Washington insiders crossing the line in defense of Medicare Advantage

Posted by on Thursday, Apr 3, 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.

Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program

By Mark Duggan, Amanda Starc, and Boris Vabson
National Bureau of Economic Research, March 2014

Our results strongly suggest that increased subsidies for private insurance in the Medicare market result in increased insurer advertising, but little additional monetary or medical benefit for consumers.

The measures of plan financial characteristics and quality that we use suggest that only about one-sixth of the policy-induced increase in plan reimbursement is captured by consumers.

While reimbursement increases have an ambiguous welfare impact on consumers, they unambiguously increase costs, through increased numbers of MA enrollees and through increased government spending per MA enrollee. A back-of-the-envelope estimate suggests that this additional spending amounted to approximately $6.4 billion during the final year of our sample period



40 Senators Sign Bipartisan Letter Urging CMS to Maintain Current Medicare Advantage Payment Levels in 2015

AHIP, February 18, 2014



Stakeholder Groups Send Bipartisan Letter Urging CMS to Protect Seniors in Medicare Advantage

AHIP, March 7, 2014



140 Physician Organizations Sign CAPG Letter Urging CMS to Protect Seniors in Medicare Advantage

AHIP, March 10, 2014



204 Members of Congress Sign New Bipartisan Letter Urging CMS to Protect Seniors in Medicare Advantage

AHIP, March 13, 2014



What They Are Saying: Bipartisan Group of 262 Members of Congress Urges CMS to Protect Seniors in Medicare Advantage

AHIP, March 28, 2014



Dr. Kavita Patel and John Rother: Proposed Medicare Advantage Cuts “Unjustifiable”

AHIP, March 19, 2014



Medicare cuts put coordinated care at risk

By John Rother, JD and Kavita K. Patel, MD MS
The Hill, March 13, 2014

In the last few years, growth in healthcare spending has begun to moderate, fueled in part by Medicare’s shift toward new forms of payment based on outcomes and quality. But short-sighted regulations proposed last week would impose dramatic cuts to Medicare Advantage (MA) that may stifle this exciting transformation.

Many of the new cost-containment strategies now underway in original Medicare were pioneered in Medicare Advantage. The models for the Affordable Care Act (ACA)’s Accountable Care Organizations were integrated delivery systems like Intermountain, Kaiser Permanente and Geisinger, which all operated MA plans.

The Center for Medicare and Medicaid Innovation is currently testing a nurse-led care coordination program in nursing homes that is strikingly similar to United Healthcare’s Evercare program. And under the so-called Dual-Eligibles Demonstrations, states, Medicaid and Medicare are working together to implement the successful chronic care strategies pioneered by specialized MA Special Needs Plans like SCAN Health Plan, Caremore and XL Health.

Last year the very plans that developed these innovations weathered a 6.7 percent cut in payment. The effect of the cut was predictable: a majority of counties across the country saw fewer plan options, premiums climbed 6 percent and out of pocket maximums jumped an average of $560.   But now, after federal regulators issued a new proposal February 21, MA appears to be headed for an entirely new round of cuts.

The new cuts would slice another 5.9 percent from Medicare Advantage this year. That amounts to nearly 15 percent in cuts over just two years. This trend is unsustainable without imposing real costs to Medicare and its beneficiaries.

Regulators have offered several rationales for these cutbacks, which can sound plausible at first when considered one by one. After all, Congress did redirect some MA funding to offset costs associated with the ACA, and slower cost growth elsewhere in Medicare arguably would mean some adjustment for MA. However, after examining the overall, cumulative impact of this latest proposal, it’s clear that regulators are missing the forest for the trees.

Continued cuts of this magnitude put at risk the next generation of new cost-saving and quality-enhancing reforms. Even as today’s models of accountable care and primary care innovation are taking hold elsewhere in health care, MA plans would be falling behind due to the forced limit on their investment in cost-curbing strategies. That is bad news for the taxpayers who must help finance Medicare today and in the decades to come.

But the consequences for beneficiaries are even more concerning. As the proposed cuts force plans to pull back from markets they currently serve, some seniors and disabled Americans will have fewer integrated care options from which to choose, or even none at all. For any Medicare enrollee, this is a scenario to avoid. But when you consider how 41% of Medicare beneficiaries make less than $20,000 a year, the proposal becomes unjustifiable.

The Center for Medicare and Medicaid Services (CMS) has the authority to prevent this scenario. They must exercise it.

One element of a smarter approach could be to extend a recently-concluded quality demonstration project. Current law requires CMS to pay bonuses to MA plans that earn 4 or 5 stars in CMS’ 5 star plan evaluation system. But when a now-concluded demonstration program allowed CMS to offer bonuses to 3 and 3.5 star plans, there was a marked improvement in plan quality across MA as plans invested in better care management and partnered with providers to offer the high-value care that patients need. Resurrecting the demonstration would be win/win by mitigating damaging rate cuts for plans while promoting even better quality across the MA program. And rather than denying many beneficiaries the option of pursuing integrated care, continuing the quality demonstration would actually improve the quality of the options availability to them.

Whatever the exact regulatory levers used to reverse the proposed cuts, CMS must change its course. Blunt cuts will only stifle the very innovation which policymakers, providers and patients are so desperate to pursue in a new era of delivery system reform.


The extraordinary power of AHIP – the health insurance lobby organization – is currently being demonstrated by its astonishing ability to massively recruit Washington insiders and politicians in its effort to salvage the overpayments being made to the private Medicare Advantage plans.

If you review the letters, op-eds, and press releases of the various individuals and organizations that have recently spoken out in support of Medicare Advantage, you will see that they all use the rhetoric of AHIP. The AHIP release of March 28 (link above) shows the extent of involvement of members of Congress, including links to their letters and op-eds, obviously orchestrated by AHIP.

The op-ed reproduced in full above demonstrates not only the use of obvious AHIP rhetoric, but it shows how pervasive the AHIP efforts have been in that they were able to recruit two respected members of the policy community to sign on to this op-ed – John Rother and Kavita Patel. This Washington sellout to AHIP is not just sad, it’s tragic.

