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.
Sunday Dialogue: The Future of Medicare
The New York Times, February 23, 2013
Readers weigh in on problems with the health care program:
Canada’s Medicare program — phased in at the same time as the American version — shows how we can make Medicare simpler and thriftier, while simultaneously upgrading its coverage. Canada’s program covers all Canadians (not just the elderly) under a single public program in each province, and bans co-payments and deductibles.
Patients can choose any doctor and hospital. Cutting out private insurers and the complexity and fragmentation they impose has simplified paperwork for patients, doctors and hospitals. Administrative costs are roughly half United States levels, saving more than $1,000 per capita.
Over all, Medicare spending on the elderly has grown three times faster in the United States than in Canada since 1980, while life expectancy (for the elderly, as for all age groups) has grown faster in Canada. If American Medicare costs had risen at Canadian rates, we’d have saved more than $2 trillion by now, and Medicare’s trust fund would show a healthy surplus.
DAVID U. HIMMELSTEIN
New York, Feb. 20, 2013
The writers, internists and professors at the CUNY School of Public Health at Hunter College, co-founded Physicians for a National Health Program.
Medicare is headed for bankruptcy because it depends largely on open-ended fee-for-service payment of almost any services providers choose to deliver, at prices mainly determined by the providers. Compounding the problem, most providers act like independent businesses seeking to increase their income, regardless of whether they are for-profit or investor-owned.
An effective Medicare fix would require a new payment system that prospectively pays providers for comprehensive care at a rate set by a single public payer. It would also need a not-for-profit medical care system based on multispecialty doctor groups that pay physicians by salary, thus minimizing incentives to deliver duplicative or unnecessary care.
The new system would have to be mandatory for all citizens, including legislators, and it would have to be financed by a progressive, earmarked health care tax.
Obviously, such reform would be slow and difficult, but so would any other change that threatened vested interests. All reform will depend on an aroused public opinion.
ARNOLD S. RELMAN
Tucson, Feb. 21, 2013
The writer is professor emeritus of medicine and social medicine at Harvard Medical School and a former editor in chief of The New England Journal of Medicine.
At a time when Congress and the Obama administration are contemplating a reduction in Medicare spending as a means of paring down our national budget deficit, it is important to remind the nation of the beneficial changes that we could be making to the Medicare program that would bring affordable, high quality care to everyone under a single payer Medicare budget that we could afford. The messages of Steffie Woolhandler, David Himmelstein and Arnold Relman need to drown out the messages of those who would send Medicare down the wrong path.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
States Can Cut Back on Medicaid Payments, Administration Says
By Robert Pear
The New York Times, February 25, 2013
The Obama administration said Monday that states could cut Medicaid payments to many doctors and other health care providers to hold down costs in the program, which insures 60 million low-income people and will soon cover many more under the new health care law.
The administration’s position, set forth in a federal appeals court in California, has broad national implications as it comes as the White House is trying to persuade states to expand Medicaid as part of the new law.
In a brief filed with the United States Court of Appeals for the Ninth Circuit, in San Francisco, federal officials defended a decision by California to cut Medicaid payments to many providers by 10 percent.
Kathleen Sebelius, the secretary of health and human services, approved the cuts in October 2011 after finding that beneficiaries would still have “adequate access” to the wide range of services covered by Medicaid.
The Obama administration urged judges to uphold those cuts, which are being challenged by patients, doctors, dentists, hospitals, pharmacists and other health care providers in California.
Health care providers said California’s payment rates were inadequate even before the cuts. They pointed to a federal study that said, “California stands out because of its very low Medicaid payment levels.”
In an interview, Gov. Jerry Brown of California, a Democrat, said the Medicaid cuts were essential to his efforts to dig the state out of a budget hole.
Federal law says Medicaid rates must be “sufficient to enlist enough providers” so that Medicaid beneficiaries have access to care at least to the same extent as the general population in the same geographic area.
Moreover, the administration said, Congress gave states “wide discretion” to set Medicaid rates, and courts should not second-guess decisions by Secretary Sebelius on the adequacy of rates.
“There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs,” the administration said.
Healthcare overhaul may threaten California’s safety net
By Anna Gorman
Los Angeles Times, February 25, 2013
An estimated 3 million to 4 million Californians — about 10% of the state’s population — could remain uninsured even after the healthcare overhaul law takes full effect. The burden of their care will fall to public hospitals, county health centers and community clinics. And those institutions may be in jeopardy.
County health leaders and others say the national health law has had the unintended consequence of threatening the financial stability of the state’s safety net.
And under the federal law, some of the funding that goes to safety-net hospitals is also set to decrease.
Now, as the state scrambles to create the new healthcare infrastructure, Gov. Jerry Brown is proposing to take back another crucial pot of money that counties have depended on for more than two decades to care for the uninsured.
California has been a leader in setting national trends in health care financing. Two developments should have low-income patients very concerned. California’s Medicaid program is critically underfunded, and the state is reducing payment rates by another ten percent. Also, the state is reducing funding for local safety-net institutions which provide critical access for low-income populations.
