Is NAIC agreement on medical loss ratios in patients’ interests?

Posted by on Wednesday, Aug 18, 2010

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.

Commissioners OK health rate plan

By Sarah Kliff
Politico
August 17, 2010

The National Association of Insurance Commissioners approved Tuesday morning (by a unanimous vote) a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.

While insurance commissioners moved forward unanimously, familiar fault lines emerged between consumer advocates and industry over the document and how it categorizes medical spending.

“In general, we are very pleased,” said NAIC consumer advocate Timothy Jost, a professor of health policy at Washington & Lee University. “The process has been very open and participatory. We feel like our concerns have been listened to.”

“The NAIC is conducting a transparent and thorough process as it develops the [medical loss ratio] MLR definition, but the current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care and fight fraud,” AHIP president Karen Ignagni said in a statement.

http://www.politico.com/news/stories/0810/41179.html

NAIC approved reporting form (blank):
http://www.naic.org/documents/index_health_reform_mlr_blanks_proposal.pdf

Letter from AHIP’s Karen Ignagni:
http://www.politico.com/static/PPM153_ahip_081510.html

The National Association of Insurance Commissioners (NAIC) has finally come to agreement on the reporting form that likely will be used to determine whether or not the private insurers are in compliance with the required medical loss ratios (MLRs). The agreement is being reported as a victory for health care consumers and a defeat for the private insurance industry, but this ignores the crucial overriding issue.

The debate was over how much of their administrative costs the private insurers would be able to pass off as quality improvements that could be classified as medical expenses. Such reclassifications would allow the insurers to spend more for other non-medical purposes such as marketing and profits. Much of their attempted overreach – some described in Karen Ignagni’s letter – was rejected.

This is not a victory for the health care consumer. We are still stuck with a middleman industry that has been granted the right to keep 15 to 20 percent of our premium dollars to use for their own purposes. Congress and the President rejected a model of reform – an improved Medicare for all – that would have eliminated much of this waste plus the waste of the excess administrative burden that the insurers place on physicians and hospitals. The insurers get to include the latter as medical costs, further padding their margins, but administrative waste doesn’t benefit anyone’s health.

With all of the attention being given to the details of implementing the Patient Protection and Affordable Care Act (PPACA), too many have forgotten about the fact that the financing model in PPACA is irreparably flawed and can never bring us affordable health care for everyone. Instead of frittering away our efforts in the peripheral skirmishes, we need to pull together and win this war.

Economic crises and cost sharing don’t mix

Posted by on Tuesday, Aug 17, 2010

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 economic crisis and medical care usage

By Annamaria Lusardi, Daniel J. Schneider, Peter Tufano
National Bureau of Economic Research
Working Paper 15843
March, 2010

We use a unique, nationally representative cross-national dataset to document the reduction in individuals’ usage of routine non-emergency medical care in the midst of the economic crisis. A substantially larger fraction of Americans have reduced medical care than have individuals in Great Britain, Canada, France, and Germany, all countries with universal health care systems. At the national level, reductions in medical care are related to the degree to which individuals must pay for it, and within countries are strongly associated with exogenous shocks to wealth and employment.

http://www.nber.org/papers/w15843

This five-nation study of the impact of the financial crisis on usage of routine medical care demonstrates that both a decline in employment and a decline in wealth are strongly associated with reductions in medical care. But once again, the United States is an outlier.

U.S. citizens pay the highest out-of-pocket amounts for health care, and therefore were two to five times more likely than Europeans to reduce their use of health care. In difficult economic times, higher cost sharing has a greater negative impact on health care access.

The Patient Protection and Affordable Care Act (PPACA) will intensify this problem because most of the subsidized private plans will have low actuarial values, requiring larger deductibles, higher coinsurance (percentage of costs paid by the patient), and higher copayments (dollar amount paid by the patient).

The health care financing system should be designed to allow individuals to have the health care that they need without exposing them to financial hardship, and that protection certainly should extend into times of economic crises.

Now that PPACA has established underinsurance as the norm, we can anticipate greater reductions in necessary care, especially during difficult economic times. Or instead we could ensure that people receive the care that they need by replacing our financing system with a single payer national health program. As voters, it’s our choice.

Is WellPoint’s business model viable?

Posted by on Monday, Aug 16, 2010

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.

Big and beleaguered: WellPoint’s bad image

By Emily Berry
American Medical News
August 16, 2010

Thus far, WellPoint and insurance trade group America’s Health Insurance Plans have responded to criticism about rate increases with variations on the same theme: Medical costs, driven by physicians and hospitals, are rising so dramatically that insurers cannot avoid raising rates.

