Aflac: American workers are at the edge of a financial cliff

Posted by on Wednesday, May 28, 2014

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.

American workers are at the edge of a financial cliff

2014 Aflac WorkForces Report

The economy is showing signs of improving, but Americans’ bank accounts are in need of resuscitation: Put simply, anemic pay raises combined with sharp increases in out-of-pocket health care costs have creditors knocking on many consumers’ doors.

  • 66 percent of employees would not be able to adjust to the large financial costs associated with a serious injury or illness.
  • 13 percent of workers are currently dealing with high medical bills.
  • 49 percent of employees have less than $1,000 on hand to pay out-of-pocket medical expenses.
  • 53 percent of workers would need to borrow from a 401(k) and/or use a credit card to cover unexpected medical costs.
  • 8 percent say high medical bills have hindered their ability to save.
  • 10 percent say high medical costs have negatively affected their credit scores.
  • 13 percent have been contacted by collection agencies about outstanding medical bills.

A well functioning health care system should make all appropriate health care accessible to everyone, and paying for the system should not lead to financial insecurity. The sector of health care financing that the Affordable Care Act was designed to protect was employer-sponsored coverage, based on the belief that this was the sector that was functioning well. Yet the 2014 Aflac WorkForces Report shows that this sector often is not providing the financial security that patients need.

We should quit trying to finance health care though a multitude of private and public plans that apply to individuals based on their continually evolving personal circumstances. That approach creates tremendous costly and wasteful administrative inefficiencies. Worse, even what are supposedly the best programs – employer-sponsored health plans – too often fail to provide the financial security that patients want and need.

Medical bill related financial insecurity would disappear for everyone if we would replace our current fragmented financing system with a single payer national health program that included first dollar coverage. Since it would use progressive financing, each of us would be able to afford it.

This is a simple concept. We don’t need the Aflac duck to explain it to us.

ACA exchange plans are creating new administrative headaches for physicians

Posted by on Tuesday, May 27, 2014

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.

MGMA ACA Exchange Implementation Survey Report

Medical Group Management Association, May 2014

Medical Group Management Association (MGMA) conducted member research in April 2014 to better understand the impact of the Affordable Care Act’s (ACA) insurance exchange implementation on medical group practices.

Summary of Findings

MGMA noted three main themes within the findings.


Practices have experienced difficulty identifying patients with ACA exchange coverage and obtaining essential information related to that coverage.

  • 62% of respondents reported moderate to extreme difficulty with identifying a patient that has ACA exchange coverage as opposed to traditional commercial health insurance.
  • Compared to patients with traditional commercial coverage, nearly 60% of respondents indicated that for patients with ACA exchange coverage it is somewhat or much more difficult to:
  • Verify patient eligibility
  • Obtain cost-sharing or network information
  • Obtain information about the plan’s provider network in order to facilitate referrals

“We are going to have to hire additional staff just to manage the insurance verification processs.”

“Identification of ACA plans has been an administrative nightmare.”

“We thought we would be able to identify ACA insurance exchange products by their insurance card, but quickly found out this isn’t so. “


Practices are facing a number of challenges related to patient cost-sharing for ACA exchange coverage.

  • 75% of respondents reported that patients with ACA exchange coverage are very or extremely likely to have high deductibles compared to patients with traditional commercial coverage.
  • Practices reported significant patient confusion about the substantial cost-sharing related to many ACA exchange products, and practices are working to help patients understand the complexities of their coverage.
  • Practices cited some of the main reasons for not participating with ACA exchange products were related to concerns about financial burdens from patient collections (such as burdens related to collecting high deductibles from patients and concerns about financial liability from the 90-day grace period).

“Patients have been very confused about benefits and their portion of the cost. Once the patients find out their deductible, they’ve cancelled appointments and procedures.”

“The at-risk piece of eligibility is tremendously hard to determine and explain to patients.”

“Patients don’t always understand how health insurance works, so we’ve been engaging in educational events for the community.”


Practices have concerns about the impact of the network design of many ACA exchange products.

  • Almost half of respondents reported they have been unable to provide covered services to ACA exchange patients because the practice is out of network.
  • 20% of respondents reported that their practice was excluded from a narrow network that they would have liked to participate in and 10% of respondents chose not to participate in a narrow network.
  • Narrow networks may create challenges related to patient referrals for appropriate treatment and hospital care. Even if the practice is included in the network, without robust representation by a wide range of providers, it may be difficult for a practice to coordinate a continuum of care consistent with the patient’s needs.

“Many patients purchased products with a very narrow network and didn’t understand the ramifications. They are very upset once they learn that they can’t go to the specialist or hospital of their choice. As primary care providers, we are now faced with the extra burden of trying to find them care within their new narrow network. Payer directories are woefully inaccurate and impossible to rely on.”

“Former patients were shocked to learn about their very narrow network of providers. It was terrible to have to inform them of their lack of coverage.”