It is not as if there were some saving grace in the private Medicare Advantage plans. The new study from NBER (above) is only the latest amongst the innumerable reports showing that most of the extra funds paid to the plans are going to the insurers rather than the beneficiaries. This particular study shows that the insurers are using our tax funds to buy advertising to sell more plans to jack up their revenues. The advertising campaign has been successful in that one-third of Medicare beneficiaries have now enrolled in the private plans.

The Affordable Care Act included provisions to reduce these overpayments to levels comparable to the costs of patients in the traditional Medicare program. AHIP has already used its influence to convince the administration to use chicanery to reduce the cutbacks in the first two years of the reductions (by issuing phony quality awards and by using accounting gimmickry with the scheduled but deferred SGR adjustments). Since the administration seems to be resisting further chicanery (we’ll soon find out) AHIP has intensified its public campaign using some of Washington’s “finest.”

The main claim that AHIP has induced these Washingtonians to make is that seniors on the Medicare Advantage program will have to pay more since the insurers will have to increase premiums and cost sharing to make up for the reduced government payments. What they don’t point out is that reductions in premiums and cost sharing amount to only about one-sixth of the overpayments that the insurers receive.

Think about those numbers. If the Medicare Advantage program were shut down and everyone in Medicare were granted the same reductions in premiums and cost sharing as those in the Medicare Advantage plans, then the entire cost would be only half of total amount of the overpayments that the Medicare Advantage plans are already receiving (tripling the number of people receiving one-sixth of the overpayments).

If members of Congress cared more about the people instead of the insurers, they would respond to the pleas of “don’t cut my Medicare” by telling their constituents that not only will they protect the savings the Medicare Advantage patients are receiving, but they also will give the same savings to everyone else on Medicare, and they will pay for it by getting rid of the Medicare Advantage plans and have a lot of money left over.

What we don’t want to pay for is more expensive advertising to draw people into a program that wastes our taxpayer dollars while rewarding AHIP’s sponsors. Even if John Rother and Kavita Patel become remorseful and do the right thing, unfortunately the members of Congress know that AHIP lobbyists are the ones who will show them the money.

If we expect to use an improved version of Medicare as a model for single payer reform, we are going to have to get rid of the private insurers – the Medicare Advantage plans.

Now the churning begins

Posted by on Wednesday, Apr 2, 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.

The Ongoing Importance of Enrollment: Churn in Covered California and Medi-Cal

By Miranda Dietz, Dave Graham-Squire, and Ken Jacobs
UC Berkeley Labor Center, April 2014

Projections for enrollment in the new insurance options created under the Affordable Care Act (ACA) are often point-in-time estimates. But just as people frequently move in and out of being uninsured, insurance coverage through Covered California (California’s health insurance marketplace) or through Medi-Cal is dynamic and can change for an individual over the course of a year.

Following each cohort across 12 months and observing changes in income, take up of employer sponsored insurance (ESI), and loss of insurance recorded in the SIPP, the analysis predicts the share of those originally enrolled who will remain in the same type of coverage at the end of the 12 months.

For individuals enrolled in Medi-Cal:

74.5%  Stay in Medi-Cal

16.5%  Income increases, eligible for Covered California

9.1%   Leave for job-based coverage

0.0%   Become uninsured (zero “unlikely to hold in reality”)

For individuals enrolled in Covered California (range between stronger and weaker retention scenarios):

57.5%-53.3%  Stay in Covered California

21.3%-20.5%  Take up Medi-Cal/public coverage

19.0%-18.3%  Leave for job-based coverage

2.2%-7.9%    Become uninsured

Enrollment in Medi-Cal and Covered California will be dynamic as Californians move in and out of coverage and change coverage sources. This policy brief predicts a significant level of churn out of Medi-Cal and Covered California each year. Approximately one-fifth of the cohort of Covered California enrollees are expected to transition to public coverage such as Medi-Cal, and another fifth are expected to transition to employer-sponsored coverage.

Understanding the extent and nature of churn can help in planning for ongoing enrollment, ensuring smooth health coverage transitions and continuity of care, and reducing uninsurance.

*  Effective implementation of the changes aimed at streamlining the redetermination processes is required for the stability of the Medi-Cal population to actually increase.

*  It will be vital for the enrollment infrastructure — from outreach, to the website, to in-person and call-center assistance — to be available and active even outside of open enrollment periods.

*  Making sure that people successfully transition from one type of insurance to another will depend not only on the ease of enrollment, but also the extent to which Covered California and Medi-Cal take advantage of existing institutional points of connection to people undergoing these life transitions, e.g., COBRA notices or government services like unemployment, CalFresh (food stamps), or the Department of Motor Vehicles.

*  It will be important that outreach, enrollment assistance, and effective sign up processes are available throughout the year for Medi-Cal and for those who experience life transitions that qualify them for mid- year enrollment in Covered California.

Bouts of uninsurance are known to have negative health consequences. The uninsured have higher mortality overall, and are more likely to go without care. Those who are not continuously insured underutilize preventive care, and have been found to use more care when they do become insured.


One of the fundamental policy flaws with a fragmented, multi-payer system of financing health care is that the eligibility of each individual for various sources of coverage is dynamic – ever changing – requiring movement in and out of various forms of coverage or ending up with no coverage at all. This study from the UC Berkeley Labor Center shows that just the movement out of California’s Medicaid (Medi-Cal) and exchange plans (Covered California) is projected to be considerable during a twelve month period.

About one-fourth of Medi-Cal enrollees will leave the program because of income increases exceeding eligibility levels for the program, or because of becoming qualified for job-based coverage. For the Covered California exchange, almost half will leave because of a decline in income to levels eligible for Medi-Cal, or because of a transfer into job-based coverage, or simply because of falling into the ranks of the uninsured.

When you look at their recommendations to ameliorate the instability of coverage, it demonstrates once again that ACA is increasing the administrative complexity of our system when what we need is the administrative simplicity of a single payer system.

This study does not address the many other circumstances that can result in a change or loss of coverage, especially with employer-sponsored plans. Unstable coverage – churning – can have negative consequences because of disruption of continuity of care such as through your source of primary care, especially if you have or will have a chronic disorder requiring ongoing medical management.