Perhaps the most alarming of all is the official response of the Obama administration (in an appeals court filing): “There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs.”
We have said over and over again that Medicaid, as a welfare program, will never have the political support to fund it adequately. The burden of the additional load of Medicaid patients will surely find the health care resources strained beyond the capacity of willing providers, especially when you consider that California already is not meeting the costs of providing care to this vulnerable population. And the 3 to 4 million Californians who will remain uninsured will need to rely on the safety-net institutions, though those institutions also are in jeopardy – again because of the lack of political support for welfare programs.
If California is successful with its cruel budget trimming, it can be anticipated that many more states will follow.
Here’s an amazing fact: Low income patients do not have the money to pay for health care. (What an intuitive stroke of genius!) What they need is an affordable system that removes financial barriers to care while ensuring adequate financing of our entire health care delivery system, thereby removing health system disincentives to providing essential care for this vulnerable population. Make that for all of us.
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.
Bitter Pill: Why Medical Bills Are Killing Us
By Steven Brill
TIME, February 20, 2013
The Way Out Of the Sinkhole
“I was driving through central Florida a year or two ago,” says Medicare’s (Jonathan) Blum. “And it seemed like every billboard I saw advertised some hospital with these big shiny buildings or showed some new wing of a hospital being constructed … So when you tell me that the hospitals say they are losing money on Medicare and shifting costs from Medicare patients to other patients, my reaction is that Central Florida is overflowing with Medicare patients and all those hospitals are expanding and advertising for Medicare patients. So you can’t tell me they’re losing money … Hospitals don’t lose money when they serve Medicare patients.”
If that’s the case, I asked, why not just extend the program to everyone and pay for it all by charging people under 65 the kinds of premiums they would pay to private insurance companies? “That’s not for me to say,” Blum replied.
In the debate over controlling Medicare costs, politicians from both parties continue to suggest that Congress raise the age of eligibility for Medicare from 65 to 67. Doing so, they argue, would save the government tens of billions of dollars a year. So it’s worth noting another detail about the case of Janice S., which we examined earlier. Had she felt those chest pains and gone to the Stamford Hospital emergency room a month later, she would have been on Medicare, because she would have just celebrated her 65th birthday.
If covered by Medicare, Janice S.’s $21,000 bill would have been deeply discounted and, as is standard, Medicare would have picked up 80% of the reduced cost. The bottom line is that Janice S. would probably have ended up paying $500 to $600 for her 20% share of her heart-attack scare. And she would have paid only a fraction of that — maybe $100 — if, like most Medicare beneficiaries, she had paid for supplemental insurance to cover most of that 20%.
In fact, those numbers would seem to argue for lowering the Medicare age, not raising it — and not just from Janice S.’s standpoint but also from the taxpayers’ side of the equation. That’s not a liberal argument for protecting entitlements while the deficit balloons. It’s just a matter of hardheaded arithmetic.
As currently constituted, Obamacare is going to require people like Janice S. to get private insurance coverage and will subsidize those who can’t afford it. But the cost of that private insurance — and therefore those subsidies — will be much higher than if the same people were enrolled in Medicare at an earlier age. That’s because Medicare buys health care services at much lower rates than any insurance company. Thus the best way both to lower the deficit and to help save money for people like Janice S. would seem to be to bring her and other near seniors into the Medicare system before they reach 65.
Meanwhile, adding younger people like Janice S. would lower the overall cost per beneficiary to Medicare and help cut its deficit still more, because younger members are likelier to be healthier.
If that logic applies to 64-year-olds, then it would seem to apply even more readily to healthier 40-year-olds or 18-year-olds. This is the single-payer approach favored by liberals and used by most developed countries.
Yet while Medicare may not be a realistic systemwide model for reform, the way Medicare works does demonstrate, by comparison, how the overall health care market doesn’t work.
Unless you are protected by Medicare, the health care market is not a market at all. It’s a crapshoot. People fare differently according to circumstances they can neither control nor predict. They may have no insurance. They may have insurance, but their employer chooses their insurance plan and it may have a payout limit or not cover a drug or treatment they need. They may or may not be old enough to be on Medicare or, given the different standards of the 50 states, be poor enough to be on Medicaid. If they’re not protected by Medicare or they’re protected only partly by private insurance with high co-pays, they have little visibility into pricing, let alone control of it. They have little choice of hospitals or the services they are billed for, even if they somehow know the prices before they get billed for the services. They have no idea what their bills mean, and those who maintain the chargemasters couldn’t explain them if they wanted to. How much of the bills they end up paying may depend on the generosity of the hospital or on whether they happen to get the help of a billing advocate. They have no choice of the drugs that they have to buy or the lab tests or CT scans that they have to get, and they would not know what to do if they did have a choice. They are powerless buyers in a seller’s market where the only sure thing is the profit of the sellers.
Indeed, the only player in the system that seems to have to balance countervailing interests the way market players in a real market usually do is Medicare. It has to answer to Congress and the taxpayers for wasting money, and it has to answer to portions of the same groups for trying to hold on to money it shouldn’t. Hospitals, drug companies and other suppliers, even the insurance companies, don’t have those worries.