“We are consistently denied ‘out of network’ approvals for the very sick who truly need to continue their care with providers who have worked with the patient for years.”…

Statement of Susan Turney, MD, MS, FACP, FACMPE, president and CEO of MGMA:

“Physician group practices are expressing dissatisfaction with the complexity and lack of information associated with insurance products sold on ACA exchanges. The more administrative complexity introduced into the healthcare system, the less time and resources practices can devote to patient care. Even though there hasn’t been a huge influx of patients into physician offices as many predicted, simple tasks such as obtaining patient insurance coverage information or finding specialists for in-network referrals have proven to be significant challenges.”…

Much has been written about the consequences of the high deductibles and narrow networks of the ACA exchange plans in impairing access and affordability for patients. This new survey demonstrates that these same features add more administrative headaches for physicians who are already overburdened by the administrative complexity of our dysfunctional health care financing system. For those who could care less about the physicians, keep in mind that these ACA plan features are preventing physicians from assisting patients in obtaining the health care that they should have. It is really about the patients.

The quotations in the report above are especially helpful to our understanding of the problems because they reveal the real world consequences of the highly flawed ACA exchange infrastructure.

Single payer would eliminate the confusion over coverage, the barriers of patient cost sharing, and the loss of choice due to network limitations. People would simply get the care that they need when they need it.

2014 Milliman Medical Index

Posted by on Friday, May 23, 2014

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.

2014 Milliman Medical Index

By Christopher S. Girod, Lorraine W. Mayne, Scott A. Weltz, Susan K. Hart
Milliman, May 20, 2014

$23,215. That’s how much is spent in 2014 on healthcare for a typical American family of four covered by an average employer-sponsored health plan according to the 2014 Milliman Medical Index (MMI).(1) And yet while the amount has more than doubled over the past 10 years, growing from $11,192 to $23,215, the 5.4% growth rate from 2013 to 2014 is the lowest annual change since the MMI was first calculated in 2002.

Although the annual rate of increase is down, it is still well above the rate of growth in the consumer price index (CPI).(2)

Employers pay the largest portion of healthcare costs, contributing $13,520 per year, or 58% of the total. However, increasing proportions of costs have been shifted to employees. Since 2007, when the economic recession began, the average cost to employers has increased 52% — an average of 6% per year — while the expenses borne by the family, through payroll deductions and out-of-pocket costs, have grown at an even faster rate, 73% (average of 8% per year).

So far, the emerging reforms required by the Patient Protection and Affordable Care Act (ACA) have had little direct impact on the cost of care for our family of four in 2014 because this family tends to be insured through large group health plans. Some of the most far-reaching reforms are focused on access to insurance in the individual and small employer markets. Additionally, while the reforms are having immediate impacts on premium rates in those markets (the individual market, in particular), it is unclear whether they will ultimately have meaningful effects on growth in the cost of healthcare services.

  1. The Milliman Medical Index is an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer’s share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads.
  2. Over the 10-year period from 2004 through 2014, CPI has increased by approximately 2.3% per year, while the MMI has average annual increases of 7.6%.

Milliman Research Report: 2014 Milliman Medical Index (12 pages):…

The Milliman Medical Index (MMI) is an important number because it represents the actual cost of health care, excluding health plan administrative costs and profits, for a typical family of four insured by an employer-sponsored PPO (preferred provider organization). Keep in mind that the workforce and their young families are a relatively healthy sector of our society, yet the health care costs for that family in 2014 are now $23,215.

We are reassured that the rate of increase is the lowest in years – only 5.4%. But that is not so reassuring when you consider that the rate is still well above the rate of growth in the CPI (consumer price index). In fact, over the last ten years, the MMI has increased an average 7.6% whereas the increase in the CPI has averaged only 2.3%.

Although the rate of increase in the MMI has decreased to 5.4%, that is still a one year increase in health spending of $1,185. That is quite a hit for a family that has seen stagnant wages for the last couple of decades.

Another important observation is that increasing proportions of the cost increases have nominally been shifted to the family – through higher payroll deductions and greater out-of-pocket costs. In actuality, most economists agree that the employer’s share of the costs is actually paid by the employee in the form of forgone wage increases.

Median household income for 2012 was $51,017. Although that does not represent the same family unit as the MMI, it does give a very rough idea of what a strain that $23,215 imposes on family budgets. It is clear that the financing of health care must be progressive.

Thomas Piketty’s treatise on Capital in the 21st Century describes our inequality in income and wealth. It takes very little imagination to see how a publicly financed single payer system would slightly temper the inequities while ensuring health care for everyone.

John Goodman clarifies entrepreneurial medicine for us

Posted by on Thursday, May 22, 2014

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.

Is Public Policy Changing The Practice of Medicine?

By John Goodman

Health Affairs Blog, May 21, 2014

At the time the ACA was enacted, the belief that health care delivery in the United States was about to be radically transformed was widespread. “We’re going to find out what works and then go do it,” said Barack Obama. Doctors will learn to practice medicine like engineers, predicted Atul Gawande. The profession will be dominated by Accountable Care Organizations (ACOs), said Karen Davis, and doctors will be rewarded for lowering costs and raising the quality of care. Only through ACOs can we achieve low-cost, high-quality care, said Elliott Fisher. Fee-for-service medicine is the problem, we were told, and the solution is bundled care. The idea that we should buy on value, not on volume, was a sentiment often heard.

