance, quality and outcomes, precisely what are we measuring? For performance, do we use standard protocols for complex clinical presentations? Even with documentation of simple problems, who is to say that the protocol used is correct when the presenting problem may not be as it appears? As an example, a negative streptococcal screening test is used to default to a diagnosis of a “virus” in a person presenting with a sore throat, when actually the person was experiencing the onset of acute leukemia. Measuring this one encounter might score well on performance and quality, when only later would it be discovered that the outcome may be below that of a resolved viral pharyngitis.

We are now seeing a proliferation of accountable care organizations that are to be rewarded with a potion of the savings that they can produce, providing that they achieve certain standards in measuring performance, quality and outcomes. What about that sore throat? Do you order a peripheral smear on everyone with a suspected viral pharyngitis? Of course not. But if it turns out to be leukemia, do you gets points for performance, quality and cost savings, even though you missed the diagnosis, but you saved the cost of a lab test?

The point is that the concept of paying for performance is a diversion from what we should be doing about much more pressing problems: improving access for everyone by removing financial barriers to care, and improving value in our collective health care purchasing by adopting a financing system that will actually provide that value – a single payer national health program. The impact would be immensely more beneficial than any pay-for-performance scheme.

This does not mean that we shouldn’t continue to try to develop methods of improving performance, quality, and outcomes. Of course we should. That is and always has been a primary goal in the art and science of medicine. What it does mean is that we should not use performance measures as a decoy to distract us from our most urgent goal – an improved Medicare for all.

HCA hasn’t changed

Posted by on Wednesday, Aug 15, 2012

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 Giant Hospital Chain Is Blazing a Profit Trail

By Julie Creswell and Reed Abelson
The New York Times, August 14, 2012

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.

HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.

As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.


Nobody expected the for-profit HCA hospital chain to change its fundamental practices. It hasn’t. It is an investor-owned corporation designed to make money, which it does very effectively. The PNHP model of single payer reform calls for an end to for-profit, investor-owned corporations in health care. You need only to read this fairly long article to understand why.

NAIC consumers’ report on ACA’s private insurance reforms

Posted by on Tuesday, Aug 14, 2012

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.

Implementing the Affordable Care Act’s Insurance Reforms: Consumer Recommendations for Regulators and Lawmakers

National Association of Insurance Commissioners (NAIC)
August 2012

These materials were prepared to assist regulators, lawmakers, and the National Association of Insurance Commissioners (NAIC) during ongoing implementation of the comprehensive insurance reforms called for by the Patient Protection and Affordable Care Act of 2010 (ACA). The purpose of these recommendations is to convey the perspectives of consumer advocates on appropriate standards and guidelines for implementing these reforms, which will go into effect in 2014.

These recommendations are limited to the ACA’s insurance reforms and do not address other critical reforms of equal importance to the consumer representatives and millions of consumers, such as the expansion of the Medicaid program, the implementation of health insurance exchanges, the availability of federal subsidies, and the need for meaningful consumer outreach and education, among others.

Table of Contents

Guaranteed Issue and Guaranteed Renewal
Elimination of Preexisting Condition Exclusions
Rating Reforms
Definition of the Small Group Market
Limitation on Waiting Periods
Coverage for Participating in Approved Clinical Trials
Essential Health Benefits, Including State-Mandated Benefits
Actuarial Value, Limitations on Cost-Sharing, and Catastrophic Coverage
Stop Loss and Self-Insurance
Limited Medical Benefit Plans
Risk Adjustment
Risk Corridors


You likely don’t have time for this now, but this report is so important that you should download it now, or at least keep the link for later downloading. If nothing else, when you have time, you should read the six page executive summary of the recommendations.

So what is this that makes it so important? It is a report prepared for the National Association of Insurance Commissioners by respected authorities who represent consumer interests (that is, patients). It discusses details of reforms of private insurance that should be considered as the Affordable Care Act is implemented.