The argument doesn’t appear to work if WellPoint and AHIP are trying to elicit sympathy or understanding from the public or policymakers.

As it went on the defensive using studies demonstrating higher medical costs, WellPoint reduced payment for physicians in most of its markets by double-digit percentages for certain procedures, and the cuts were across all specialties, said Susanne Madden, CEO of the consulting firm Verden Group in Nyack, N.Y.

“They’ve done a spectacular job destroying customer loyalty and physician loyalty at the same time, and they’re not making any friends in government,” she said. “They don’t seem to have a grasp on the fact that if they do not have physicians as allies in some way, shape or form, they’re going to have a hard time.”

If it cannot raise rates, WellPoint — and other national insurers — will have to cut costs, experts said. This is where physicians might be affected. WellPoint is likely to cut costs by further reducing payments for hospitals and physicians and restricting networks, experts said.

http://www.ama-assn.org/amednews/2010/08/16/bisa0816.htm

WellPoint’s phenomenal business success has been largely due to its ability to offer competitive premiums by limiting what it has had to pay out in health care benefits. Will WellPoint’s business model continue to be viable?

It has targeted its marketing to the healthy workforce and their young, healthy families, and to the portion of the individual market that can pass underwriting standards. Under the Patient Protection and Affordable Care Act (PPACA) WellPoint will no longer be able to exclude individuals with greater health care needs, neither by favorable selection nor by retroactive rescissions. Without other innovative cost controls, premium increases will be inevitable.

Under PPACA, WellPoint will also be required to provide a standard package of benefits, preventing them from reducing health care spending by cutting benefits. They will also be required to provide plans with tiered actuarial values, prohibiting them from requiring ever greater out-of-pocket cost sharing by the patient. Thus premiums will have to reflect the actual increases in health care costs.

It would be possible for WellPoint to slash reimbursement rates for physicians and hospitals, but that would be a terrible business decision wince it would risk a massive exodus from their provider networks.

It is likely that WellPoint and other insurers will establish more restrictive networks with providers who are willing to accept payment reductions in exchange for greater volume, but that loss of choice would certainly further alienate their plan subscribers, also threatening their market.

The plans may search for other innovations, including some of those in PPACA, but at this time there is little prospect that cost savings could be achieved without creating greater animosity amongst patients and providers.

To comply with PPACA, WellPoint will have to increase premiums and market primarily plans with low actuarial values of 60 or 70 percent, leaving excessive out-of-pocket costs for those with health care needs. The subsidies in PPACA are too small to prevent financial hardship, and there is little political will to expand the federal budget by increasing the subsidies.

The situation can only grow worse with time. The WellPoint model will inevitably end up in the trash heap of failed policies as it is replaced with a single payer national health program – a program that would meet the needs of patients and their health care professionals.

Corporate perquisites and drug testing the left

Posted by on Wednesday, Aug 11, 2010

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.

Executives at health insurance giants cash in as firms plan fee hikes

By Noam N. Levey
Los Angeles Times
August 11, 2010

The top executives at the nation’s five largest for-profit health insurance companies pulled in nearly $200 million in compensation last year — while their businesses prepared to hit ratepayers with double-digit premium increases, according to a new analysis conducted by Health Care for America Now.

http://www.latimes.com/health/la-fi-insurance-salaries-20100811,0,7386070.story

And…

White House spokesman blasts liberal critics

By Peter Nicholas and Tom Hamburger
Los Angeles Times
August 11, 2010

Festering tensions between the White House and liberal activists flared Tuesday, with presidential Press Secretary Robert Gibbs scolding what he called “the professional left” for its vocal objections to President Obama’s record.

“These people ought to be drug tested,” Gibbs said. “They will be satisfied when we have Canadian healthcare and we’ve eliminated the Pentagon. That’s not reality. They wouldn’t be satisfied if Dennis Kucinich was president.”

The backlash against Gibbs was swift.

Dr. Quentin Young, a Chicago physician and national coordinator of Physicians for a National Health Program, which advocates for single-payer health insurance, said he was “incredulous” when he first heard of Gibbs’ comments. Young, an early supporter of Obama, immediately wrote Gibbs.

“I believe that unless you retract the insulting description of deeply committed citizens you will drive off those of us who supported the president’s campaign and have anguished over the fruitless lurches to the right that have characterized the first half of the president’s first term,” Young wrote.

http://www.latimes.com/news/nationworld/nation/la-na-gibbs-20100811,0,7297603.story

It is no secret what the Democrats under the leadership of President Obama did when it came time to fix our health care system. They left the big corporations in charge of the health care funds. The report on the very high compensation for the top executives of the nation’s five largest for-profit health insurance companies at a time of double digit premium increases leaves no doubt as to who the financing infrastructure is designed to benefit. It is a sickening example of our national priorities which result in a massive transfer from the ordinary people to the wealthy.