Four years on, these predictions have been far from the mark — to put it charitably. We have spent tens of millions of dollars on demonstration programs and pilot projects investigating coordinated care, integrated care, managed care, pay-for-performance medicine, electronic medical records systems, etc. The result? Three separate Congressional Budget office reports have concluded that none of this is working, or at least not working very well.

In what I am about to say, I am relying heavily on input from Larry Wedekind, CEO of IntegraNet. This is a firm that operates independent physicians associations under contract with Medicare Advantage plans and commercial insurance plans. These groups go under different names but let’s settle for Integrated Delivery Networks, or IDNs. As far as I can tell, the IDNs managed by IntegraNet are at the cutting edge.

The most significant innovations in medical practice are usually produced by entrepreneurs, and although they may be motivated by many factors, entrepreneurs tend to flourish where there is significant downside financial risk and significant upside potential for profit. That’s why some of the most interesting things going on right now are in IDNs managed by entrepreneurs, in contrast to the activities of hospitals, insurance companies and government agencies.

Ironically, the ill-advised medical loss ratio (MLR) regulations have inadvertently had a good effect — they have spurred insurance companies to shift the management of care to doctor organizations, and thus increased the sphere of opportunity for entrepreneurial medicine.

The original ACO regulations were so onerous that entrepreneurs (and some of our best medical centers) avoided them altogether. But now it appears that the Obama administration is moving in the direction of using Medicare Advantage-type (risk adjusted) formulas to pay ACOs. This will attract more entrepreneurs to the ACO market and, if the administration continues the trend, ACOs could actually become more attractive to enrollees than the MA plans.

IntegraNet and other independent physician organizations got a big boost when the Obama administration imposed a medical loss ratio (MLR) regulation on participating insurers. Under the regulation, health insurers must spend at least 85 percent of their revenues on “medical care,” leaving no more than 15 percent for administration, overhead and profit. If the health insurer contracts with an IDN, such as the one managed by IntegraNet, however, all the fees paid to the IDN count as “medical care” — no matter how much the IDN spends on administration.

Politically, we are about to come full circle. Although Barack Obama ran against the MA plans in the 2008 election, and although many Democrats regard Medicare Advantage as unhealthy “privatization,” this is the only place in all of Medicare where the president’s promise is being realized: practitioners really are finding out what works and they are doing it. Unwilling to endorse the MA approach, the administration created a new entity called an ACO. But the ACO model is likely to become viable only to the extent that ACO plans look more and more like MA plans. If all goes well, we are likely to end up with a reformed Medicare that looks very much like something the president campaigned against when he promised to reform the health care system. And if that happens, the President and Rep. Paul Ryan may discover that they see eye to eye on just about everything relating to Medicare!

As a result, IntegraNet can do something Humana, Aetna, and UnitedHealthcare cannot do: By becoming efficient and improving patient health, it can lower its medical costs, say, to 70 percent of premium income and reap much of the remainder as profit — to be shared with the doctors and even the insurers (!).

What Should Be Done?

4.  Eliminate all restrictions on profit. If we want entrepreneurs to find solutions to our problems they need to be able to take big risks and reap big rewards. The value to society of successful innovation in this area is enormous. If entrepreneurs get rich in the process, more power to them. The benefit they will create for the rest of us will far exceed any profit they manage to earn for themselves.…

John Goodman, the “Father of Health Savings Accounts,” has long been an advocate of private, free market solutions to our health care dysfunctions. Let’s look at how Medicare Advantage (MA) and Accountable Care Organizations (ACO) fit into his concepts of entrepreneurial medicine.

He chides Democrats for opposing privatization of Medicare through private Medicare Advantage plans, and yet indicates that the Accountable Care Organizations established by the Affordable Care Act are apt to end up much more like his favored Medicare Advantage plans. As he says, we could end up with President Obama supporting ACO transformation into Paul Ryan’s premium support model of privatizing Medicare.

It is important to look at why he thinks that is a good idea because he is quite frank in representing the views of those who support privatization.

Look at what he has to say about Integrated Delivery Networks (IDN). Insurers are allowed to keep 15 percent of premiums for administration and profits. But Goodman suggests that insurer payments to an IDN could be considered to be 100 percent health care. Yet the IDN could have its own 15 percent or more cut for administration and profits. As he states, “By becoming efficient and improving patient health, it can lower its medical costs, say, to 70 percent of premium income and reap much of the remainder as profit — to be shared with the doctors and even the insurers (!).” Entrepreneurialism trumps patient care!

In case we think we might misunderstand what he is saying, he clarifies that. “Eliminate all restrictions on profit. If we want entrepreneurs to find solutions to our problems they need to be able to take big risks and reap big rewards. The value to society of successful innovation in this area is enormous. If entrepreneurs get rich in the process, more power to them.”

We can thank John Goodman for being very frank in his discussion. In doing so, he has exposed the true thinking of those who oppose the government and support market approaches to health care.

I’ll take the government, thank you.

Sen. Bernie Sanders – Panel Discussion on Single Payer Health Care

Posted by on Wednesday, May 21, 2014

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.