It is important to understand the complexities and interactions of the various private insurance reforms that should be considered. Two things are clear: 1) They will never get the details aligned such that the final product will serve the best interests of patients, and 2) The complexities leave wide open the opportunities for the private insurance industry to game the system – obviously for their own benefit and not for the benefit of patients.

This report does not address many other important issues such as the changes in Medicaid, the complexities of the private insurance premium and out-of-pocket subsidies, the fate of the 30 million who will remain uninsured, and, most importantly, how this highly flawed, outrageously expensive, and highly fragmented model of reform is the worst model to try to best serve the interests of consumers (oh yes, patients).

Maybe it’s time for someone to write that much needed paper, “It’s the Private Insurers, Stupid!”

Blue Shield’s contract dispute with University of California hospitals

Posted by on Monday, Aug 13, 2012

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 Shield, UCLA end long health insurance dispute

By Chad Terhune
Los Angeles Times, August 10, 2012

Nonprofit insurer Blue Shield of California said it resolved a lengthy contract dispute with UCLA and other UC system hospitals over reimbursements for patient care.

The previous contract expired Dec. 31 as the two sides bickered over rising medical costs. These disputes have become more common across the country as some insurers try to rein in healthcare costs and major hospitals exert their market power to maintain adequate reimbursements.

Contract talks broke down between UCLA and Blue Shield in 2006 and 2008 as well.



Blue Shield top executives’ pay changed little in 2011

By Chad Terhune
Los Angeles Times, August 11, 2012

Nonprofit insurer Blue Shield of California said its outgoing chief executive earned $4.6 million last year, off slightly from a year earlier, as all insurance companies faced new government rules on how customer premiums are spent.

The San Francisco company declined to comment on the value of Bodaken’s retirement pay and benefits or to reveal the pay package of his successor. Paul Markovich, chief operating officer, will take over as CEO Jan. 1.


We should be able to agree that a health care financing system should be designed to optimally serve the health care needs of the patient. Under the private insurance model of health care financing, there should be no better example as to how that might work than non-profit Blue Shield of California’s coverage of care at the public University of California academic medical centers. Surely, a large non-profit traditional insurer and a system of public university health centers would collaborate to serve patients first.

California’s Blue Cross set the stage. It converted to a for-profit corporation, and then engaged in practices to improve investor return. An important part of their strategy was to impose contract restrictions on both patients and providers. To remain competitive, Blue Shield adopted the same strategies, blurring the distinction between the for-profit and non-profit Blues in California.

There are clinical situations in which the most appropriate care would be provided at one of California’s prestigious university medical centers. A health care financing system that was designed in the patients’ best interests would ensure access to these centers when appropriate. But that is not what happened in this instance when disputes arose over contract terms on the provider side. Though there was no dispute on the patient side of the contracts, Blue Shield patients nevertheless were potentially exposed to severe financial penalties should they access care at the university centers.

So this is what we get with the best in private insurance financing – contract disputes that are disruptive to patient care. If a single payer system – an improved Medicare – were our only program, spending would be priced right, based on global budgets and negotiated rates. Patients would no longer be restricted to contracted networks imposed on them by private insurers. Instead, patients would consult with health care professionals of their own choice and would receive care in facilities that best served their own medical needs, rather than in facilities that best complied with the business plans of private insurers.

Why do we keep paying private insurers for their expensive administrative services that they use to impede our access to care? That’s not very smart.

Paul Ryan on single payer

Posted by on Saturday, Aug 11, 2012

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.

Paul Ryan on single payer:


Res ipsa loquitur.

Pharmaceutical R&D – its cost and what it delivers

Posted by on Friday, Aug 10, 2012

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.

Pharmaceutical research and development: what do we get for all that money?

By Donald W Light, Joel R Lexchin
BMJ, August 7, 2012

Data indicate that the widely touted “innovation crisis” in pharmaceuticals is a myth. The real innovation crisis, say Donald Light and Joel Lexchin, stems from current incentives that reward companies for developing large numbers of new drugs with few clinical advantages over existing ones.