Liberals who care are becoming less tolerant. The message has been received by The White House. Their response? We should be “drug tested” for wanting “Canadian healthcare.”

PNHP’s Quentin Young has responded appropriately to presidential Press Secretary Robert Gibbs, as quoted above.

It isn’t that those on the left who wanted a better deal for all Americans are poor losers. It’s that the administration of Change who greased the conduits for the upward flow of societal funds are bad winners.

How effective the mind is in dealing with perceptions and realities brings us to asking another question. Who is it that needs to be drug tested?

The new health care legislation is a step toward elimination, by slow strangulation, of private health insurance and establishment of government as the ‘single payer.’”                                                                                                           – George Will, in his weekly newspaper column, Sunday July 11, 2010

Everyone loves to pick on the Affordable Care Act (ACA), and well they should.  This 2,000+ page contraption, this heap of handouts to the special interest lobbyists with a few shiny baubles thrown in to placate the common folk, was not only written by the for-profit health insurance industry but now will be implemented by former WellPoint/Anthem Vice President Liz Fowler who actually penned much of the law in her role as Max Baucus’ chief healthcare counsel for the Senate Finance Committee.  You don’t have to make this stuff up, as emptywheel reported on FireDogLake July 14, 2010, “Former WellPoint VP Liz Fowler to Implement Health Care Oversight”

But what about George Will’s fine whine that the insurance industry faces strangling regulation?  Robert Pear wrote in the New York Times on August 2 that the new law will lead to more regulation of the industry, and “the transition is full of risks and uncertainty for all involved.” If the Obama administration is going to “regulate the industry for the benefit of consumers,” he noted, then “they can’t help but destabilize or disrupt the existing market.”

Wall Street doesn’t like uncertainty.  It detests being destabilized.  Stock analysts are not missing out on this.  The brokerage firm Edward Jones “downgraded the ratings on the stocks of the three health insurers it covers – UnitedHealth Group, WellPoint and Aetna — to ‘sell’ from ‘hold’ late on Friday [7/30]. Those companies are the three largest U.S. health insurers.” (Reuters 8/2/10)

This new blow comes after legendary investor Warren Buffett pulled the plug on WellPoint and United Health, selling all Berkshire Hathaway’s holdings in the insurance giants during the first quarter of 2010 (“Buffett’s Berkshire Disposes Stake in UnitedHealth, WellPoint”)

Speaking in Virginia, former House Speaker and presumed presidential candidate Newt Gingrich said on May 14,

“The employer-based system will collapse because [the ACA] encourages businesses to drop health care coverage and incur the fine. When employees realize the high costs of the health care exchanges, they will demand a nationalized health care system.

It only gets worse, or better, depending on your perspective.  According to Gingrich, the business community is going to lead the call for single payer Medicare for All.

And well they should.  Gingrich wasn’t making this up.  On May 6, CNN Money released documents showing that “many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government…  AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option.”

Is the Affordable Care Act unaffordable?  Isn’t it at least a step in the right direction?

Those questions can only be answered by considering whether the ACA ends up strengthening or weakening the health insurance corporations. Progressive critics of the bill point out that the new legislation hands over $350 billion in government subsidies to the private insurers while mandating consumers to buy the industry’s shoddy products.  That, combined with a lack of price controls means the ACA could prove to be a bonanza for the corporate stakeholders in the medical-industrial complex.

On the other hand, the changing marketplace is full of perils, even if the conservative icons quoted above are exaggerating them to stir up fear of Socialized Medicine (and maybe scare up some donations).

If we stand back and rest on our laurels, believing that the ACA will save us, then we are doomed. The industry lobbyists are working overtime to take the best parts of the bill and weaken them, while destroying any good that is in the bill (see Wendell Potter in the Huffington Post on July 27, Health Insurers Leaning on State Insurance Commissioners to “Reform” Reform).

We believe that Medicare for All is inevitable in the United States.  It is up to all of us to determine when the inevitable becomes the reality.”

– Representatives Dennis Kucinich (D-Ohio), John Conyers (D-Mich.), and U.S. Senator Bernie Sanders (I-Vt.), statement for Medicare’s birthday, July 29, 2010

If you’re not inclined to believe George and Newt, then how about Dennis, John, and Bernie:  “It is up to all of us to determine when the inevitable becomes the reality.”

The reality is that single payer, Medicare for All, is not inevitable, nor is there any guarantee the ACA won’t bankrupt us while enriching the corporations that lobbied for it.