The following paragraph is from a 2008 Quote of the Day (before ACA) that describes a few but by no means all of the reasons for churning. Churning is not a new discovery. Unfortunately, the ACA improvements have only a minimal impact in reducing churning. With the new mandates, eligibility requirements and other ACA provisions, churning may actually show a net increase. Reading this paragraph will once again remind you why we need single payer reform – an improved Medicare that covers absolutely everyone, forever. With single payer, churning is eliminated.

“You may have changed jobs, likely more than once, and lost the coverage that your prior employer provided. Your employer may have changed plans because of ever-increasing insurance premiums. Frequently your insurer introduces plan innovations such as larger deductibles, a change from fixed-dollar copayments to higher coinsurance percentages, tiering of your cost sharing for services and products, reduction in the benefits covered, dollar caps on payouts, and other innovations all designed to keep premiums competitive in a market of rapidly rising health care costs. You may have lost coverage when your age disqualified you from participating in your parents’ plan. You may have found that health benefit programs have been declining as an incentive offered by new employers. Your children may have lost coverage under the Children’s Health Insurance Program when your income, though modest, disqualified your family from the program. Your union may not have been able to negotiate the continuation of the high-quality coverage that you previously held. Your employer may have reduced or eliminated the retirement coverage that you were promised but not guaranteed. Your employer may have filed for bankruptcy without setting aside the legacy costs of their pensions and retiree health benefit programs. You may have decided to start your own small business and found that you could not qualify for coverage because of your medical history, even if relatively benign, or maybe your small business margins are so narrow that you can’t afford the premiums. You may have been covered previously by a small business owner whose entire group plan was cancelled at renewal because one employee developed diabetes, or another became HIV infected. Your COBRA coverage may have lapsed and you found that the individual insurance market offered you no realistic options. You may have retired before Medicare eligibility, only to find that premiums were truly unaffordable or coverage was not even available because of preexisting medical problems.”


Paul Krugman: “Obamacare IS the conservative alternative”

Posted by on Tuesday, Apr 1, 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.

Obamacare Lives!

By Ross Douthat
The New York Times, March 31, 2014

Back when rate shock, website problems and lagging enrollment were threatening to unravel the new health care law before it fully took effect, I concluded a column on Obamacare’s repeated near-death experiences with the following warning to conservatives:

“The welfare state’s ability to defend itself against reform, however, carries a cautionary message for Obamacare’s critics as well. What isn’t killed outright grows stronger the longer it’s embedded in the federal apparatus, gaining constituents and interest-group support just by virtue of its existence even if it doesn’t work out the way it was designed. And as disastrous as its launch has been, if the health care law can survive this crisis in the same limping, staggering way it survived Scott Brown and the Supremes, then it will be a big step closer to being part of the status quo, with all the privileges and political strength that entails.

“So yes — it’s possible that this brush with death will be fatal, possible that the law will fall with the lightest, most politically painless push. But it’s still likely that Obamacare will be undone only if its critics are willing to do something more painful, and take their own turn wrestling with a system that resists any kind of change.”

With the latest numbers showing exchange enrollment climbing toward 7 million, I think we can safely retire that “possible,” and change the “likely” to an “all-but-definite.” Not because rising enrollment proves that Obamacare is definitely working, in the sense that both its friends and critics would have originally understood the term. We don’t know yet what the paid enrollment looks like or how successfully the program is actually enrolling the uninsured. (After some grim estimates, this Rand study is making liberals feel a little more optimistic, but still suggests a below-expectations result.) We don’t know what the age-and-health-status composition of the enrollee pools looks like or what that means for premiums next year and beyond. We don’t know if any of the suspended/postponed provisions of the law will actually take effect. And we certainly don’t know what any of this means for social policy in the long run.

But we do know that there won’t be an immediate political unraveling, and that we aren’t headed for the kind of extremely-low-enrollment scenario that seemed conceivable just a few months ago, or the possible world where cancellations had ended up outstripping enrollment, creating a net decline in the number of insured. And knowing that much has significant implications for our politics. It means that the kind of welfare-state embedding described above is taking place on a significant scale, that a large constituency will be served by Obamacare (through Medicaid as well as the exchanges) in 2016 and beyond, and that any kind of conservative alternative will have to confront the reality that the kind of tinkering-around-the-edges alternatives to Obamacare that many Republicans have supported to date would end up stripping coverage from millions of newly-insured Americans. That newly-insured constituency may not be as large as the bill’s architects originally hoped, or be composed of the range of buyers that the program ultimately needs. But it will be a fact on the ground to an extent that was by no means certain last December. And that fact will shape, and constrain, the options of the law’s opponents even in the event that Republicans manage to reclaim the White House two years hence.

Such political and policy constraints, I should note, are potentially a good thing for would-be conservative reformers, since the serious right-of-center alternatives to Obamacare have always included policies to expand coverage, and with a coverage expansion accomplished, Republicans may find themselves effectively forced in a more serious direction. (This is a drum that Avik Roy, among others, has been beating for some time.) Or so I would hope; of course, they might just end up drifting toward gimmicky micro-reforms instead, or find themselves embroiled a ruinous civil war over how hard to push toward some kind of full repeal.

But wherever they go and whatever they do, they will have to deal with the reality that Obamacare, thrice-buried, looks very much alive.


Obamacare, The Unknown Ideal

By Paul Krugman

No, I haven’t lost my mind — or suddenly become an Ayn Rand disciple. It’s not my ideal; in a better world I’d call for single-payer, and a significant role for the government in directly providing care.

But Ross Douthat, in the course of realistically warning his fellow conservatives that Obamacare doesn’t seem to be collapsing, goes on to tell them that they’re going to have to come up with a serious alternative.

But Obamacare IS the conservative alternative, and not just because it was originally devised at the Heritage Foundation. It’s what a health-care system that does what even conservatives say they want, like making sure that people with preexisting conditions can get coverage, has to look like if it isn’t single-payer.