The “innovation crisis” myth

The constant production of reports and articles about the so called innovation crisis rests on the decline in new molecular entities (defined as “an active ingredient that has never been marketed . . . in any form”) since a spike in 1996 that resulted from the clearance of a backlog of applications after large user fees from companies were introduced. This decline ended in 2006, when approvals of new molecular entities returned to their long term mean of between 15 and 25 a year.

The real innovation crisis

More relevant than the absolute number of new drugs brought to the market is the number that represent a therapeutic advance. Although the pharmaceutical industry and its analysts measure innovation in terms of new molecular entities as a stand-in for therapeutically superior new medicines, most have provided only minor clinical advantages over existing treatments.

How much does research and development cost?

Although the pharmaceutical industry emphasises how much money it devotes to discovering new drugs, little of that money actually goes into basic research. Data from companies, the United States National Science Foundation, and government reports indicate that companies have been spending only 1.3% of revenues on basic research to discover new molecules, net of taxpayer subsidies. More than four fifths of all funds for basic research to discover new drugs and vaccines come from public sources. Moreover, despite the industry’s frequent claims that the cost of new drug discovery is now $1.3bn (£834m; €1bn), this figure, which comes from the industry supported Tufts Center, has been heavily criticised. Half that total comes from estimating how much profit would have been made if the money had been invested in an index fund of pharmaceutical companies that increased in value 11% a year, compounded over 15 years. While used by finance committees to estimate whether a new venture is worth investing in, these presumed profits (far greater than the rise in the value of pharmaceutical stocks) should not be counted as research and development costs on which profits are to be made. Half of the remaining $0.65bn is paid by taxpayers through company deductions and credits, bringing the estimate down to one quarter of $1.3bn or $0.33bn. The Tufts study authors report that their estimate was done on the most costly fifth of new drugs (those developed in-house), which the authors reported were 3.44 times more costly than the average, reducing the estimate to $90m. The median costs were a third less than the average, or $60m. Deconstructing other inflators would lower the estimate of costs even further.

Hidden business model

Although the industry’s vast network of public relations departments and trade associations generate a large volume of stories about the so called innovation crisis, the key role of blockbuster drugs, and the crisis created by “the patent cliff,” the hidden business model of pharmaceuticals centres on turning out scores of minor variations, some of which become market blockbusters.

Myth of unsustainable research and development

Complementing the stream of articles about the innovation crisis are those about the costs of research and development being “unsustainable” for the small number of new drugs approved. Both claims serve to justify greater government support and protections from generic competition, such as longer data exclusivity and more taxpayer subsidies. However, although reported research and development costs rose substantially between 1995 and 2010, by $34.2bn, revenues increased six times faster, by $200.4bn. Companies exaggerate costs of development by focusing on their self reported increase in costs and by not mentioning this extraordinary revenue return. Net profits after taxes consistently remain substantially higher than profits for all other Fortune 500 companies.

Towards more cost effective, safer medicines

What can be done to change the business model of the pharmaceutical industry to focus on more cost effective, safer medicines? The first step should be to stop approving so many new drugs of little therapeutic value. The European Medicines Agency (EMA) does Europe a disservice by approving 74% of all new applications based on trials designed by the companies, while keeping data about efficacy and safety secret. Twenty nine per cent of new biologicals approved by the EMA received safety warnings within the first 10 years on the market, and therapeutically similar drugs by definition have no advantages to offset their unknown risk of increased harm. We need to revive the Norwegian “medical need” clause that limited approval of new drugs to those that offered a therapeutic advantage over existing products. This approach led to Norway having seven non-steroidal anti-inflammatory drugs on the market compared with 22 in the Netherlands. Norway’s medical need clause was eliminated in 1996 when it harmonised its drug approval process with that in the EU. EU countries are paying billions more than necessary for drugs that provide little health gain because prices are not being set to reward new drugs in proportion to their added clinical value.