It reminds me of a slogan we have in Indiana, “Healthcare Reform:  We’re Still For It, and We’re Not Done Yet!”

From California to Vermont, Medicare for All advocates are working for bills to create state single payer systems.  The grassroots are pushing up thru the disappointment of the Affordable Care Act.

Nationally, with the growing recognition that the health insurance giants stand as the greatest barrier to affordable healthcare for all, investors are beginning to see that this is not an industry socially responsible stockholders should be in (Huffington Post May 12, Napalm, Big Health Insurance, and Divestment).

I went to medical school to take care of sick people.  The insurance companies fulfill their fiduciary responsibility to their investors by finding ways not to pay for the care of the sick.  All their innovation and creativity go to this goal of not paying for care.  No other sector in our crazy healthcare system operates under this incentive.

It will take a mass movement, like those for women’s suffrage and civil rights.   It will take a divestment campaign like the one against apartheid in South Africa.  We must keep the pressure up, shine a light on their nefarious deeds, drive down their stock prices, and expose them for what they are: parasitic middlemen who add no value while sucking billions out of our economy.

It is up to all of us to determine when the inevitable becomes the reality.”

In a recent post, we brought together an overall assessment of the Patient Protection and Affordable Care Act of 2010 (PPACA), showing how it cannot be expected to remedy our health care system’s four major problems—lack of universal access, unrelenting surge in costs, decreasing affordability for much of the population, and variable, often mediocre quality of care. That was followed by other posts that took cancer as a bellwether for how patients with serious illness are likely to fare under the new law, again with disappointing results.

Even though the new law is just entering its implementation phase, we already know how and why it will fail to meet urgent needs for reform. More fundamental reform that more directly attacks the forces responsible for system problems will be required, sooner rather than later. But to be more successful the next time around, we need to learn the lessons as to how and why this last reform effort went off the tracks if we are to avoid making the same mistakes once again. That is the subject of this post.

Here are some of more important ways in which the politics of reform diverted the process from the real goals of reform, ending up instead with a nearly $1 trillion bill that serves corporate interests in the medical-industrial complex and Wall Street much better than Main Street and ordinary Americans.

1. Framing of the issues and the entire political process were hijacked by the very interests that are largely responsible for the system’s problems of access, cost and
quality. The opening assumption was that we had to build on the existing system, thereby serving the interests of insurers, drug and medical device makers, hospitals, organized medicine and other parts of the system that would resist structural change. Missing from the subsequent health debate were more basic issues, such as whether health care is a right or a privilege based on ability to pay for just another commodity on the open market, and whether the business model underlying our system is consistent with the long-term public interest. Instead, the language of the debate was dominated on the right by defense of markets as the solution and that government is the enemy, and on the left by such meaningless slogans as “competition” and “guaranteed affordable choice”. The debate then devolved to such arcane details as public options, exchanges and triggers, which much of the public found difficult to track and understand.

2. The democratic process was commandeered by corporate money. Corporate interests, intent on expanding their markets through the “reform” bill, pushed their agenda through lobbying, campaign contributions to key legislators, advertising campaigns through disease advocacy groups and Astroturf organizations, and feeding talking points the media (which thrived on the 24-7 coverage of the battle over a year and a half). These examples illustrate this coordinated effort by industry: Industry representatives were often in critical places as illustrated by these examples: (1) (MSNBC. Obama health czar directed firms in trouble) (2) (Center for Public Integrity, as cited in Moyers, B, Winship, M. The unbearable lightness of reform. Truthout, March 27, 2010)
• Elizabeth Fowler, insurance industry representative turned staffer of the Senate Finance Committee, largely wrote that bill.
• Nancy-Ann DeParle, White House Director of the Office of Health Reform, had received $6 million previously while serving on boards of directors of at least half a dozen companies that were targets of federal investigations, whistleblower lawsuits and other regulatory actions.
• By the time the reform law was finally passed, about 1,750 businesses and organizations had hired some 4,525 lobbyists, eight for every member of Congress, at a cost of $1.2 billion.