I don’t really think one more repetition of the logic will convince many people, but here we go again. Suppose you want preexisting conditions covered. Then you have to impose community rating — insurers must offer the same policies to people regardless of medical history. But just doing that causes a death spiral, because people wait until they’re sick to buy insurance. So you also have to have a mandate, requiring healthy people to join the risk pool. And to make buying insurance possible for people with lower incomes, you have to have subsidies.

And what you’ve just defined are the essentials of ObamaRomneyCare. It’s a three-legged stool that needs all three legs. If you want to cover preexisting conditions, you must have the mandate; if you want the mandate, you must have subsidies. If you think there’s some magic market-based solution that obviates the stuff conservatives don’t like while preserving the stuff they like, you’re deluding yourself.

What this means in practice is that any notion that Republicans will go beyond trying to sabotage the law and come up with an alternative is fantasy. Again, Obamacare is the conservative alternative, and you can’t move further right without doing no reform at all.

Douthat: http://douthat.blogs.nytimes.com/2014/03/31/obamacare-lives/

Krugman: http://krugman.blogs.nytimes.com/2014/03/31/obamacare-the-unknown-ideal/

There have been many isolated efforts to define the conservative, or Republican, or libertarian proposal to replace the Affordable Care Act (ACA or Obamacare), but there is no one model that the Republicans wish to advance in Congress at this time. The Republican controlled House of Representatives has voted fifty times to repeal ACA, but they have not voted on any substitute to address the widely acknowledged deficiencies in health care financing.

Conservative Ross Douthat and liberal Paul Krugman now provide us with a perspective on the conservative/Republican alternative for reform.

Douthat acknowledges that a conservative goal is to expand coverage (especially for the more vulnerable), whereas the current “tinkering-around-the-edges alternatives to Obamacare that many Republicans have supported to date would end up stripping coverage from millions of newly-insured Americans.” He suggests that the policy restraints of an ACA already in place would force Republicans “in a more serious direction.”

Krugman, on the other hand, writes, “Obamacare IS the conservative alternative.” Not only does it meet many of the conservative goals of insurance reform, it was even designed by the conservatives. The liberal position would have been to support a single payer model.

Single payer was abandoned in favor of the conservative model that would bring Republicans on board with a new, post-partisan president, while liberals would forfeit the single payer advantages in exchange for a politically feasible, bipartisan accord.

Think of where that puts us now. If the conservatives were to gain complete control, they would tweak ACA to loosen regulation of insurers, to reduce federal funding, and to place greater control within the states. If the liberals were to gain complete control, they would tweak ACA to correct many of the defects that were left in place when the negotiations refining the legislation were halted abruptly because of the Democrats having lost a filibuster-proof majority in the Senate (not to mention the sabotage of a former Democratic vice-presidential nominee).

The fact that further battles will all take place over on the right is a tragedy. The fundamental structure of ACA is irreparably flawed, as would be any modifications that the Republicans would make to move the insurance function further into the private marketplace. Already we have seen a great multitude of very serious flaws that scream out for remedial legislation. But each new patch creates more complexity. The fundamental infrastructure cannot be repaired by patches. We need a new infrastructure (and it would be better and cheaper!).

Krugman says, “in a better world I’d call for single-payer.” Let’s make this a better world.

The High Burden of Health Care Costs on Insured Adults

Posted by on Monday, Mar 31, 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.

Beyond Coverage: The High Burden of Health Care Costs on Insured Adults in Massachusetts

By Sharon K. Long
BCBS of Mass Foundation, RWJ Foundation, Urban Institute, March 2014

These findings highlight the vulnerability that Massachusetts families experience when faced with high health care costs. Overall, 42.5 percent of all nonelderly adults in the state reported that health care costs had resulted in financial problems or health care access problems for their families in the past year, with the burden greater for low-income adults (46.5 percent for those with income at or below 138 percent FPL) and middle-income adults (53.9 percent for those with income between 139 and 399 percent FPL). Nearly three-quarters (70.6 percent) of those who were uninsured for all or part of the year reported problems with health care costs. However, neither higher income nor health insurance coverage protected Bay State families: 31.7 percent of higher-income adults and 38.7 percent of adults with insurance coverage for the full year also reported that health care costs had resulted in problems for their families.

Health care costs are creating difficult choices for families in Massachusetts. Insured adults frequently reported going without needed care because of costs, cutting back on non-health-related spending to pay for health care, and reducing their family’s financial security to pay for health care, both by reducing savings and by taking on debt, including credit card debt. As a result, medical debt had a significant impact on many families, particularly middle-income families, with contacts from collection agencies quite common.



Health Insurance Coverage Is Just The First Step: Findings From Massachusetts

By Sharon Long, Kate Willrich Nordahl, Kaitlyn Kenney Walsh, Kathy Hempstead, and Ariel Fogel
Health Affairs Blog, March 26, 2014

The challenges faced by low-income and middle-income Massachusetts families are particularly worrisome given that the consumer protections for out-of-pocket health care costs are generally better in Massachusetts than those required under the ACA. For individuals with family income between 100 and 200 percent of poverty who are enrolled in the state’s subsidized health insurance program, out-of-pocket spending for covered prescriptions and medical services is limited to $1,000 per benefit year. The ACA allows individuals in this income cohort to have out-of-pocket costs that can sum to more than double this amount ($2,250).


The provisions of the Affordable Care Act (ACA) have provided the nation with health care coverage similar to that which has existed in Massachusetts. However, “the consumer protections for out-of-pocket health care costs are generally better in Massachusetts than those required under the ACA.” Though Massachusetts has better coverage, “Overall, 42.5 percent of all nonelderly adults in the state reported that health care costs had resulted in financial problems or health care access problems for their families in the past year.”

Over half of middle-income adults in Massachusetts also “reported that health care costs had resulted in financial problems or health care access problems for their families.”

Furthermore, “neither higher income nor health insurance coverage protected Bay State families: 31.7 percent of higher-income adults and 38.7 percent of adults with insurance coverage for the full year also reported that health care costs had resulted in problems for their families.”