Single Payer: Where do we go from here? A Panel Discussion

Senator Bernie Sanders, May 21, 2014


  • Sen. Bernie Sanders (I-Vt)
  • Robert Weissman, President, Public Citizen
  • Gerald Friedman, Professor, Economics, University of Massachusetts at Amherst
  • Dr. Margaret Flowers, PopularResistance. org
  • Dr. Andrew Coates, President, Physicians for a National Health Program
  • Michael Lighty, Director of Public Policy, National Nurses United

Dr. Andrew Coates: In a modern democracy, it seems to me that it’s a responsibility of the government to guarantee all necessary care to everyone in the democracy, and also to protect the privacy of the decision making between the patient and his or her caregiver. And if you think about that a little bit further, what would it mean if we had national health insurance? What would it mean if we had access to all necessary care?  – we didn’t have to worry when our mother needed to make a transition to a nursing home.; we didn’t have to worry when our child got leukemia; we didn’t have to worry… like all of my patients – every patient I have in the hospital is worried about the money problems that are going to follow their illness. And it is an absolute national disgrace – Yes, we can indict that, but let’s think about that the other way. What kind of freedom would we have if we could travel anywhere we wanted and know that there would be an adequate health care infrastructure? – if the Adirondacks – with an underserved population in my own state – has hospitals with the support staff they needed? This would be liberating. And it would change the political culture of our nation to the idea that we can do this together. We all deserve basic human dignity, and we should all be free – and I think that health care is such a modern necessity that that can take our democracy to that place.

Video (drag time marker to 25 minutes for start of forum):

This video should be shared with others to assist in disseminating the message of the moral imperative of single payer.

So where do we go from here? The simple answer is forward. We need to continue with education, coalition and grassroots efforts so that the nation will understand that we, as a democracy, can bring health care to everyone while eliminating the pecuniary punishment inflicted on those unfortunate enough to have health care needs.

Gruber and colleagues call for more research on health plan competition

Posted by on Tuesday, May 20, 2014

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.

More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces

By Leemore Dafny, Jonathan Gruber, Christopher Ody
The National Bureau of Economic Research, NBER Working Paper No. 20140, May 2014


First-year insurer participation in the Health Insurance Marketplaces (HIMs) established by the Affordable Care Act is limited in many areas of the country. There are 3.9 participants, on (population-weighted) average, in the 395 ratings areas spanning the 34 states with federally facilitated marketplaces (FFMs). Using data on the plans offered in the FFMs, together with predicted market shares for exchange participants (estimated using 2011 insurer-state market shares in the individual insurance market), we study the impact of competition on premiums. We exploit variation in ratings-area-level competition induced by United Healthcare’s decision not to participate in any of the FFMs. We estimate that United’s nonparticipation decision raised the second-lowest-price silver premium (which is directly linked to federal subsidies) by 5.4 percent, on average. If all insurers active in each state’s individual insurance market in 2011 had participated in all ratings areas in that state’s HIM, we estimate this key premium would be 11.1% lower and 2014 federal subsidies would be reduced by $1.7 billion.

From the Conclusion:

Given the incipiency of these markets, this study is but a first step in what will surely become a deeper and broader literature on insurance exchanges and the nature and significance of competition among exchange participants. There is substantial room for further research on how competition affects pricing and other outcomes in this market. Future studies will be easier to execute once information about consumer enrollment decisions has been released, and once the market is in longer-term equilibrium. These conditions will allow researchers to apply well- established supply-side methodologies to studying competition on the exchanges. Such research will permit more-nuanced conclusions and recommendations regarding the impact of competition and competition-related policies on various outcomes of interest. Given the large federal role in developing and regulating the exchanges, and in subsidizing the purchase of plans offered on the exchanges, research on how competition affects consumer choice and insurer behavior is of critical importance.

This study makes an attempt to support the theory that as the number of competing insurers increases within each of the 395 ratings areas for federally facilitated marketplaces, the premiums decrease. Though the title is quite clear that “more insurers lower premiums,” the actual data are quite fuzzy.

If you look at Figure 2 in the report, there is considerable scatter around the weighted regression line, and if you eliminate just a few of the outliers from the 395 ratings areas, there is no obvious correlation between numbers of insurers and premiums.

Nevertheless, to make their point they used two what-ifs. They project that premiums for the second lowest cost silver plan were 5.4 percent higher than they would have been simply because one insurer – United Healthcare – declined to offer plans through the exchanges. Further, they project that if all insurers already active in each rating area were to participate in the exchanges then the premium for this silver plan would have been 11.1 percent lower. It seems to be a leap to state that competition has been shown to be successful in lowering premiums because it would have been so with other competitors participating in the exchanges even though those other competitors did not actually participate. At least it demonstrates an unwavering belief in the competition theory being tested, which really wasn’t tested, but, what if?

Of greater concern is their concluding comment. They state, “There is substantial room for further research on how competition affects pricing and other outcomes in this market.” Also, “Given the large federal role in developing and regulating the exchanges, and in subsidizing the purchase of plans offered on the exchanges, research on how competition affects consumer choice and insurer behavior is of critical importance.”

Jonathan Gruber, who helped develop both the Massachusetts plan and the Affordable Care Act, is a co-author of this NBER paper. He had told us that the proven model of single payer had to be rejected because of lack of political feasibility, yet in its place we had to adopt a model using health plan competition – a model that needs further research to see how it will affect consumer choice and insurer behavior. What? We enact this for the entire nation, and then we’ll see how it works?