Steven Brill’s TIME article, “Bitter Pill: Why Medical Bills Are Killing Us,” seems to be awakening those who have, until now, accepted the very high prices of health care as an inevitability for having a technologically advanced health care system here in the United States.
In his 36 page article – which will surely be required reading in many health policy courses – Brill makes it clear that we no longer need to take the “bitter pill” of medical bills that are killing us. Clearly, Medicare already has several tools to control costs and has the potential for further improving value in the nation’s health care purchasing.
At the end of his article, Brill seems to be advancing a non sequitur when he writes, “The real issue isn’t whether we have a single payer or multiple payers. It’s whether whoever pays has a fair chance in a fair market… We don’t have to scrap our system and aren’t likely to.” This certainly does not follow from what he had to say as the central theme of his article.
He then recommends some tired or inadequate remedies that would have very little impact on the problems that we face in health care. What is ironic is that he has built a tremendous case for the logical solution – an improved Medicare for all – and then he seems to dismiss it. You cannot read his article and escape the conclusion that a single payer national health program is an absolute imperative, that is, if we really do want affordable care for everyone.
Download this article (the full 36 pages is available for free at the link above), and share it with others. But put a Post-it note on it that states: WARNING! For the health of our nation, ignore the section at the end titled “Changing Our Choices” (that’s the tired remedies section), but concentrate on what an improved Medicare system could do for all of us.
State Innovation Models Initiative: General Information
Centers for Medicare and Medicaid Services
Center for Medicare and Medicaid Innovation, February 2013
The State Innovation Models Initiative is providing up to $300 million to support the development and testing of state-based models for multi-payer payment and health care delivery system transformation with the aim of improving health system performance for residents of participating states. The projects will be broad based and focus on people enrolled in Medicare, Medicaid and the Children’s Health Insurance Program (CHIP).
The Innovation Center created the State Innovation Models initiative for states that are prepared for or committed to planning, designing, testing, and supporting evaluation of new payment and service delivery models in the context of larger health system transformation. The Innovation Center is interested in testing innovative payment and service delivery models that have the potential to lower costs for Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), while maintaining or improving quality of care for program beneficiaries. The goal is to create multi-payer models with a broad mission to raise community health status and reduce long term health risks for beneficiaries of Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).
For more information, click on “Fact Sheet: State Innovation Models Initiative” at this link: http://innovation.cms.gov/initiatives/State-Innovations/
State Receives $937,691 Grant to Continue Healthcare Transformation Efforts
State of Hawaii, February 21, 2013
The State of Hawaii once again has an opportunity to demonstrate its leadership in healthcare transformation. The Centers for Medicare and Medicaid Services (CMS) today announced that Hawaii was awarded a planning grant worth $937,691 as part of the agency’s State Innovations Model (SIM) initiative.
Beginning April 1, the state will have six months to design and submit a State Healthcare Innovation Plan, built around multipayer payment and healthcare delivery system transformation.
“Transforming our state’s healthcare system continues to be a focus of my New Day plan, and under the leadership of Beth Giesting, the state’s healthcare transformation coordinator, we’ve made great strides over the last year,” said Gov. Neil Abercrombie.
Section 3021 of the Affordable Care Act establishes the Center for Medicare and Medicaid Innovation. Its purpose is “to test innovative payment and service delivery models to reduce program expenditures under the applicable titles (Medicare and Medicaid) while preserving or enhancing the quality of care furnished to individuals under such titles.”
The law lists “opportunities” for models to be tested, including “allowing states to test and evaluate systems of all-payer payment reform for the medical care of residents of the state.” Of note, nowhere does section 3021 limit the innovative testing to “multi-payer models.” Yet CMS now states that “the goal is to create multi-payer models.”
To show how important this administrative decision is, look at Hawaii. Gov. Neil Abercrombie has been a single payer supporter. He was a cosponsor of H.R. 676, John Conyers’ single payer bill, when he was a member of Congress. Efforts have recently been underway to move Hawaii towards becoming a single payer state. But now with this grant, Hawaii is going to “design and submit a State Healthcare Innovation Plan, built around multipayer payment and healthcare delivery system transformation.”
The CMS fact sheet (link above) list other states receiving funds under this program, including states that were thought to be in a position to lead the way on single payer reform, such as Vermont and California.
According to the fact sheet, Vermont has been awarded a $45 million grant to establish “three models: a shared-savings ACO model that involves integration of payment and services across an entire delivery system; a bundled payment model that involve integration of payment and services across multiple independent providers; and a pay-for-performance model aimed at improving the quality, performance, and efficiency of individual providers.” That doesn’t exactly have a single payer ring to it.
Although the law did not limit the innovations to be developed and tested to multi-payer models, the Obama administration has. Once again, single payer advocates have been denied a seat at the table. What are we going to do about it?