We should also fully fund the EMA and other regulatory agencies with public funds, rather than relying on industry generated user fees, to end industry’s capture of its regulator. Finally, we should consider new ways of rewarding innovation directly, such as through the large cash prizes envisioned in US Senate Bill 1137 (Sen. Bernie Sanders), rather than through the high prices generated by patent protection. The bill proposes the collection of several billion dollars a year from all federal and non-federal health reimbursement and insurance programmes, and a committee would award prizes in proportion to how well new drugs fulfilled unmet clinical needs and constituted real therapeutic gains. Without patents new drugs are immediately open to generic competition, lowering prices, while at the same time innovators are rewarded quickly to innovate again. This approach would save countries billions in healthcare costs and produce real gains in people’s health.


This important BMJ article by Donald Light and Joel Lexchin gives us the background that explains why we have the feeling that the pharmaceutical firms are gouging us with outrageous pricing, in spite of their excuse that these prices are necessary to support their research and development – an excuse that seems not to hold water.

The pharmaceutical industry wants less government involvement (except for the research money), when what we need is much more government involvement. Under a single payer system that included pharmaceuticals, prices would be negotiated based on truly legitimate costs plus fair profits, and not based on wasteful expenses such as product research designed primarily to reset the patent clock.

As Light and Lexchin explain, even the European nations would benefit with a greater regulatory role in improving value though such measures as determining medical need of new products. But just think how much better off we would be in the United States if we would just get past the concept that we must go all out to protect the sacred marketplace – a concept that has allowed the pharmaceutical firms to continue to plunder us.

Dutch insurer intends to block single payer for Slovakia

Posted by on Thursday, Aug 9, 2012

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.

Slovakia wants to nationalise private health insurers

Private Healthcare UK
August 6, 2012

Slovakia’s prime minister Robert Fico plans to reduce national healthcare to a single state-owned insurer by 2014, and this would mean the nationalisation of two private health insurers or buying them.

The government wants to introduce a system of one health insurer instead of several health insurers. Fico says, “Privately-owned health insurers should leave the Slovak market. Slovakia’s health care system has been suffering from a lack of funding, while private insurers turn a profit based on public money.”

The current health care system in Slovakia is a form of private-public partnership, where all Slovaks pay a healthcare tax of 14%, and can choose cover provided by one of the three providers, who provide cost-free treatment.

The two private health insurers, Union, owned by Dutch insurer Achmea, and Dovera, controlled by Slovak-Czech private equity group Penta Investments, provide cover for 1.8 million of a total 5.4 million Slovakians. The state owned General Health Insurance Company, better known as VsZP, provides cover for the remaining 3.6 million.

As a local company, Penta has to be very careful what they say and so has said it will listen to government plans.

But Achmea has said it will use all official and legal channels to protect the business interests of Union, and is not interested in selling Union or its portfolio to the state. If it invokes EU law on protectionism it could take many years for any legal battle to be concluded, and as a large EU health insurer Achmea has the financial and political muscle to thwart tiny Slovakia.


Slovakia has a health insurance program covering everyone, financed by a payroll tax. But Slovakians can choose one of two private insurers in place of their public plan. Slovakia’s prime minister now wants to end the diversion of public money to profits of the private insurers, so all funds are spent on health care.

Many in the United States who support private insurance have praised the Dutch system of private health plans, but you really have to question the moral authority of these plans when a large Dutch private insurer intends use EU law to force Slovakia to continue to use its unwanted insurance product.

Yet our political leaders in the United States want to keep the private insurers in charge. It seems that Slovakia has some valuable lessons for us.

Is the federal employees health program anti-competitive?

Posted by on Wednesday, Aug 8, 2012

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.

OPM seeks more competition for employee health plans

By Joe Davidson
The Washington Post, August 6, 2012

The Obama administration is considering fundamental changes to the Federal Employees Health Benefits program (FEHB), which is generally regarded as something Uncle Sam does right.

Yet, the Office of Personnel Management (OPM) thinks the good thing could be even better by giving workers more choice in health insurance companies. The OPM wants to do that by reviving legislation proposed during the George W. Bush administration.