This is the shocking truth about our new national standard of underinsurance: In spite of having greater financial protection than that offered through the Affordable Care Act, over one-half of middle-income adults and nearly one-third of higher-income adults in Massachusetts still had problems with health care costs. And many of those who didn’t have problems likely avoided them by being fortunate enough to remain healthy. That is not the way an egalitarian health care financing system should work.

This ACA turkey won’t fly. All of us, including many of those with higher incomes, would benefit from single payer.

Canada is paying more and getting less from private insurers

Posted by on Friday, Mar 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.

Canadians spend more on private health insurance for smaller payouts

Medical Xpress, March 24, 2014

Spending by Canadians on private health insurance has more than doubled over the past 20 years, but insurers paid out a rapidly decreasing proportion as benefits, according to a study published today in the CMAJ (Canadian Medical Association Journal).

The study, by University of British Columbia and University of Toronto researchers, shows that overall Canadians paid $6.8 billion more in premiums than they received in benefits in 2011.

Approximately 60 per cent of Canadians have private health insurance. Typically obtained as a benefit of employment or purchased by individuals, private health insurance usually covers prescription drugs, dental services and eye care costs not paid by public health care.

Over the past two decades, the gap between what insurers take in and what they pay out has increased threefold. While private insurers paid out 92 per cent of group plan insurance premiums as benefits in 1991, they paid only 74 per cent in 2011. Canadians who purchased individual plans fared even worse, with just 38 per cent of their premiums returned as benefits in 2011.

“Small businesses and individual entrepreneurs are the hardest hit – they end up paying far more for private health coverage,” says study lead author Michael Law, an assistant professor in UBC’s Centre for Health Services and Policy Research, “It’s essentially an extra health tax on one of our main economic drivers.

“Our findings suggest that private insurers are likely making greater profits, paying higher wages to their executives and employees, or spending more on marketing,” Law adds.


CMAJ article (first page, paywall for rest):http://www.cmaj.ca/content/early/2014/03/24/cmaj.130913.extract

Although Canada’s single payer system provides excellent coverage for most health care, a market for private health insurance sprung up to cover prescription drugs, dental services and eye care that were not covered by the original program. The for-profit insurers did what they are expected to do. They began by retaining 8 percent of premiums for administrative costs and profits. But after two decades, they now retain as much as 62 percent of premiums for profits, high executive compensation, marketing and other administrative costs.

Although some are calling for more regulation of Canada’s private insurers, they should have learned from the experience in the United States. No amount of regulation will eliminate their inefficiencies and waste. Coverage for these services should be rolled over into the public single payer system.

Opponents protest that Canada cannot afford to offer these benefits in their public program. Nonsense. Most Canadians are already receiving drugs, dental care and eye care, and it is being paid for out-of-pocket or through private insurance. The money is already being spent; it just needs to be spent better. Placing these benefits into the public program would do the following things: 1) administered pricing would ensure value, 2) financial barriers to care would be reduced, 3) financing would be more equitable, and 3) the excesses and waste of the private insurers would be eliminated.

When we enact our single payer system here in the United States, we’ll need to be sure that we don’t make the same mistakes as Canada, though they are far fewer than our blunders.

Jimmy Carter says Medicare should be expanded to all ages

Posted by on Thursday, Mar 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.

President Jimmy Carter: “A Call To Action”

The Diane Rehm Show, March 26, 2014

Diane Rehm: Briefly, how do you feel about the Affordable Care Act?

President Jimmy Carter: I was disappointed the way it was done and the complexity that it assumed. Instead of taking a leadership role from the White House and saying, “This is what we think is best,” they had five different congressional committees do it and it got, I think, the lowest common denominator, which is the most complex system. I would really have favored just the expansion of Medicare to include all ages, rather than just to deal with old people.

Video (38 second clip of quote above; also full 51 minute video):http://thedianerehmshow.org/shows/2014-03-26/president-jimmy-carter-call…

Characterizing the Affordable Care Act as “the lowest common denominator – the most complex system,” President Jimmy Carter tells us that he would have favored “the expansion of Medicare to include all ages.”

He’s right, and here’s why. There have been numerous analyses of multiple models of reform. Most of them have included a model that would build on our private insurance system and expand Medicaid, just as is found in the Affordable Care Act. Of these analyses, this is the most expensive model and it falls short on important goals such as universality, equity, administrative efficiency, and affordability.

In contrast, single payer is the least expensive of the effective models and achieves virtually all of the goals of reform. An improved version of Medicare that is expanded to include everyone would be such a model. A health service model – socialized medicine – would also work, but the nation is still too leery of that much government involvement. The popularity of Medicare indicates that this is about the level of government involvement that most would support.

We have to keep reminding Americans that the exchanges are marketing private insurance – not government insurance, so they cannot confuse a government exchange with government insurance. In fact, the exchanges are prohibited from even including a government “public option” (which wouldn’t have worked anyway since the rest of the fragmented, dysfunctional system would have been left in place). Those who defend the private Medicare Advantage plans have to be reminded that they burn up more taxpayer dollars for administration and profits while depriving patients of choice because of their limited networks of providers. Once payment between government Medicare and private Medicare Advantage is equalized, the the private insurers cannot possibly compete with the government program because of their inherent inefficiencies. This was already proven by the failure of the Medicare + Choice plans that preceded Medicare Advantage.

It’s too bad that Jimmy Carter didn’t start talking about Medicare for all when he was president. It might have been helpful if the public had had a few decades to think about it before we got to the point that legislation could be passed. They could have pressured the politicians to do it right.

Matt Anderson questions his “medical home”

Posted by on Wednesday, Mar 26, 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.

Nine Questions About My New Medical Home

By Matthew Anderson
Health Affairs Blog, March 17, 2014

Sometime in the past five years — it’s hard for me to say exactly when — I suddenly found myself living in a new home.  I must admit I am still a bit disoriented by how this happened. But it did. People keep telling me that everything will be ok but I am not entirely sure.