Observational intensity bias associated with illness adjustment: cross sectional analysis of insurance claims
By John E Wennberg, Douglas O Staiger, Sandra M Sharp, Daniel J Gottlieb, Gwyn Bevan, Klim McPherson, H Gilbert Welch
BMJ, February 21, 2013
We have shown that a method of risk adjustment that used data on diagnoses and controlled for the effects of supply, by using data on the frequency of visits by physicians in the year prior to a patient’s death, was more efficient than the standard method; but that still accounted for less than 25% of geographic variation in age, sex, and race adjusted mortality among fee for service Medicare beneficiaries. Thus, our study points to the importance of developing risk adjustment methods that better explain variation in age, sex, and race mortality rates and suggests that these will be found by using data that are clearly independent of the effects of supply.
Dartmouth Study Questions Widely Used Risk-Adjustment Methods
By Jordan Rau
Kaiser Health News, February 21, 2013
In evaluating a hospital and health plan in the increasingly expensive U.S. health care system, federal officials and researchers often first factor in an assessment of how sick their patients are. A new study, however, challenges the validity of several widely used “risk-adjustment” efforts and suggests that Medicare is overpaying some plans and facilities while underpaying others.
Without these risk adjustments to level the comparisons, a hospital with more frail and very ill patients—who are more likely to die — might incorrectly appear to be doing a worse job than a hospital with healthier patients — who are more likely to survive.
Medicare risk-adjusts when determining how much to pay private Medicare Advantage insurance plans. It also used risk adjustments when deciding that 2,217 hospitals should be penalized for having high rates of patient readmissions. Risk adjustment is also a key component in new models of delivering care, such as the accountable care organizations.
The new study by the Dartmouth Atlas Project, published today in the health journal BMJ, faults the practice of trying to assess how sick patients are by looking at records to see patient diagnoses. The authors argue that the more times patients see doctors or get tests, the more new diagnoses they are given. “The more one looks, the more one finds,” the authors wrote. The Atlas researchers have asserted in three decades of research that areas of the country with gluts of hospital beds, specialists and other providers tend to deliver more care, whether it’s needed or not.
“You would think sicker places would have higher visit rates, but they don’t,” said Dr. John Wennberg, the lead author and the founder of the Atlas.
Here’s how their latest study worked: The researchers examined Medicare records for more than 5 million beneficiaries in 306 different regions of the country. They looked at three different formulas commonly used to assess how sick patients are, each based on the number and nature of diagnoses for patients as well their age, race and sex. Medicare uses one of those methods, known as “hierarchical condition categories” (HCC) to adjust for risk.
The researchers also analyzed the death rates of patient populations in each of the 306 regions. They found that the sickness of the patients explained between 10 and 12 percent of the discrepancy between places with high mortality rates and those with low mortality rates. But there was still a wide spread between regions of the country. For instance, under the HCC method, the death rate in the Salt Lake City region was 59.3 patients per 1,000—much higher than around Miami, where the death rate was 32.6 patients per 1,000. If that difference were accurate, then it would appear that patients in Salt Lake City were getting astoundingly worse care than in Miami—something that the researchers considered implausible.
Next, the researchers looked at the number of physician visits the patients had in the previous year. They then used statistical methods to “correct” the sickness rates, essentially reclassifying those patients with lots of excess physician visits as less sick than they would appear based by their diagnoses alone.
When the researchers used this revised metric to look at regional death rates, they now found it explained between 21 percent and 24 percent of the differences between high-mortality and low-mortality areas—twice as much as the standard risk-adjustment methods explained. Once visits were factored into the equation, Salt Lake City’s death rate dropped to 51.8 patients per 1,000 and Miami’s rate rose to 47.3 percent. That was much closer than before, although there remained an unexplained variation.
In a phone interview, Wennberg said the paper showed that the government and others need to refine the methods of adjusting for risk. “The way we’re doing it now has a lot of problems,” he said.
Private insurers pride themselves on market innovation. They will always find ways to reduce the amount that they spend on patients. They use devious methods to selectively enroll healthier individuals while receiving payments that are more appropriate for a mixture of both the sick and the healthy. When efforts are made by means of risk adjustment to modify payments to compensate for this injustice, insurers will use data manipulations to make their patients appear to be even sicker than they are in order to receive extra payments for their care.
This study by John Wennberg and his colleagues demonstrates that the differing regional rates of visits by physicians introduces a bias that makes it appear that regions with lower visits by physicians have higher costs and higher mortality rates, and vice versa. They conclude that correcting for such variations in intensity of patient observation (physician visit rates) would improve current risk adjustment methodologies, but that this would still account for “less than 25% of geographic variation in age, sex, and race adjusted mortality among fee for service Medicare beneficiaries.”
We already know that the private Medicare Advantage plans play games with risk adjustment. The Affordable Care Act will require risk adjustment between the private plans offered by the state insurance exchanges, and we can anticipate that they, too, will game the system.
Will this latest study finally bring us a risk adjustment process that the insurers cannot game? Unlikely. As more data are added, such as the intensity of patient observation suggested by this study, the administrative complexity increases, while the insurers find ever more not-yet-patched holes in the risk adjustment infrastructure.