3. Market failure was not recognized as the wellspring of our system problems. Market advocates were successful in perpetuating the myth that competition in health care markets can rein in uncontrolled costs, even when experience and many studies confirm the opposite. These examples make the point:
• Continuous escalation of prices and costs by drug and medical device manufacturers, hospitals, physicians and other members of the medical-industrial complex.
• A nine-year study by the Community Tracking Study of 12 major U. S. health care markets found these four barriers to efficiency and quality of care: (1) providers’ market power; (2) absence of efficient provider systems; (3) employers’ inability to push the system toward efficiency and quality; and (4) insufficient health care competition, (3) (Nichols, L et al. Are market forces strong enough to deliver efficient health care systems? Confidence is waning. Health Aff (Millwood) 23 (2): 8-21, 2004))
• Consolidation among providers limits choice and competition in many markets. (4) (Kronick, R, Goodman, DC, Weinberg, J, Wagner, E. The marketplace in health care reform. The demographic limitations of managed competition. N Engl J Med 328: 148, 1993)
• A 2006 AMA study found near-monopolies by private insurers in 95 percent of HMO/PPO metropolitan markets. (5) (Associated Press. Study: Health insurers are near monopolies. April 18, 2006)

4. The private insurance industry, already dependent on various kinds of government subsidies, does not offer enough value to retain its 1,300 insurers.
These are the main reasons that the present multi-payer system should be replaced by a not-for-profit single-payer financing system: (6) (Geyman, JP. Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It. Common Courage Press, 2009)
• continued inflation of health care costs, which insurers cannot control.
• growing unaffordability of premiums and health care.
• decreasing coverage of policies with often unaffordable out-of-pocket costs.
• growing economic insecurity and hardship, even for the insured.
• shrinking private insurance markets and cutbacks in public markets.
• adverse selection in shrinking risk pools.
• increasing profits despite declining enrollments (e.g. Aetna profits up by 42 percent in second-quarter 2010). (7) (Veiga, A. Aetna posts higher 2Q profit up 42 percent. Associated Press, July 28, 2010)
• Stockpiling large surpluses even while hiking premiums. (8) (Young, A. Consumer group: Insurers kept surplus while hiking premiums USA Today, July 22, 2010)

5. The Obama Administration has so far been unwilling to confront the special interests and address the real problems. After winning the 2008 election, with the Democrats taking both the House and Senate as well as the White House, the pragmatic and overly cautious incoming president did a 180-degree turn from this statement made five years previously to the Illinois AFL-CIO:
I happen to be a proponent of a single payer universal health care program… (applause)…I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its Gross National Product on health care, cannot provide basic health insurance to everybody….But as all of you know, we may not get there immediately. Because first we have to take back the White House, we have to take back the Senate, and we have to take back the House. (9) (Obama. Speech to the Illinois AFL-CIO, June 30, 2003)
As a result of the deals the president made with corporate interests through their voluntary, unenforceable pledges, he joined forces with them in gaining political support for “reform”. But this “alliance” with corporate interests assured that the legislative outcome would meet corporate interests more than those of ordinary Americans. And it leaves the president with little clout to rein in these interests, since he now depends on the PPACA to work. It would be a PR and political disaster if more insurers leave the market, more physicians refuse to see newly “insured” patients, and growing numbers of patients and families see affordable care and choice as disappearing. The state of Maine has already asked the federal government to waive its medical loss ratio (MLR) requirement, fearing disruption of the individual and small business market. (10) (Pear, R. Covering new ground in health system shift. New York Times, August 3, 2010: A13)

6. Policy makers and politicians ignored the lessons of history in attempting incremental “reforms” that had already failed over the last 30 years. Improved access and containment of health care costs have been addressed by many initiatives over the last 30 years, including managed care, employer and individual mandates, tax credits, association health plans, chronic disease management, pay for performance, and expansion of health information technology. Although all have failed to redress these two system problems, they were included in one way or another in the PPACA as more fundamental financing reform, such as shifting to a not-for-profit financing system, was intentionally kept off the table for political reasons.

In sum, the medical-industrial complex won this last battle over health care reform. Robert Kuttner, co-founder of The American Prospect 20 years ago, reminds us of the political challenge ahead: President Obama took office at a moment when free-market ideology, Wall Street hegemony, and conservative incumbency were thoroughly disgraced by recent events. But Obama has not yet been able to translate that failure into a durable progressive counterrevolution. (11) (Kuttner, R. A 20-year odyssey. The American Prospect 21 (7): 3, 2010)

Adapted in part from Hijacked! The Road to Single Payer in the Aftermath of Stolen Health Care Reform, 2010, with permission of the publisher Common Courage Press.

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Private insurers’ double contracting

Posted by on Tuesday, Aug 10, 2010

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.

Dropping an insurer requires care and analysis

By Victoria Stagg Elliott
American Medical News
August 9, 2010

Approximately 55.8% of medical practices surveyed earlier this year by the Medical Group Management Assn. said they were renegotiating or eliminating low-paying commercial payer contracts as a way of dealing with the recession.

But deciding which insurer to drop and then, if appropriate, actually taking them off the rolls requires careful analysis and handling.