“While the FEHB model has withstood the test of time and influenced the direction of health reform, the competitive environment is not as robust as it could be,” says an unsigned OPM briefing paper obtained by The Washington Post. “The health insurance market has changed dramatically over the last 50 years, but . . . the FEHB program lacks the flexibility to adjust in response to the changing market.”

Specifically, the OPM paper, which has circulated recently among congressional and industry officials, expresses concern about the growing dominance and market concentration of Blue Cross Blue Shield and the departure or diminished role of other health plans.

Two Blue Cross Blue Shield plans, standard and basic, together serve about 62 percent of the federal employee market. The next five largest plans cover 22 percent.

In a June article about health exchanges under the Affordable Care Act, Health Affairs says that although insurance plans are widely available in FEHB, “enrollment was concentrated in plans owned by just a few organizations, typically Blue Cross/Blue Shield plans.” Health insurance premiums, the article continued, were lower “where competition was extremely high” and higher “where competition was extremely low.”

FEHB “continues to be the gold standard for health insurance, offering far more choices and competition than other large employers,” said Alissa Fox, a senior vice president of the Blue Cross and Blue Shield Association.

She goes on to offer an argument that runs counter to the basic notion of capitalism. Increased competition, in this case, will result in increased prices, according to Fox. The regional plans could “cherry pick” low-cost regions, argues a Blue Cross Blue Shield paper, resulting in national plans being forced to charge higher premiums to cover higher-cost regions.

“Within a few years, the nationwide plans will become non-competitive and stop offering nationwide coverage all together,” the Blue Cross Blue Shield paper says. “This may leave certain areas of the country underserved.”

More competition might be better in theory, but that theory falls short with FEHB, says Jacqueline Simon, public policy director for the American Federation of Government Employees. Arguments on both sides of this debate are invalid, she said, “unless and until there is one standard benefits package that all plans must provide, plans will not be competing on price and/or quality, and those are the only things that matter.”


OPM paper:

BlueCross BlueShield Association perspective:

Many in the policy community have claimed for decades that employer-sponsored plans offer the best benefits and the greatest value in health care coverage, and that the largest of all programs – the Federal Employees Health Benefits Program (FEHBP) – is the very best, with the greatest competition and the greatest value.

The position papers from the Office of Personnel Management (OPM) and from the BlueCross BlueShield Association (BC/BS) cast serious doubt on whether private plan competition is providing us with the best value. OPM claims that the dominance of BC/BS is anti-competitive and results in higher than necessary insurance premiums. BC/BS claims that introducing more competition on a regional level will result in adverse selection, forcing national plans (i.e., BC/BS) to charge higher premiums to cover higher-cost regions.

The point is obvious. The very best that we have in competition of private health plans – FEHBP – doesn’t work well since it still is anti-competitive and exhibits adverse selection.

If the very best can’t do it right, why do our policy makers insist on sticking with this flawed model? One model that worked very well and avoided these unsound policies was the traditional Medicare program, that is until private Medicare Advantage plans were introduced into the mix. We now see anti-competitive plan concentration (United Health) and well-documented adverse selection favoring the private plans while sticking taxpayers with a larger Medicare bill.

Let’s get rid of the private plans, including the private Medicare Advantage plans, and then, under our own improved Medicare for all program, we would no longer have to deal with market concentration and adverse selection.

Low cognitive ability impairs enrollment in Medicare supplemental plans

Posted by on Tuesday, Aug 7, 2012

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.

Low Cognitive Ability And Poor Skill With Numbers May Prevent Many From Enrolling In Medicare Supplemental Coverage

By Sewin Chan and Brian Elbel
Health Affairs, August 2012


Because traditional Medicare leaves substantial gaps in coverage, many people obtain supplemental coverage to limit their exposure to out-of-pocket costs. However, some Medicare beneficiaries may not be well equipped to navigate the complex supplemental coverage landscape successfully because of their lower cognitive ability or numeracy—that is, the ability to work with numbers. We found that people in the lower third of the cognitive ability and numeracy distributions were at least eleven percentage points less likely than those in the upper third to enroll in a supplemental Medicare insurance plan. This result means that many Medicare beneficiaries do not have the financial protections and other benefits that would be available to them if they were enrolled in a supplemental insurance plan. Our findings suggest that policy makers may want to consider alternatives tailored to these high-need groups, such as enhanced education and enrollment programs, simpler sets of plan choices, or even some type of automatic enrollment with an option to decline coverage.