As long as individual patients are linked to individual private plans, there will always be intermediaries – the private insurers – who will manipulate the system to their own benefit. We should remove these superfluous, administratively inefficient middlemen and replace them with our own public administrators. The task of negotiating appropriate payments with health care professionals and institutions would be much simpler if we got the private intermediaries out of the way.
Young immigrants shut out of health reform
By Drew Joseph
San Francisco Chronicle, February 19, 2013
California’s young immigrants who have been granted reprieves to stay in the country stand to gain little from the federal health reform law that the state Legislature is working to implement.
The Affordable Care Act excludes illegal immigrants from accessing the law’s benefits, but some immigrant and health advocates are angry that the young people known as Dreamers have been left out, saying the policy contradicts the law’s intent of expanding coverage to more people.
“It really defeats what the goals of the ACA were to begin with,” said Sonal Ambegaokar, health policy attorney at the National Immigration Law Center.
The Deferred Action for Childhood Arrivals program (DACA), which was announced in June, allows people who were brought into the United States when they were young to stay for two years if they pursue education or military service. The young people eligible for the program are known as Dreamers, in reference to the proposed Dream Act – legislation that would give them a path to citizenship.
More than a quarter of the 1.76 million people who are or will be eligible to apply for DACA – about 460,000 immigrants – live in California, according to an August 2012 Migration Policy Institute report.
After the DACA program was announced, the Obama administration clarified the policy, specifying that people to whom DACA applies will not qualify for Medicaid now or as the health law is implemented. And while many Americans will receive subsidies to buy insurance through their state’s exchanges – the insurance marketplaces established by the Affordable Care Act – people granted DACA approval will not be able to purchase coverage through those exchanges even with their own money.
Critics say the rule does not make sense. They argue that people approved for the program are lawfully present in the country, but when it comes to health care, they are treated as undocumented immigrants and will face a harder time finding coverage.
Health Care for DACA Grantees
National Immigration Law Center, January 2013
What health insurance options are available to DACA grantees under ACA?
Until recently, like other individuals granted deferred action, DACA grantees would have had access to all the new health insurance options under ACA as “lawfully present” individuals. Due to a rule change by the Obama administration in August 2012, DACA grantees were specifically excluded from the ACA as well as nonemergency Medicaid and CHIP, and have the same access to health insurance as do undocumented individuals despite being granted deferred action by the U.S. Department of Homeland Security. As a result of the rule change, DACA grantees who have valid work permits and valid Social Security numbers (SSNs) and who are otherwise eligible:
* Cannot enroll today in affordable coverage through Medicaid or CHIP unless their state provides coverage to a broader group of lawfully present individuals.
* Do not have access today to prenatal care through Medicaid or CHIP unless their state provides coverage for pregnant women regardless of the woman’s immigration status.
* Cannot apply today for private health insurance under Pre-Existing Condition Insurance Plan (PCIP) unless their state has a similar health insurance program that is available regardless of status.
* Will not be able to buy affordable private health insurance, even at full cost, in the new insurance marketplaces created by ACA after 2014.
* Will not be eligible for federal tax credits (or subsidies) to help make private health insurance affordable after 2014, even if they are paying federal taxes.
* Will not be eligible for the Basic Health Plan if their state has this program.
* Likely will not be required to have health insurance after 2014.
What health care options do DACA grantees and undocumented individuals have today?
* Emergency-room care.
* Community health centers and free clinics.
* Public and safety-net hospitals.
* Public health services (immunizations, treatment of communicable diseases such as tuberculosis, HIV, or sexually transmitted diseases).
* Emergency treatment under the emergency Medicaid program, including labor and delivery for pregnancy.
* Hospital and community health centers’ financial assistance programs (also known as “charity care”).
* Private health insurance.
Young immigrant children who were brought to this country and remained here without proper documentation have been raised here and are as much a part of our culture as are legal citizens. The Dream Act has been proposed to grant these individuals legal status to match the reality that this is their country.
Because of the failure of Congress to pass the Dream Act, President Obama has established the Deferred Action for Childhood Arrivals program (DACA). This is not a replacement of the Dream Act, but it is aimed at the same demographic, and it does provide temporary, potentially renewable legal status.
It seems that these individuals under DACA should have the same access to health care as other documented immigrants. However, it was decided that they would specifically be excluded from the provisions of the Affordable Care Act. They are not totally excluded from all health care since they have the same access as undocumented immigrants – those services and facilities listed above.
Although some might say that these services are adequate for this population, most of us want not want these limitations placed on our health care (with the exception of being able to purchase insurance outside of the exchanges and without subsidies – a problem for this population).
Immigration policy and health policy are two different topics. They should be dealt with separately. Right now, Congress is engaged in a process to reform immigration, and hopefully our lawmakers will demonstrate wisdom and benevolence in their decisions.
Health care is another matter. Everyone should have whatever health care is necessary. Period. Our laws and regulations and their implementation should have a goal of making certain that people get the care that they need. The Obama administration’s interpretation of their own DACA program falls short.
Under an optimally designed single payer program, whomever you are, if you need care, you get care. That’s the way it should be.