Questions to consider include: What are the rates that a particular insurer is paying? How does what the insurer actually pays compare with what is billed? How long does it take an insurer to pay? What is the denial rate? Are preauthorization procedures onerous and frequently required? Is there something about a payer that makes it more difficult to work with than others?

Experts suggest next looking at how many patients would be affected.

Other issues to consider include how dropping an insurer may affect referrals from other clinicians, and whether cutting a plan from the rolls means that another will cover more than a quarter of a practice’s patient volume. Most experts say that particular ratio would give one insurer too much sway over a practice. However, they acknowledge that it may be unavoidable in some areas of the country because of insurance industry consolidation.

Physicians should then contact referring physicians as well as affected patients.

Any communication with patients should avoid badmouthing a particular insurance company and include information about possible options, such as staying with the practice and paying an out-of-network rate, or transferring to another physician, experts said.

http://www.ama-assn.org/amednews/2010/08/09/bica0809.htm

Had President Obama and Congress selected an improved version of Medicare to provide stable, life-long health care financing for everyone, they would have eliminated the injustices, inequities, and especially the instability of the double contracting processes required by the private insurance model of health care financing.

What is meant by double contracting? Much attention has been given to the purchase of a health care contract – a private health insurance plan – but little attention is paid to the private insurer contracts extracted from physicians and other providers in the health care delivery system.

Whether it is individuals or employers who purchase the private plans, everyone is acutely aware of the perpetual changes in premiums, benefits and cost sharing, which often requires a change in plans or even a change in insurers. Contracting on the patient side is quite unstable, which has allowed the insurers to surreptitiously shift ever more of the financial responsibility to the patient who needs to access care.

Now look at the other contract – the one that the provider of health care services signs with the private insurer. As insurers adopt ever more innovations, the desire and even the ability of the physician or other providers to accept or renew the contracts diminishes. That creates instability in the physician and hospital networks which can very directly impact the insurer/patient contract. Patients may end up stuck with insurance plans that have terminated relationships with their health care professionals.

Instead of being stuck with a single, one-size-fits-all, government program (that would cover all legitimate beneficial services for all of us), we were given choice – choice of unstable, double-contracted private plans offered by the double-crossing private insurance industry. Nice choice.

Private equity funds are out to make money

Posted by on Monday, Aug 9, 2010

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.

Health plan acquisitions target small- to medium-sized companies

By Emily Berry
American Medical News
August 9, 2010

As a newly reformed health system takes shape, private equity firms are eyeing investments in health plans.

“Private equity funds are out to make money, to invest money, and they’ve got money they want to put to work now,” said Chip Clark, partner in the provider care sector in Ernst & Young’s North America Transaction Advisory Services practice.

Investments are likely to target small- to medium-size plans that won’t elicit intense regulatory scrutiny, as well as Medicaid contractors likely to continue making money from growing Medicaid rolls and cash-strapped states, observers said.

“Sustainability is going to require companies that can operate on thinner margins with a wider portfolio of products and services,” said Paul Keckley, PhD, executive director of the Deloitte Center for Health Solutions, the health research services arm of Deloitte LLP. “A substantial amount of consolidation is very likely.”

He said private equity investors he advises are watching for good opportunities in the health care industry, including health insurance plans. A business in the midst of a wave of change isn’t necessarily a bad thing in their eyes, he said. “It’s exactly what private equity looks for: sectors that are volatile, sectors where there’s tremendous opportunity for synergy, sectors where you could pick up a pretty strong management team.”

http://www.ama-assn.org/amednews/2010/08/09/bisa0809.htm

The Patient Protection and Affordable Care Act (PPACA) has provided expanded investment opportunities for the private equity firms. Two of the greatest opportunities include: 1) consolidation through acquisition of small and medium-size health insurance companies, and 2) takeover of Medicaid contractors in an environment of expanding programs in cash-strapped states.

As Ernst and Young’s Chip Clark says, “Private equity funds are out to make money, to invest money, and they’ve got money they want to put to work now.”

Health care money managers very understandably have always placed business first, even if it harms patients and the original sources of payments – be it individuals, employers or government. Instead of giving us a financing infrastructure that placed patients first, PPACA has greatly expanded the business opportunities for the money managers.

This theme is getting old.

In our last post, we reviewed a daunting set of challenges to access and quality of care for Americans unfortunate enough to get cancer. In this post, we ask the obvious question whether, and to what extent, the new health care law, the Patient Protection and Affordable Care Act of 2010 (PPACA), may help to alleviate these problems.