Actually we do not need further research on private insurance plans competing within an exchange. We have had decades of experience with the Federal Employees Health Benefits Program, and with California’s CalPERS for public employees and the Pacific Business Group on Health for employer-sponsored plans. Each of these exchanges offered a choice of competing private plans. Yet health care costs continued to escalate at intolerable rates. Plans competing within exchanges have not been effective in slowing health care inflation to levels found in other nations.

The authors contend that more research on health plan competition is of “critical importance.” Baloney. We’ve had all the research we need on health plan competition. What we need is to get rid of the private health plans, fix Medicare, and then provide it to everyone. Now.

Vladeck: Provider Concentration And The Failure Of Market Theory

Posted by on Monday, May 19, 2014

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.

Paradigm Lost: Provider Concentration And The Failure Of Market Theory

By Bruce C. Vladeck
Health Affairs, May 19, 2014 (online)

The belated rediscovery of provider prices as a significant contributor to the high costs of US health care (although the data were there in the literature all along), coupled with the presumed role of provider concentration in producing some of the upward pressure on prices, has created a serious conundrum for those who seek to apply conventional economic reasoning to matters of health policy. The conundrum arises from the conflict between the presumed per se undesirability of increased concentration and the fact that many of the causes of that increase may themselves be highly desirable — or at least practically unavoidable.

The dilemma posed for policy makers and analysts arises from the assumption that increased concentration is intrinsically a bad thing, even though many good things seem to be happening as provider concentration progresses. On the one hand, the number of independent health care providers appears to be decreasing as a result of hospital mergers and acquisitions, the agglomeration of physicians into larger and larger group practices, and the alignment of physician practices with hospitals. The relationship between increased provider concentration and increased prices has long been conventional wisdom (even if recent data and analyses have called that wisdom at least partially into question). Ergo, such increases in concentration should be opposed.

On the other hand, at least some of the factors driving increased concentration are widely believed to improve care and population health, or at least to encourage greater efficiency in the delivery of health care services. These factors include growing clinical integration across previously atomized providers; the dramatic reduction in use of inpatient services, which decreases the number of full-service hospitals needed in any given market; the mandatory adoption of expensive information technologies; and the growing experimentation with payment schemes in which providers bear at least some degree of financial risk.

Sage: ‘Getting The Product Right’

Sage is trying to address the very real and very significant costs of the inefficiency that permeates the US health care system. Recognizing that the power to influence prices that comes with increased market power theoretically reduces the incentives for efficiency, Sage proposes to reduce that power by redefining what health care payers buy. This, in turn, would presumably give consumers greater ability to make informed, price-sensitive decisions about which health services they wished to consume.

Antitrust analysis is generally complicated in markets with differentiated products. Sage’s proposal would either exacerbate that problem or require the creation of a new authoritative regulatory structure to determine exactly how new products should be defined.

Ginsburg And Pawlson: Let Consumers Decide What To Buy

The authors’ theory seems to be that if increased provider consolidation limits the ability of insurers to exert downward pressure on prices, then the solution to high prices is transferring an increasing share of the purchasing function to individual consumers through higher out-of-pocket liabilities and the development of tiered networks, which offer different prices to consumers with ostensibly different preferences. However, this prescription only exacerbates the underlying problem. No matter how much information — the magical potion in many market-based approaches to health policy — atomized consumers may have, it is almost certainly less than that of even the most indolent insurance company.

Ginsburg and Pawlson also appear to be in favor of narrowing provider networks as a way of reducing providers’ leverage in negotiations with payers and thereby holding prices down. They note that in the 1990s such policies engendered significant consumer resistance because of the restrictions they imposed on access to providers. However, they seem not to mind the fact that such resistance may be minimized in the future by the growing inability of many households to afford the kind of health care they prefer. Such an approach not only fails to counteract the growing economic inequality in this country but also appears to legitimate it.

The Myth Of The Sovereign Consumer

One effect of changes in health financing in the past two decades is unavoidably clear, if too often overlooked or minimized in importance by the health policy community: The average individual with health insurance is considerably worse off now than twenty years ago. Out-of-pocket payments are much higher, for both premiums and copayments; cash on the barrelhead is increasingly required for services that used to be provided first and billed for afterward; and the numbers of avaricious debt collectors and medically related bankruptcies continue to soar.

At the same time, consumers are regularly inundated with self-serving or downright erroneous information from health insurers, providers, and entrepreneurs alike about health care services and their use that carries the implicit message that any illness or financial difficulty is essentially the fault of the consumer.

It is ironic that the increased unaffordability of routine health care is exactly the problem that historically led to the creation of health insurance programs in both the public and private sectors. Those who are quick to applaud the expected demise of employer-sponsored coverage in the United States overlook the extent to which large employers, eager at least to not offend their employees, historically used their purchasing power with insurers to protect those employees (as well as to maintain an enormous de facto cross-subsidization of the less healthy employees and family members by the healthier ones).