1. Is this a home or is it a hostel?

2. Will my old friends still be welcome in my new home?

3. Does Mommy love me or is she just paid to say so?

4. Why are we playing computer games during family time?

5. Are there any family secrets left?

6. Everyone tells me how important I am, so why is my allowance being cut?

7. Do I have to go to Church now?

8. Can we get some family therapy?

9. Can’t we afford a better home?

There was a time when family medicine saw itself as a counter-culture in medicine with a mission to incorporate a different set of values.  Our job should be to improve the wellbeing and health of our patients and their communities, not the bottom line of the corporations who thrive off our labor.

Such a dream will not happen until health care is seen as a public good instead of a private commodity.  A national health system, it seems, is the only economically rational and humane way forward.

What is a patient-centered medical home? To some it means the place you go to get health care – full primary care and a convenient and efficient entry path into more specialized services. To others it means a way of organizing the business of health care to make it more accountable for reducing costs, guided by the dictates of private insurers and government bureaucrats implementing the Affordable Care Act.

Matthew Anderson’s nine questions about the nature of the medical home should serve as a teaser to read the full article on the Health Affairs Blog. It is not simply about the medical home concept, but it questions the whole direction in which our health care system is headed. Not only should you read it, but you should download it and share it with others.

Dr. Anderson has the right values. He is a driving force behind The Social Medicine Portal (An Alternative to Corporate Health) and an editor of the journal, “Social Medicine.”

The Social Medicine Portal: http://www.socialmedicine.org/welcome-to-the-social-medicine-portal/

Social Medicine: http://www.socialmedicine.info/index.php/socialmedicine/index

Repeating his astute words, “Our job should be to improve the wellbeing and health of our patients and their communities, not the bottom line of the corporations who thrive off our labor. Such a dream will not happen until health care is seen as a public good instead of a private commodity.  A national health system, it seems, is the only economically rational and humane way forward.”

‘Value Transformation’ and health care reform

Posted by on Tuesday, Mar 25, 2014

By Samuel Metz, M.D.

In their recent paper in the Harvard Business Review, Messrs. Porter and Lee make an eloquent argument that their Value Transformation process will reduce health care costs and improve medical outcomes. They could be right. However, this strategy will certainly fail in the U.S. because it addresses delivery of health care, not financing of health care.

This distinction is crucial. Porter and Lee describe an ideal delivery system, addressing how providers are paid for patient care. Their proposal leaves untouched our financing system, which determines which patients participate, who pays, and how we collect.

If we look at successful health care systems, we find that none finance care with our American private insurance business model.

Delivery of health care in the U.S. is not much different from those in successful systems. What separates the U.S. from successful health care systems (i.e., those providing better to more people for less money than we do) is that millions of Americans lack access to any care at all—at least not until the acuity of their deteriorating health drives them to emergency rooms.

Successful health care systems within our country (there are too few) utilize a variety of delivery systems, and many utilize aspects of the authors’ Value Transformation process. However, all have three common financing characteristics not seen in our American financing model: (1) universal access to comprehensive care without discrimination against the sick, poor, or unemployed; (2) encouragement of patients to seek health care without financial penalty; and (3) financing by publicly accountable, transparent, not-for-profit agencies.

A health care system containing all three characteristics but using only one publicly accountable, transparent, not for profit financing agency is called “single payer.” Many single payer systems apply Value Transformation processes in their delivery systems, and with good results.

In contrast, providers practicing in a health care system lacking these three financing characteristics are motivated primarily to avoid sick patients. We see this as private health insurance companies focus on selling policies to the working wealthy only, to the exclusion of the unemployed poor. Mark Bertolini, CEO of Aetna insurance, neatly summarized this strategy: “margins over market.” An insurance executive’s successful health care system starts by including only those patients sufficiently wealthy to afford policies and sufficiently healthy not to need care.

The Value Transformation process can potentially reduce costs and improve outcomes only for patients who gain access to care. Patients without access will continue to embarrass our public health record and inflate our costs by their desperate attempts to get care through emergency rooms; all this despite the Value Transformation process to which they have no access.

There are three rules to create a successful health care system:

1. If you want to provide comprehensive care to more people for less money, reform the financing system.
2. If you want to dramatically reduce costs without compromising quality, reform the delivery system.
3. If you want Rule #2 to work, you must first apply Rule #1.

The critical shortcoming of Porter and Lee’s Value Transformation process is that it reforms our dysfunctional delivery system without first reforming our dysfunctional financing system. There are no examples of any delivery system succeeding in the absence of a functional financing system.

The complete power of Porter and Lee’s Value Transformation process can be enjoyed when (and only when) a reformed financing system allows all Americans to enjoy access to comprehensive care.

Recommended Reading:
1. Michael E. Porter and Thomas H. Lee. “The strategy that will fix health care” Harvard Business Review, October 2013. http://hbr.org/2013/10/the-strategy-that-will-fix-health-care/ar/1
2. Kenneth Arrow et al. Toward a 21st-Century Health Care System: Recommendations for Health Care Reform. Ann Intern Med 2009; 150:493-495. http://www.annals.org/content/150/7/493.full.pdf+html
3. WC Hsiao et al. What Other States Can Learn From Vermont’s Bold Experiment: Embracing A Single-Payer Health Care Financing System. Health Affairs 2011; 30:1232-1241. http://content.healthaffairs.org/content/30/7/1232.full?sid=56ce15de-c1b1-4dcf-8ffb-a7b3a09871b6
4. Stephen Kemble. Why Competition Among Health Plans Can’t Help Us. OpEd News, November 17, 2011. http://www.opednews.com/articles/Why-Competition-Among-Heal-by-Stephen-Kemble-111117-858.html
5. Jim Kronenberg. A Conversation with David Lawrence. History of Medicine Project, Medicine in Oregon, Summer 2011, page 20. http://associationpublications.com/flipbooks/oma/summer-11/pubData/source/OMA_Summer2011.pdf
6. T.R. Reid. The Healing of America, Penguin Press, New York, 2009. Chapters 10, 13.
7. Mark Stabile et al. Health Care Cost Containment Strategies Used In Four Other High-Income Countries Hold Lessons For The United States. Health Affairs 2013(4); 32:643-652. http://content.healthaffairs.org/content/32/4/643.full.pdf+html

Dr. Samuel Metz is a Portland anesthesiologist and a member of Physicians for a National Health Program and Mad As Hell Doctors, both advocates for single-payer health care, and of Health Care for All Oregon, an umbrella organization advocating for publicly funded universal care for all Oregonians.