On the potentially positive side of the ledger, PPACA will extend insurance coverage by 32 million people by 2019 (including 16 million on Medicaid); will provide subsidies starting in 2014 to help many lower-income people afford coverage; will eliminate cost-sharing for many preventive services; will provide new funding to increase the capacity of community health centers; will put in place some limited reforms of the insurance industry, such as prohibiting exclusions based on pre-existing conditions and banning annual and lifetime limits; and will establish a new non-profit Patient-Centered Outcomes Research Institute charged with assessing the relative outcomes, effectiveness and appropriateness of different treatments.

All that might at first appear to remedy many of the system problems facing cancer patients, but this is unfortunately not the case, for these kinds of reasons.

1. At least 23 million people will still be uninsured in 2019, while tens of millions more will be underinsured. Exchanges don’t become available to help the uninsured gain coverage for four more years, and even then that coverage may well be unaffordable for many. The individual mandate, as the primary lever to expand coverage in 2014, faces an uncertain future over constitutional challenges; 71 percent of Missouri voters have already opposed that mandate in a referendum. (1) (Landers, P. Missouri voters oppose mandatory health insurance. Wall Street Journal on line. August 4, 2010) Medicaid expansion is delayed until 2014, and then will still be underfunded with many restrictions to care. As one example of recent cutbacks, the University Medical Center, as the only public oncology facility in Nevada, was shut down in 2009 leaving some 2,000 uninsured and underinsured cancer patients stranded. (2) (Pelley, S. The recession impact: Closing the clinic. 60 minutes: Bad economy leaves patients without health insurance in dire straits. April 5, 2009) As the economic downturn continues and the states make further draconian cuts, we can only expect Medicaid coverage to become even less adequate.

2. The rapidly rising costs of cancer care keep going up unabated. Under PPACA, the market still rules on prices.The costs of cancer care increase by about 20 percent a year. (3) (Newcomer, L. Oncology’s perfect storm: The next decade. Am J Manag Care 11 (no. 17, Sup), S507, December 2005) Chemotherapy drugs lead the charge, and drug makers can set their prices with little restraint. As just one example, Ovation Pharmaceuticals raised the prices of four of its drugs by up to 3,436 percent (not a typo!) in 2006, including Cosmegen, its drug for Wilm’s tumor, a cancer of the kidney in children. (4) (Appleby, J. Drug prices up 100% — or higher. USA Today: August 8-10, 2008) By 2007, three approved targeted drugs for cancer were costing about $100,000 a year. (5) (McKoy, JM, Fitzner, KA, Dewards, BJ et al. Cost considerations in the management of cancer in the older patient. Oncology 21 (7): 8522, 2007) Other cancer treatments are also right up there. A course of proton beam therapy for prostate cancer (already over-utilized beyond indications) costs about $50,000. (6) (Pollack, A. Hospitals chase a nuclear tool to fight cancer. New York Times, December 27, 2007)

3. Health insurance and cancer care have become increasingly unaffordable for many patients and families. According to the Kaiser Family Foundation, the average premium for a family of four was $13,375 in 2009. (7) (Fritze, J. Average family health insurance policy: $13, 375, up 5%. USA Today, September 16, 2009) Translating that to affordability terms, the Commonwealth Fund has developed criteria marking when payments become unaffordable, as measured against other essential costs of living—above 10 percent is considered a financial hardship. (8) (Schoen, C, Doty, M, Collins, SR, Holmgren, AL. Commonwealth Fund. Insured but not protected: How many adults are underinsured, the experiences of adults with inadequate coverage mirror those of their uninsured peers, especially among the chronically ill. Health Affairs Web Exclusive, June 14, 2005) That means that an annual household income of $130,000 a year would be required to cover health insurance without financial hardship, quite aside from the costs of health care themselves if family members get sick! And the cost of health insurance is going up by 10 to 13 percent in 2010, depending on type of plan. (9) (Moeller, P. Double-digit medical expense trend to continue. U. S. News & World Report, September 3, 2009) The PPACA will not help this problem. The Congressional Budget Office has projected that annual family insurance premiums in 2016 will cost more than $20,000, not including deductibles and other out-of-pocket costs, despite implementation of the new health care “reform” law. (10) (Congressional Budget Office. An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act. November 30, 2009) The actual costs of health care are an even bigger burden for patients and families than insurance, especially for cancer care. Even for those with insurance, out-of-pocket expenditures keep going up as more cost-sharing is added through deductibles, co-payments and coinsurance. As the costs of chemotherapy drugs continue skyward, insurers typically require enrollees to pay coinsurance of 20 to 33 percent toward the cost of these drugs. If uninsured, the costs are even higher since hospitals typically charge them rates that are almost 2.5 those charged to insurers. (11) (Anderson, GF. From ‘soak the rich’ to ‘soak the poor’: recent trends in hospital pricing. Health Aff (Millwood) 26: 780-89, 2007) Thomson Reuters reported in 2008 that one in four patients with advanced cancer with annual incomes less than $40,000 were refusing recommended treatment because of cost. (12) (Szabo, L. Study: Many cancer patients foregoing care because of cost. USA Today, October 13, 2008) And the recession of the last two years now finds an increasing number of patients reducing or stopping their life-extending chemotherapy drugs in hopes of their precious supplies lasting longer, but instead resulting in rapid regrowth of their cancers. (13) (Gardner, A. Recession causing cancer patients to quit life-extending drugs. Bloomberg BusinessWeek, August 4, 2010)