Of course, government insurance programs wield this purchasing power more directly, more openly, and—when it comes to the effect on provider prices and the minimization of out-of-pocket liabilities for individual households—far more effectively. In other words, Medicare and Medicaid, and their beneficiaries, are much less at risk of increased prices resulting from provider concentration than are most private insurers or privately insured people.

Those who are uneasy about further increasing the government’s role in minimizing price growth in health care might do well to compare today’s high-deductible plans to the historical experience of Blue Cross plans with private-sector monopoly control (which hardly ever paid hospitals more than their actual costs) and first-dollar coverage.

As a proud former rate setter in both state and federal governments, I confess to an absence of alarm at these authors’ recognition that if none of their nostrums work, rate regulation may become increasingly unavoidable. But I am skeptical of the political likelihood of a return to rate setting; nor am I entirely convinced of its desirability. The exercise of government power is one way to constrain sellers in concentrated markets, but not the only one.

It is conceivable, for instance, that one explanation of the relatively low rate of hospital price increases in recent years is that private insurers, in response to some of the first- and second-order pressures generated by the Affordable Care Act, are actually negotiating aggressively with hospitals, instead of just passing on increases to their customers or enrollees, as was standard practice in the past.

Instead of continuing to try to impose axiomatic and solipsistic theories on a reality to which they increasingly fail to apply, we need to figure out what kind of health care system we really want and how much we are prepared to pay for it. Then we need to invent or reconfigure the social institutions that we will have to have to get that system.

In health care, there is plenty of evidence that cooperation benefits patients much more than does competition. Working together to provide the best care for the patient is far better than competing to obtain the best business outcome for the health care providers. The current increasing consolidation in the health care delivery system shines light on these conflicting dynamics.

In this paper, Bruce Vladeck provides a perspective in response to different views of this topic released in online papers and presented at a Health Affairs briefing this morning, sponsored by The Commonwealth Fund. Although the discussion was primarily about the impact of provider concentration in the health care marketplace, the issues go well beyond that.

As Vladeck mentions, historically the Blue Cross plans exerted private sector monopoly control while providing first dollar coverage. Now the coverage has deteriorated, impairing access to care and leaving patients exposed to major costs. The dynamic that we need to be looking at is not the balance between the market clout of the consolidating health care providers and the purchasing power of insurers as representatives of the payers, rather the important dynamic, again according to Vladeck, should be configuration of the social institutions that will allow us to pay for the health care system that we really want.

Although Vladeck suggests that insurers may have become more aggressive price negotiators, he nevertheless makes it clear that the government price setters – Medicare and Medicaid – have had much more clout.

Consolidation that improves efficiency, effectiveness and access for the benefit of the patient is great. Other nations have shown that you do not need to limit consolidation or concentration to prevent overpricing in such imbalanced markets. All you need is government price administration such as we would have with a single payer financing system. That would eliminate the superfluous private insurers with their wasteful administrative excesses and inefficiencies that stem from our dysfunctional fragmentation of health care financing.

Is your doctor in your network? Use a recorder when you ask your insurer.

Posted by on Friday, May 16, 2014

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.

California consumers say duped by Blue Shield’s limited Obamacare plans

By Terry Baynes
Reuters, May 15, 2014

Consumers who purchased new health plans from Blue Shield of California have sued the insurer, claiming they were misled into thinking the insurance would cover their desired doctors and hospitals.

In their complaint filed in California state court on Wednesday, San Francisco residents John Harrington and Alex Talon accused Blue Shield of misrepresenting that their plans, sold on California’s health exchange, would cover the full provider network advertised on the company’s website.

They sued on behalf of a class of people who had purchased so-called “preferred provider organization” plans from the insurer only to realize that the doctor and hospital networks for their plans were limited.

Harrington bought a so-called silver plan on California’s online exchange while Talon bought a platinum plan through the insurer’s website. They said they made their choices based on Blue Shield’s alleged representations that their doctors would be covered.

After receiving medical treatment numerous times between January and March, Harrington and Talon later discovered that their providers were not covered, forcing them to pay the charges out-of-pocket, the complaint said.…


Recording seems to refute claims made by Anthem

By David Lazarus
Los Angeles Times, May 15, 2014

David Cienfuegos said his wife was told by Anthem Blue Cross that his doctor was part of the insurer’s coverage network, but then was left with the tab for about $5,800 in medical costs after Anthem insisted that it never said any such thing.

In this case, though, Cienfuegos, 40, has a digital recording of the Anthem rep clearly saying his surgery would be covered.

And he’s suing to hold the insurer accountable.

In its Feb. 19 letter rejecting Cienfuegos’ appeal, Anthem said the company’s own records show that “no specific provider was mentioned in the conversation nor was it noted you were misinformed about participating status for this specific provider in question.”

That’s just b-i-z-a-r-r-e.

Cienfuegos’ wife can be heard on the recording spelling out the provider’s name, and the Anthem rep can be heard confirming both his in-network status and that the procedure would be covered.

One of the more important reasons given for using private health plans as a basis of reform was that they were working well and people were happy with them. The Blues – Blue Cross and Blue Shield – were held out as prime examples of well functioning plans. Although patients did not like being restricted to provider networks, the lists were quite comprehensive, so it worked. But now…

Both the Blue Shield and the Blue Cross plans in California are using more restricted networks in Covered California – the insurance exchange under the Affordable Care Act. Even the plans with the highest coverage – the platinum plans – are using these narrower networks.