PNHP note: This article originally appeared at the blog of Health Care Disconnects, an online journal devoted to sharing evidence-based information about problems and solutions to the dysfunctional health care system in the United States.

Are we forgetting about the underinsured?

Posted by on Tuesday, Mar 25, 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.

America’s Underinsured

By Cathy Schoen, Susan L. Hayes, Sara R. Collins, Jacob A. Lippa, and David C. Radley
The Commonwealth Fund, March 2014

The twin goals of health insurance are to enable affordable access to health care and to alleviate financial burdens when injured or sick. It is well known that the uninsured are at high risk of forgoing needed care and of struggling to pay medical bills when they cannot postpone care. Studies further find that insured people who are poorly protected based on their households’ out-of-pocket costs for medical care are also at risk of not being able to afford to be sick.

Using newly available data from census surveys, this report provides national and state-level estimates of the number of people and share of the population that were insured but living in households that spent a high share of annual income on medical care in 2011–12. In the analysis, we refer to these people as “underinsured.” However, this group is only one subset of the underinsured. Our estimates do not include insured people who needed care but went without it because of the out-of-pocket costs they would incur, or the insured who stayed healthy during the year but whose health insurance would have exposed them to high medical costs had they needed and sought care.

The analysis finds that in 2012, there were 31.7 million insured people under age 65 who were underinsured. Together with the 47.3 million who were uninsured, this means at least 79 million people were at risk for not being able to afford needed care before the major reforms of the Affordable Care Act took hold.

In all states, people with low incomes are at greatest risk for being underinsured or uninsured. Nationally, in 2012, nearly two-thirds (63%) of those with incomes below the federal poverty level were either underinsured or uninsured. Among those with incomes between 100 percent and 199 percent of poverty, nearly half (47%) were underinsured or uninsured.

A decade or more of people losing health coverage and a steady erosion in the financial protection of insurance has also put middle-income families at risk. In 2012, one of five people (20%) under age 65 with middle incomes (between 200% and 399% of poverty)—an estimated 15.6 million people—were either underinsured or had no health insurance.

Low- and Middle-Income Households Most at Risk

The exposure to high out-of-pocket medical care costs even when people have insurance reflects insurance trends — including higher deductibles and cost-sharing, as well as gaps in benefits or limits on coverage — in both the employer and individual insurance markets. This puts insured families at risk in terms of access to health care and financial well- being. Studies indicate that low- and middle-income insured individuals and families who face high out- of-pocket costs for medical care relative to their incomes are nearly as likely as the uninsured population to go without care because of costs, forgo care when sick, struggle to pay medical bills, or incur medical debt. Both population groups — underinsured and uninsured — are at far higher risk of access or medical bill concerns than those with more protective coverage.

Premiums for Employer-Sponsored Insurance Have Risen More Rapidly Than Incomes, Value of Benefits Declined

Over the past decade, the cost of health insurance has risen far faster than incomes for middle- and low-income working-age families.

At the same time that premiums have risen, the value of benefits has declined. Deductibles more than doubled for plans provided by larger and small employers. This increase — plus other cost-sharing or limits on benefits — has left insured patients paying a higher share of medical bills. With little or no growth in incomes over a decade, insurance and care have become less affordable.

Medicaid and Income-Related Premium Assistance

Using newly available information on out-of-pocket payments for premiums, we estimate that 29 million insured people — 11 percent of the total under-age-65 population and 13 percent of the insured population under age 65 — paid premiums that exceeded the Affordable Care Act premium contribution thresholds for those at their household income level before reforms. In other words, they had high premium out-of-pocket costs compared with incomes, with “high” defined as in excess of Affordable Care Act contribution thresholds.

However, not everyone who pays high premiums relative to income will be eligible for help. The 29 million insured people includes 13.7 million with incomes below 138 percent of poverty who are paying premiums above the Affordable Care Act thresholds for this group. Of these, 8.8 million had private insurance they bought on their own or through employers. Based on their income alone, they would likely be eligible for expanded Medicaid if their state decides to participate in Medicaid expansions.

For those with incomes above Medicaid eligibility, the law restricts eligibility for premium assistance in marketplaces to people buying insurance on their own and to workers who have employer coverage where the employee’s premium costs for self-only coverage exceeds 9.5 percent of income. Among the 29 million insured with high premium costs in 2012, 11.7 million had employer-sponsored coverage and incomes that would be too high to qualify for expanded Medicaid.

Medicaid Expansion Makes a Critical Difference

Many of the states not participating in Medicaid expansion have among the highest rates of uninsured or underinsured people as a share of their total state populations. Without Medicaid expansion, this vulnerable group will remain at high risk for access, health, and financial problems.

Changing the Insurance Map of the Country

Substantial gains, however, will depend on the plans people choose and state efforts to ensure high-value benefit designs and accessible networks. One concern is to what extent people with low or modest incomes will opt for “bronze” level plans. People choosing bronze-level plans will pay 40 percent of medical care costs on average and thus remain at financial risk. Additionally, in choosing a bronze plan, people with low incomes forgo the cost-sharing subsidies that are tied to silver plans that substantially reduce out-of-pocket spending for medical care. As of February 2014, 62 percent of those enrolling in the new marketplaces selected silver plans, 19 percent had selected gold or platinum, and 19 percent had selected bronze.

In addition, it is important to note that the Affordable Care Act’s limits on out-of-pocket costs for covered benefits also apply only to in-network providers. As discussed in a recent report profiling insured people with medical debt, even with the new limits, the insured may encounter high medical care costs if they receive care from out-of-network clinicians.

From the Conclusion

However, the new marketplaces offer plans that include substantial cost-sharing and annual caps on out-of-pocket patient costs that apply to in-network providers only. With these benefit designs, there is the risk that the nation could convert the uninsured into the underinsured and fail to stop the erosion in insurance protections for people with private insurance coverage.