How to Think Clearly about Medicare Administrative Costs: Data Sources and Measurement
By Kip Sullivan
Journal of Health Politics, Policy and Law, February 15, 2013
The Centers for Medicare and Medicaid Services (CMS) annually publishes two measures of Medicare’s administrative expenditures. One of these appears in the reports of the Medicare Boards of Trustees and the other in the National Health Expenditure Accounts (NHEA). The latest trustees’ report indicates Medicare’s administrative expenditures are 1 percent of total Medicare spending, while the latest NHEA indicates the figure is 6 percent. The debate about Medicare’s administrative expenditures, which emerged several years ago, reflects widespread confusion about these data. Critics of Medicare argue that the official reports on Medicare’s overhead ignore or hide numerous types of administrative spending, such as the cost of collecting taxes and Part B premiums. Defenders of Medicare claim the official statistics are accurate. But participants on both sides of this debate fail to cite the official documents and do not analyze CMS’s methodology. This article examines controversy over the methodology CMS uses to calculate the trustees’ and NHEA’s measures and the sources of confusion and ignorance about them. It concludes with a discussion of how the two measures should be used.
Two Official Yardsticks
Medicare’s administrative costs were $8 billion in 2011, or 1.4 percent of total Medicare spending of $549 billion that year. Those figures come from the latest annual report of the Medicare trustees, prepared by OACT (Office of the Actuary within the Centers for Medicare and Medicaid Services). As I document below, the $8 billion includes costs incurred directly by CMS (notably, the salaries of CMS staff and payments to insurance companies to process claims) as well as costs incurred by other federal agencies on Medicare’s behalf (e.g., tax collection services provided by the Internal Revenue Service, Part B premium collection services provided by the Social Security Administration and the Railroad Retirement Board, and fraud prevention services provided by the Federal Bureau of Investigation).
The latest NHEA, also prepared by OACT, is for 2010. According to it, Medicare’s overhead totaled $31 billion that year, far more than the $7 billion reported by the trustees for 2010. That $31 billion constituted 6 percent of total Medicare spending in 20102 — much higher than the 1 percent rate reported for that year by the trustees. The difference between the trustees’ measure of overhead and the NHEA measure is due almost entirely to the fact that the NHEA defines Medicare’s overhead to include not only the $7 billion in administrative expenditures reported by the trustees for 2010 but also the $24 billion in administrative expenditures incurred by the insurance companies that participate in Parts C and D.
Selecting the Right Yardstick
The NHEA measure tracked the trustees’ measure quite closely for the first twenty years of Medicare’s existence. But since the mid- 1980s, which is when the percentage of Medicare beneficiaries insured by insurance companies began to rise beyond the negligible levels of the 1970s, the NHEA measure of Medicare’s overhead has risen dramatically while the trustees’ measure has continued to decline. As of 2010, the latest year for which data from both measures are available, the NHEA measure was 4.5 times larger than the trustees’ measure — 5.9 versus 1.3. This enormous disparity between two measures that used to be almost identical should long ago have triggered inquiries within Congress and the US health policy community as to whether the higher administrative costs associated with the growing privatization of Medicare are justified.
In his article, Kip Sullivan has finally laid to rest the distortions and obfuscations of those who contend that Medicare’s administrative costs are much higher than commonly cited percentages – 1.4 percent in 2011. Not only has he shown that the other government costs that allegedly were left out are actually included, but he has also shown that the other official measure of Medicare’s administrative costs shows how much more it is costing us to fund the administrative excesses of the private Medicare Advantage and Part D drug programs – an egregiously wasteful use of our Medicare funds.
Quoting Sullivan, “This enormous disparity between two measures that used to be almost identical should long ago have triggered inquiries within Congress and the US health policy community as to whether the higher administrative costs associated with the growing privatization of Medicare are justified.”
It should also have triggered the question: Why haven’t we yet enacted an improved Medicare for everyone?
Waiting Times in the Health Sector: What Works?
By Luigi Siciliani, Michael Borowitz and Valerie Moran
Organisation for Economic Development and Co-operation (OECD), OECD Health Policy Studies, February 2013
The book first provides a framework to understand the role of waiting times in health systems in Chapter 1. It then discusses variation and best practice in defining and measuring waiting times across OECD countries in Chapter 2. The book summarises and discusses the effectiveness of the most common policies to address long waiting times in 13 OECD countries in Chapter 3. Chapters 4-16 provide detailed country case studies respectively in Australia, Canada, Denmark, Finland, Ireland, Italy, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, and the United Kingdom. They describe current policy developments and assess the effectiveness of policies in the last ten years.