From the Conclusion

Many public policies focus on individual choice as a means of determining exactly how benefits should be distributed or of assuring that a policy has maximal effectiveness. Inherent in all of these policies is the assumption that all or most people have the mental capacity to make the choices that are in their best interest. We have shown that many people do not have this capacity and that this deficiency can affect their choices in adverse ways.

Overall, people in the lower third of the cognitive ability distribution were six to twenty-three percentage points less likely to enroll in a supplemental Medicare insurance plan than those in the upper third of the cognitive ability distribution, even after controlling for a host of other variables. Furthermore, the chance of enrolling in a supplemental Medicare insurance plan was approximately five percentage points lower for those in the lower third of the numeracy distribution than for those in the upper third.

These problems were most pronounced for those with low incomes, low wealth, and multiple chronic illnesses, where the likelihood of enrollment was forty percentage points lower for the least cognitively able, and an additional thirteen percentage points lower for those with weak numeracy skills. People who are chronically ill and those who do not have the financial ability to self-insure against substantial out-of-pocket costs would almost certainly be better off enrolling in supplemental insurance plans.

The magnitude of our findings on cognitive ability and numeracy was sizable, particularly compared to the influence of health on enrollment decisions. By way of comparison, if we add together the estimated effect on enrollment for people who were hospitalized in the past year and those with three or more chronic illnesses, the sum is still considerably less than the negative effect of being in the bottom third of the cognitive ability distribution.

Given the difficulty associated with making good choices, addressing the problem of low cognitive ability and numeracy is important, and not only for Medicare. Health care reform is likely to increase the set of decisions to be made, particularly for the newly insured. Unless there is comprehensive insurance coverage in which all services are covered and the issue of coverage choices is redundant, understanding the role of cognitive ability and numeracy in making these decisions is essential.


This study demonstrates that low cognitive ability decreases enrollment in supplemental Medicare insurance plans, preventing these individuals from having the financial protections and other benefits of supplemental coverage. Other studies have shown that this results in impaired outcomes.

Although the authors recommend approaches that would improve enrollment while preserving choice, they end with a statement that begins, “Unless there is comprehensive insurance coverage in which all services are covered and the issue of coverage choices is redundant…”

Of course, an expanded and improved Medicare which, amongst other improvements, would roll into the benefit package the coverage provided by supplemental plans, would obviate the need to make any choices since all reasonable services would be covered. Low cognitive ability and poor skill with numbers would no longer be determinants in whether or not a person had adequate coverage. Everyone would automatically.

Fireworks! Orchestras! and dancing doctors!

Posted by on Monday, Aug 6, 2012

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.

Fireworks! Orchestras! and dancing doctors!

Health Care – A Counter-Ceremony Honoring America’s Health Care System

By Kevin Horrigan
St. Louis Post-Dispatch, August 5, 2012

“Perhaps not surprisingly in a country where health care reform is so controversial, it was the high-profile presence of the NHS that stunned many American writers…. Certainly the U.S. equivalent, which would be dancing health insurance corporate executives, was hard to imagine.”

— Paul Harris, in The Guardian, June 28

Hah, hah, hah. Very funny. It’s not hard at all to imagine what the “U.S. equivalent” to your Olympic Opening Ceremony’s salute to Britain’s National Health Service would look like. I’m already working on it.

Sure, “dancing health insurance corporate executives” will be part of it. If you’d made that much money last year, you’d want to dance, too.

“Executives in the top spots at the country’s seven largest publicly traded health plans were paid a collective $87 million for their services in 2011,” American Medical News reported in May.