It is a problem enough for the patients who are having difficulty finding out which physicians and hospitals are on the plan, but these anecdotal accounts confirm that the insurers are not a reliable source of that information either. And when the insurers are wrong, they still have the chutzpah to try to make their own clients absorb the losses.

Not only do individuals frequently change their coverage, the provider lists also frequently change. Since the lists are now narrower, there is a much greater probability that patients will lose continuity of care because of the unstable coverage and unstable networks.

There will be many more lawsuits like these, which may then cause the insurers to relax their restrictions. Yet far too many will still be caught in this out-of-network trap. And the insurers will not stop there. They will introduce yet more market innovations that will be designed to reduce their obligation to pay for health care. After all, they are businesses, not public service organizations.

Enough. Time for a single payer national health program.

Measuring low-value care in Medicare

Posted by on Thursday, May 15, 2014

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.

Measuring Low-Value Care in Medicare

By Aaron L. Schwartz, BA; Bruce E. Landon, MD, MBA; Adam G. Elshaug, PhD, MPH; Michael E. Chernew, PhD; J. Michael McWilliams, MD, PhD
JAMA Internal Medicine, May 12, 2014


Importance:  Despite the importance of identifying and reducing wasteful health care use, few direct measures of overuse have been developed. Direct measures are appealing because they identify specific services to limit and can characterize low-value care even among the most efficient providers.

Objectives:  To develop claims-based measures of low-value services, examine service use (and associated spending) detected by these measures in Medicare, and determine whether patterns of use are related across different types of low-value services.

Design, Setting, and Participants:  Drawing from evidence-based lists of services that provide minimal clinical benefit, we developed 26 claims-based measures of low-value services. Using 2009 claims for 1 360 908 Medicare beneficiaries, we assessed the proportion of beneficiaries receiving these services, mean per-beneficiary service use, and the proportion of total spending devoted to these services. We compared the amount of use and spending detected by versions of these measures with different sensitivity and specificity. We also estimated correlations between use of different services within geographic areas, adjusting for beneficiaries’ sociodemographic and clinical characteristics.

Main Outcomes and Measures:  Use and spending detected by 26 measures of low-value services in 6 categories: low-value cancer screening, low-value diagnostic and preventive testing, low-value preoperative testing, low-value imaging, low-value cardiovascular testing and procedures, and other low-value surgical procedures.

Results:  Services detected by more sensitive versions of measures affected 42% of beneficiaries and constituted 2.7% of overall annual spending. Services detected by more specific versions of measures affected 25% of beneficiaries and constituted 0.6% of overall spending. In adjusted analyses, low-value spending detected in geographic regions at the 5th percentile of the regional distribution of low-value spending ($227 per beneficiary) exceeded the difference in detected low-value spending between regions at the 5th and 95th percentiles ($189 per beneficiary). Adjusted regional use was positively correlated among 5 of 6 categories of low-value services (mean r for pairwise, between-category correlations, 0.33; range, 0.14-0.54; P ≤ .01).

Conclusions and Relevance:  Services detected by a limited number of measures of low-value care constituted modest proportions of overall spending but affected substantial proportions of beneficiaries and may be reflective of overuse more broadly. Performance of claims-based measures in supporting targeted payment or coverage policies to reduce overuse may depend heavily on how the measures are defined.

Excerpts from the Discussion

In this national study of selected low-value services, Medicare beneficiaries commonly received care that was likely to provide minimal or no benefit on average. Even when applying narrower versions of our limited number of measures of overuse, we identified low-value care affecting one-quarter of Medicare beneficiaries. These findings are consistent with the notion that wasteful practices are pervasive in the US health care system.

Although these findings suggest that direct approaches to measuring wasteful care may be tractable and informative, other findings underscore potential challenges in developing and applying direct measures of overuse. In particular, the amount of low-value care we detected varied substantially with the clinical specificity of our measures. Estimates of the proportion of Medicare beneficiaries receiving at least 1 measured low-value service decreased from 42% to 25% when we used more restrictive definitions that traded off sensitivity for specificity, and the contribution of low-value spending to total spending decreased from 2.7% to 0.6%.

Thus, the performance of administrative rules to reduce overuse through coverage policy, cost sharing, or value-based payment (eg, pay for performance) may depend heavily on measure definition. Such strategies may be appropriate for select services whose value is invariably low or whose low-value applications can be identified with high reliability. For other services, however, more sensitive measures could result in unintended restriction of appropriate tests and procedures by coverage and payment policies, whereas more specific measures could substantially limit the effect of these strategies. Provider groups seeking to minimize wasteful spending — for example, in response to global budgets — may be able to distinguish appropriate from inappropriate practices at the point of care without having to use rigid rules derived from incomplete clinical data.

Although our analysis suggests that common drivers of low-value care exist, our study did not identify specific determinants of wasteful care. Factors associated with low-value care may also be associated with high-value care.