Table 3.1 – (Policies and their potential effect on waiting times)
1. Increased production in the public sector by funding extra activity – WEAK
2. Contracting with private sector – WEAK
3. Sending patients abroad – WEAK
4. Increased productivity by introducing activity-based financing (DRGs) – MEDUIM
5. Increased choice of providers – MEDIUM
6. Improved management of waiting lists – MEDIUM
1. Explicit guidelines to prioritise patients – MEDIUM
2. Subsidise private insurance – WEAK
1. Waiting-time guarantees – WEAK
2. With sanctions – STRONG
3. With choice and competition – STRONG
Chapter 5 – Canada
This chapter outlines the main characteristics of the Canadian health care delivery system, traces the development of unacceptably long patient waiting times for care and examines public concern about the viability of Canadian Medicare. While individual jurisdictions addressed the problem of waiting times with limited success, federal provincial and territorial leaders collaborated in the development of a pan-Canadian approach to reduce waiting times in the context of the 2004 10-Year Plan to Strengthen Health Care. Reductions in waiting times are presented as are the results of statutory parliamentary reviews of progress.
In response to their 2004 commitment and given the funding to support it, Canadian jurisdictions have delivered measurable improvement in patient waiting times in the priority clinical areas. There has been improvement in the infrastructure required to collect data and to compare and report on performance. This improvement, across the country, would not have been possible without the federal, provincial and territorial collaboration and commitment set out in the 10-Year Plan to Strengthen Health Care. Nor could it have been documented without similar collaboration on data, definitions and reporting methodologies.
The accomplishments of the past eight years were necessary and have been beneficial but not sufficient according to the most recent Parliamentary Review. It calls for investment in dealing with the root causes of waiting and investment in better management practices along the continuum of care.
The full 328 page report can be read online at this link:
A well designed single payer national health program uses equitable public financing to ensure that health care is universal, administratively efficient, and reasonably comprehensive. The opponents of single payer cannot deny these well documented benefits, so they usually resort to the claim that single payer systems cause rationing. Does this allegation have any basis in fact?
The term “rationing” traditionally has referred to the equitable allocation of a commodity that is in short supply. In health care, the term is more limited. In OECD nations any person experiencing a medical emergency receives essential care. There is no rationing of emergency services.
On the other hand, in many but not all nations a backlog in the scheduling of elective services may develop. Theoretically, everyone would still receive appropriate care, but they might have to wait for it. Rather than labeling this phenomenon “rationing,” we should call it what it is – “waiting times” or “queues.”
This new OECD report is important because it demonstrates that, with good government stewardship, queues can be reduced to acceptable levels. (Totally eliminating queues by providing instant access to all services, no matter how specialized, is not practical nor desirable.)
The United States was not included in this report. Queues are not as much of a problem for individuals who are well insured, though some excessive delays do occur. Rather, some experts claim that we do “ration” care for those without the ability to pay for that care, with the exception of emergency services provided in an Emergency Department. Yet “ration” may not be the appropriate term since these individuals do not receive an equitable allocation of a limited resource; they are denied care in a system to which others are granted access.
Let’s suppose that we enacted a single payer national health program in the United States. It is true that if we later elected leaders who were opposed to government programs, their inattentiveness to needs could result in the development of excessive queues. That is why it is important to understand what does and what does not work.
In the list in Table 3.1 (above), you can see that measures that are not particularly effective are those such as sending patients abroad, contracting public patients with the private sector, or subsidizing private insurance plans (like ACA does).
Moderately effective measures include increasing choice of providers (not locking patients into networks), using activity-based financing (DRGs), and improved queue management, with better systems of prioritizing patients.
The strongest measures, according to this report, include establishing waiting time guarantees with sanctions for failing to comply (sanctions combat sloth), and providing more choice and competition. Here choice refers to choice of health care professionals and institutions, selected based on competition on perceived quality and service. Another important measure that was left off of this list is fine-tuning system capacity.
Since Canada’s single payer system is the closest to the PNHP model of reform, it is important to understand what is happening there. We still hear that “single payer would cause rationing like they have in Canada.” But, with federal and provincial collaboration, they have made considerable progress in reducing their queues, and are continuing with efforts toward further improvement.
All we would need to avoid “rationing” under a single payer system is responsible public stewardship. If the people in charge insist that we can’t have single payer because of rationing, then we, in turn, need to insist that they be discharged as our public stewards. There are plenty of well qualified individuals who do care about the health of our people.
“Expanded & Improved Medicare For All Act”, H.R. 676
Sponsor: Rep. John Conyers, Jr., plus 40 Cosponsors (2/14/13)
To provide for comprehensive health insurance coverage for all United States residents, improved health care delivery, and for other purposes.
The Library of Congress
Thomas (Select “Bill Number” and enter H.R. 676)
As of 2/15/13 the text of the legislation has not been received from the Government Printing Office, but a draft is available at this link:
Congressman John Conyers has reintroduced his bill for a single payer national health program: H.R. 676, “Expanded & Improved Medicare For All Act.” Some perspective is warranted.
Our government stewards are intensely involved in implementation of the Affordable Care Act (ACA), and thus tend to dismiss any consideration of single payer reform as being irrelevant in today’s political climate. Such an attitude is decidedly unwise.
We know that a decade from now 30 million people will still be without any health insurance, and tens of millions more may be exposed to excessive medical debt because of the inadequate coverage of the health plans – the standard silver plan having an actuarial value of only 70 percent. We also know that the ACA model of reform will not be capable of adequately controlling costs and will fail to provide much needed reform such as the reduction or elimination of profound administrative waste.