Picture this: It’s night in Florida. We’re in a darkened Raymond James Stadium in Tampa, jammed with 66,000 delegates to the Republican National Convention and their guests. A spotlight illuminates the stage. The seven top health care CEOs, carrying canes and dressed in white top hats and tails, prance on stage as the Mormon Tabernacle Choir sings “Puttin’ on the Ritz.”

Pretty nice, huh? And that’s just the start.

The spotlight widens to show 94 primary care doctors, in multi-colored scrub suits, forming a ring around David Cordani, the CEO of Cigna Health Care, bowing and scraping to honor the fact that at $19.1 million, Cordani made more in 2011 than all 94 of them combined.

The orchestra breaks into Gershwin’s “It Ain’t Necessarily So” as the stadium floor is lighted, revealing 400 actual health insurance bureaucrats wearing telephone headsets and sitting at small desks. They shake their heads back and forth in our “Salute to Rescission.”

The crowd erupts, because fans know that if Republicans repeal the Affordable Care Act, God will be in his heaven, all will be right with the world and insurance companies once again will be allowed to retroactively cancel coverage when someone needs it.

But now! What’s that? Lights around the stadium’s upper tier are forming a large donut, signifying the “Medicare donut hole” that will return once “Obamacare” is eliminated, thus insuring that drugs for anything between basic coverage and catastrophe are not covered. The orchestra swings into “Live and Let Die.”

Cannons in the end zones fire clouds of pills into the sky. As they fall to the floor, out of the stadium tunnels limp thousands of senior citizens who are allowed to scrounge for the pills. But only for three minutes, because it’s time for our….

Tribute to the ER! Giant video boards flash the image of former President George W. Bush uttering these immortal words in 2007: “I mean, people have access to health care in America. After all, you just go to an emergency room.”

The theme from the TV show “ER” comes up as sirens wail, ambulances and EMS trucks tear around the stadium floor, disgorging patients into the busy “emergency department” on center stage, already jammed with insured adults and children who have no primary care doctors.

Our ER “treats” them and send them on their way with big weights (symbolizing hospital bills) strapped to their backs, which they then pass to the people in the crowd — who are delighted to get them!

On guy-wires stretched across the top of the stadium a huge number “17.6” sparkles in gold and silver lights. It represents the percentage of the gross domestic product devoted to health care — 8 percent higher than the Brits. The music swells into Creed’s “Can You Take Me Higher?”

The crowd sings along, waving 66,000 foam “We’re Number 1” fingers, signaling America’s status as the nation with the most expensive health care in the world — 2.4 times more expensive than the silly Brits.

KA-BOOM! go the fireworks. We crane our heads skyward to see a giant figure “37,” symbolizing the World Health Organization’s ranking of the American health care system.

The big finale: With the crowd’s attention diverted skyward, volunteers — all of them from health insurance companies — have erected cardboard cutouts of men, women, children and babies around the floor of the stadium. There are so many of them — 45,000 — that they loop around the field in a squiggly line almost a mile long.

They represent the 45,000 Americans whose lack of health insurance contributes to their premature death each year, according to a 2009 study by the Harvard Medical School. Now riding into the stadium atop Rafalca, his wife’s Olympic dressage horse, is Mitt Romney, who will be nominated for president on the following night.

He guides the mare’s nose to the first cardboard figure. A simple nudge and, like dominoes, they topple over in spectacular sequence. The crowd goes wild.


Of course, depending on what happens in November, we could see an alternative “big finale.”

Obama could enter the stadium on his trusty steed “Single Payer,” and immediately run into the obscure maze of “Machinery Politics,” knocking Obama off of “Single Payer” who is immediately diverted to the glue factory as Obama remounts on “Pragmatic Incrementalist” who saunters over and nudges the first of 30,000 cardboard cutouts. The crowd goes wild (though only those sitting in the far left saw what really happened).

We’re going to have to do something about that crowd!

(They say that practical jokes have to be executed absolutely perfectly or you shouldn’t even try them. There is something about the domino cascade of 30,000 to 45,000 cutouts of American men, women, children and babies that just doesn’t sit well. Can we ever get the crowd to understand?)

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