As we look for methods of slowing the increases in health care spending, much attention is being given to devising methods of identifying and reducing the amount of unnecessary care provided today. This article contributes to that discussion by showing the potential impact of measuring low-value care in Medicare patients. The results are quite disappointing.

When more sensitive versions of the measures were used, a very large number of Medicare beneficiaries were found to be receiving services categorized as low-value, but they were unable to determine whether or not the care provided was actually wasteful in the various clinical circumstances. Thus policies that would reduce these services could result in “unintended restriction of appropriate tests and procedures by coverage and payment policies.”

When more specific versions of the measures were used, the potential cost savings were very small, thus “substantially limit(ing) the effect of these strategies.” Adjusting between sensitivity and specificity trades off the inappropriate labeling of beneficial care as being of low-value, with the failure to identify enough of the clinical instances that were truly of low-value. Regardless of the sensitivity or specificity, mistakes will be made in classifying what truly is or is not low-value care.

As a cost saving measure, it would appear that such an approach would be administratively complex with costs that could offset a significant proportion of the very modest gains in recovery of charges for low-value care.

The authors note that health care professionals working within global budgets “may be able to distinguish appropriate from inappropriate practices at the point of care without having to use rigid rules derived from incomplete clinical data.” Clinical judgement trumps empirical computer algorithms.

It is not as if the policy community does not already know how to recover some of the profound waste in our system. Just the administrative savings alone recovered by adopting a single payer system would be enough to pay for the care that people are not now receiving that they should be. But our policymakers don’t seem to be giving up in their anything-but-single-payer pursuit of cost containment in health care. Their obsession is pathological.

High cancer drug prices

Posted by on Wednesday, May 14, 2014

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.

High Cancer Drug Prices in the United States: Reasons and Proposed Solutions

By Hagop Kantarjian, MD, David Steensma, MD, Judit Rius Sanjuan, Adam Elshaug, MPH, PhD and Donald Light, PhD
Journal of Oncology Practice, May 6, 2014

The increase in cancer drug prices in the last 15 years has many contributing factors and is harming our patients and our health care system. It represents to many cancer experts a crossing of a moral line between reasonable profits and profiteering, in a situation involving a human catastrophe: patients who have developed cancer, and who may die because they cannot afford the treatment. With typical out-of-pocket expenses of 20% to 30%, the financial burden of cancer treatment would be $20,000 to 30,000 a year, nearly half of the average annual household income in the United States. Many patients (estimated 10% to 20%) may decide not to take the treatment or may compromise significantly on the treatment plan. This difficult situation poses three relevant questions: (1) Are cancer drug prices too high? (2) Are they hurting patients and our health care system? and (3) Can we do something about it? The answer to each is affirmative. It is also our obligation as cancer doctors to keep patients from “harm and injustice.” If high prices make drugs unaffordable and inaccessible, thus causing harm, then we should voice our concerns and advocate for solutions.

What would be a just price for a cancer drug? A simple answer would be a price that recognizes that most risks and costs of development are borne by the public through tax breaks and public funding, so that cancer drugs are affordable. The prices would maintain reasonable profits to drug companies but remain fair, accessible and affordable to patients and to the health care system.

What are some potential solutions? The United States is on the precipice of great change in how we measure value in health care. In a recent survey of US oncologists, 80% favored more use of cost-effectiveness data in coverage decisions. In 2011, the American College of Physicians outlined the position that “There should be a transparent and publicly acceptable process for making health resource allocation decisions with a focus on medical efficacy, clinical effectiveness, and need, with consideration of cost based on the best available medical evidence.” Several solutions could help reduce cancer drug prices. Reviewing and reducing the research bureaucracy and burdens could eliminate unnecessary steps that increase cost, delay timelines, and shorten drug patent times. Allowing Medicare to negotiate drug prices, eliminating pay-for-delay strategies; allowing importation of drugs from abroad for personal use; and allowing PCORI and other cancer advocacy groups, experts, or committees to consider cost in their recommendations, would all enhance the capacity of market forces to produce more reasonable cancer drug prices. Professional societies representing cancer specialists and advocating for cancer patients should be involved in reducing the hype around new cancer drugs that do not have a major impact on patient outcomes. They could also develop pathways and guidelines that incorporate estimates of a drug “value” (benefit, toxicities, cost, etc). A broad-based group representing cancer experts, PCORI, patients and their advocates, regulatory bodies, and pharmaceutical and insurance companies could review the new drugs for their cost and benefit after US Food and Drug Administration approval, and formulate cancer treatment pathways that incorporate the costs and benefits of cancer drugs. Such structures are in place in many other countries. These include, for instance, the Pharmaceutical Benefits Scheme in Australia, the Pharmaceutical Market Restructuring Act in Germany (AMNOG; affects prices in 31 countries), and others (Canada, United Kingdom, New Zealand, France, etc). These structures have been documented to result in more reasonable cancer drug prices (based on expected benefits), which improves affordability and promotes high levels of access for the population. For manufacturers, this creates predictable markets with strong drug penetration, and ultimately generates better profits to drug companies.

As this article indicates, there are many things that could be done to reduce prices of, not just cancer drugs, but all new drugs that enter the market with exorbitant pricing. Just think how much easier this would be under a single payer system.

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