Full report (40 pages – several Exhibits and Tables):

This Commonwealth Fund report provides an estimate of the numbers of underinsured – people who could experience financial hardships and impaired access in the face of medical need. Although the authors express optimism that the numbers of uninsured will decline as a result of the provisions of the Affordable Care Act (ACA), there is a high probability that there will be a substantial increase in the numbers of people who will be underinsured.

The private insurance design features supported by ACA makes continued underinsurance an inevitability. The insured are vulnerable because of low actuarial value plans with high-deductibles and other cost sharing, narrow and ultra-narrow networks that impair access to in-network providers, inadequacies of the subsidies, and the perpetuation of an expensive, administrative wasteful model of financing care – a model that we all pay for, including the underinsured.

What is not expressed in the Commonwealth data is the number of people who may not have attempted to access care because of concerns of high out-of-pocket costs. Studies have shown that these people do forgo care that they should have.

A sobering thought is the even larger numbers of individuals not represented in this study. These are the people who remained healthy and never had to test the adequacy of their insurance. Tens of millions of people are vulnerable and would become financially insecure if they did develop significant health problems. This includes many individuals with employer-sponsored insurance. They are underinsured and don’t know it.  Excluding these individuals from the underinsured count results in estimates far below the actual numbers.

The design of ACA makes it clear that both the uninsured and underinsured will remain a problem in the foreseeable future, but it will be underinsurance that will likely provoke widespread discontent. Its prevalence may well become the most compelling reason to abandon the perversities brought to us by the private insurance industry. People will be ready to replace our dysfunctional system with a single payer national health program that would eliminate, for everyone, financial barriers to health care.

AHIP’s Ignagni rejects mandate for comprehensive benefits

Posted by on Monday, Mar 24, 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.

Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP)

C-SPAN, March 21, 2014

Karen Ignagni:  I would say that what we’ve learned – and I want to go back to this whole transition point – the reason that the decision was made to allow people to stay in their plans is because there was concern being expressed about ten categories of coverage – no matter how meritorious each and every one of those benefits may be – for an individual purchasing, or a small business, sometimes from where they started, which, in general, the old market had very high deductibles – that’s what people preferred to buy because they wanted to keep their premiums low. Then if you take ten categories of coverage and you have a giant step up, well that is a bridge too far for some individuals. And that was being telegraphed pretty clearly in the fall, not from us but from people who were buying the product and would have to spend more. So I would create a lower tier so that people could gradually get into the program, so they could be part of the risk pool so we don’t hold the healthier people outside, so the process could be working the way it was designed, so we get the healthy and the sick. And I think doing things gradually, just from human nature perspective, it just makes more sense.

Marry Agnes Carey:  Wouldn’t a lot of healthy people congregate in that lower tier?

Karen Ignagni:  Not necessarily. We’re not seeing that right now in the bronze, silver and gold. I think by that hypothesis you would have expected an extraordinary amount of people to buy bronze and they have chosen more silver, which is not as high deductible. So they wanted to lower their deductibles. They’re willing to pay a little bit more per month. But the point is that people are choosing. What I would do is give people more choices. I just… human nature suggests that people like that. They’re in control if they have more choices.


One of the more important goals of health care reform was to require plans to provide comprehensive benefits. Although, as with other compromises in the Affordable Care Act (ACA), the legislation fell short, at least they did require that ten categories of benefits be covered, even if insurers were allowed considerable flexibility within each of the ten categories. Now AHIP – the insurers’ lobby organization – is attempting to dismantle the benefit requirement.Suppose we said that males could decline obstetrical benefits if they wanted to, or females could decline prostate cancer benefits, or non-drug using monogamists could decline HIV/AIDS benefits, or young invincibles could decline all benefits except physical trauma, or whatever, what would happen to the risk pooling function of insurance? Obviously that would violate one of the the most important functions of prepaid health care – pooling all risks. Fragmenting risks into a multitude of pools moves away from prepaid health care for everyone and toward each person becoming responsible for paying for the care they use. At the extreme is requiring everyone to pay full costs in cash. How far along that polarity do we move – moving from bad to worse?

Creating another tier below the lowest current metal level – bronze – meets the desires of insurers who want to expand their markets by offering really cheap plans that exclude major benefits, but it does so at a cost of breaking up the risk pools such that people with expected higher costs are concentrated in comprehensive plans, driving premiums up to ever less affordable levels.

“Erin,” responding on the KHN Blog, suggested that we call this new lower metal tier “pyrite” or fool’s gold.

Look how the insurance industry has manipulated the goals of health care reform:

* We wanted to include everyone, and 31 million people will be left out.

* We wanted to reduce financial barriers to care, and the insurers reduced the actuarial value of their plans by increasing financial barriers to care in the form of deductibles and other cost sharing.

* We wanted to slow total spending to sustainable levels. If that is successful under ACA, it will be accomplished by preventing access to essential health care through limited networks and excessive cost sharing, not through true efficiencies such as are found in single payer systems.

* We wanted to improve quality and instead the insurers sell us more worthless administrative services to play ACO and P4P games.

* We wanted to reduce administrative waste, and instead we add greater administrative complexity through the establishment of insurance exchanges and accountable care organizations.

* We wanted everyone to have comprehensive benefits, and now the insurers bring up the old saw about “giving people more choices” because that puts people “in control” and people “like that.” So let’s strip out their benefits so they can choose cheaper plans that relieve insurers of the pesky need of covering expensive disorders.

Single payer would have achieved these goals, but the insurers keep chiseling away at them to meet their own business needs while sacrificing health care for the people. We can’t seem to fix the insurers, so let’s get rid of them.

(Karen Ignagni said that people are willing to pay more for the silver plans in order to lower their deductibles, but that is not the reason. Since Congress knew that people would select plans with the lowest premiums and thus have grossly inadequate coverage – bronze plans with 60% actuarial value – they prohibited those selecting bronze plans from receiving cost-sharing subsidies for out-of-pocket expenses, forcing them to buy up at least to the still inadequate silver plans with 70% actuarial value. Karen Ignagni knows this, so she was being dishonest by covering it up with the people-liking-choice spin, when all choices are bad – except single payer of course.)

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