Many understandably do not want to wait the years it will take to see that ACA is a failure. They are turning to their states to try to achieve single payer reform. But state efforts not only face the “political feasibility” hurdle, they also face the federal gridlock of existing programs, laws and regulations that place barriers in the way of state reform.
For example, Vermont’s highly touted single payer legislation has not enabled adequate federal flexibility with Medicare, Medicaid, and employer self-insured (ERISA) funds. Although state activists talk about obtaining federal waivers to free up these funds, without comprehensive federal legislation, the existing waiver programs cannot possibly open the gates for state-level single payer. Considering the complexity of existing federal laws and regulations, the federal legislation required to enable state single payer systems likely would be as complex, if not more so, than enacting a national single payer program. The latter simply would displace our dysfunctional financing system, whereas the former would have to negotiate the the extremely complex maze that has been constructed over many decades, most recently compounded by ACA.
The California legislature has twice passed a bill that they labeled “single payer,” but only with the promise of the Republican governor that it would be vetoed. Now that California has a Democratic governor and a two-thirds super-majority in each house of the state legislature, with only one week left to file bills for the current two year session, no state legislator has been willing to sponsor the single payer bill. They insist that all attention must now be devoted to implementation of ACA.
This is why H.R. 676 is so important. Even if Congressional barriers succeed in blocking the legislation, the Expanded and Improved Medicare for All Act serves as a very important vehicle for education and advocacy. The bill was introduced two days ago with 37 cosponsors, and yesterday, 3 more were added. That is more than they began with in the last session of Congress. We should build on this.
State efforts should be encouraged, but with a dose of reality. We need to be working on a national movement – all of us, including the state activists. We can support each other in our state efforts, but all of us must pull all stops in support of the national efforts.
Perhaps around 2017 the picture will finally emerge that the fragmented and dysfunctional model of a multitude of private plans and public programs cannot be repaired, and that a public program such as single payer or a national health service will be essential. Until then, we must continue to spread the message that there is a model that will work. People need to know that, when ACA fails, there is a place to where we can turn.
WellPoint Names New Chief Executive
By Anna Wilde Mathews and Jon Kamp
The Wall Street Journal, February 12, 2013
WellPoint Inc. named Joseph R. Swedish as its new chief executive, unexpectedly turning to a hospital-industry veteran to lead the second-largest U.S. health insurer through the challenging implementation of the health-care overhaul.
Mr. Swedish, 61 years old, will take over as CEO on March 25, the company said. Since 2004, he has been president and CEO of Trinity Health, a Catholic operator of 47 hospitals with revenue of around $9 billion last year.
The choice is likely to surprise investors, whose displeasure with previous WellPoint CEO Angela Braly helped lead to her resignation last August. Mr. Swedish’s career has been spent on the provider side of health care, and recently at nonprofit institutions, so he isn’t a familiar face for managed-care investors.
Mr. Swedish’s hospital experience could be viewed as helpful, but investors were generally predicting WellPoint would pick a managed-care veteran, said Thomas Carroll, an analyst at Stifel Nicolaus. “This individual is completely out of the blue from an investor-expectation standpoint,” he said.
In general, lines between insurers and health-care providers have been increasingly blurring, and Mr. Swedish said both sides are facing similar “strategic bets” as the industry changes. Indianapolis-based WellPoint is already working on collaborations with providers, and he wants to “accelerate that at a very rapid pace,” he said. WellPoint is expanding the operations of CareMore Health Group, a Medicare plan it bought that also operates its own care centers, and it has launched an initiative aimed at paying primary-care doctors more to coordinate patients’ care.
Trinity is a “well-managed health system,” with stable operations and a strong balance sheet, said Kay Sifferman, a vice president at Moody’s. Both Moody’s and Standard & Poor’s rate Trinity’s bonds highly. Before his announced departure, Mr. Swedish was moving toward consummating a major combination, with Catholic Health East, that would create the fifth-largest U.S. hospital system.
WellPoint has said it is planning and investing heavily to ensure it will have a strong presence on the new health exchanges, as well as doing extensive consumer research to ensure it crafts products that will resonate with buyers. “We will continue to progress with what they have already initiated,” Mr. Swedish said. “Quite frankly, I like our chances.”
WellPoint includes 14 Blue Cross and Blue Shield plans and has a major presence in California, often seen as a tough market for health insurers. The company has “to execute to win,” Mr. Swedish said. “We are all very attentive to that.”
According to The Wall Street Journal, “lines between insurers and health-care providers have been increasingly blurring,” a fact we already knew. The appointment of a hospital CEO, who is currently involved in major consolidation efforts, as the new CEO of WellPoint – the nation’s second largest insurer – seems to blur even further the line between insurers and health care providers.
Health care providers take care of patients. Insurers take care of business. With consolidation on all fronts, insurers are blending into the providers. With this new model, the insurer/health care provider is becoming well positioned to take care of… well… business. And the patients? As the incoming WellPoint CEO says, the company has “to execute to win.” Isn’t there something Freudian about “execute”?
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