4. The PPACA will end up reducing choice of coverage for many Americans. The Exchanges will not be open for business until 2014, and then only for the uninsured and some small businesses. Affordability of adequate coverage through Exchanges remains open to question. And for those already insured, the trend is toward more restricted choice. The country’s biggest health insurers are now testing plans with tightly controlled networks of providers that will often force the insured to change physicians or pay much higher costs for the privilege of keeping their own doctors. (13) (Abelson, R. Insurers push plans that limit choice of doctor. New York Times, July 27 2010)

5. Insurance “reforms” won’t prevent insurers from gaming the new system, maximizing their own profits as their underinsurance products become ever less adequate. Insurers still have many ways to get around some of the regulations put in place by PPACA. For starters, existing insurance plans were grandfathered in without having to implement such requirements as stopping the use of pre-existing conditions to deny coverage. Annual and lifetime caps won’t be implemented until 2014; even then existing plans are permanently exempted from both requirements. (14) (Andrews, M. Caps on coverage. A big point of conflict. New York Times, January 27, 2010: A:15) As the rules get written by the Department of Health and Human Services (HHS), insurers are lobbying hard for regulations least restrictive to their business practices, such as counting many administrative costs as direct patient care (e.g. calculations of medical loss ratios (MLRs), credentialing of physicians, quality assurance initiatives). They have wide latitude to set their premium rates despite the concerns of regulators. Plans can still deny coverage or even cancel policies. They have already forced the government to backpedal on the requirement that they offer coverage to children up to 26 years of age on their parents’ policies—insurers are now permitted to set limited signup periods for such coverage, such as just one month a year. (15) (Associated Press. Health insurers win concession on kids’ coverage. July 29, 2010) In Florida, Blue Cross and Blue Shield, Aetna and Golden Rule (a subsidiary of UnitedHealth) have notified the insurance commissioner that they will stop issuing individual policies for children. (16) (Alonzo-Zaldivar, R. Some insurers stop writing new coverage for kids. Philly.com, July 27, 2010)

One of the most critical rule-setting matters before HHS is the definition of minimal benefits, still pending. Many insurers now have fine-print restrictions in their policies that cancer patients find too late, such as steep surcharges for top-tier hospitals and higher coinsurance for Tier 4 chemotherapy drugs and radiation therapy. (17) (Court, J. Insurance: you pay, they bait and switch. Los Angeles Times, May 8, 2002) More than one-half of enrollees in private Medicare plans have no annual limits on their out-of-pocket costs, and many of these plans exclude coverage for chemotherapy. (18) (Medicare Rights Center. Clean house. Asclepios 8 (10), March 6, 2008)

6. The quality of cancer care will still suffer on two counts—the under-use of necessary care and the over-use of some services of marginal value that at times are even harmful. Although the PPACA may alleviate some of the access barriers for some cancer patients at least four years down the road, the main cost and affordability barriers will continue with little restraint so that many cancer patients will under-use essential care. Since most reimbursement policies are not significantly altered and perverse incentives for physicians and hospitals to provide more services will continue, over-utilization of services of marginal value will remain a system problem. One common example makes the point. Radical prostatectomy is still performed in 60 percent of American men less than 75 years of age, often resulting in bowel, urinary or sexual dysfunction; many of these men did not need surgery in the first place. (19) (Bill-Axelson, A, Holmberg, L, Ruutu, M et al. Radical prostatectomy versus watchful waiting in early prostate cancer: The Scandinavian Prostate Cancer Group-4 randomized trial. J Natl Cancer Inst 100 (16), 2008) (20) (Wilt, TJ. SPCG-4: A needed START to PIVOTAL Data to Promote and Protect Evidence-Based Cancer Care. J Natl Cancer Inst 100 (16): 1123-5, 2008) The new Patient-Centered Outcomes Research Institute will not be operational until near the end of this decade, and then will not be empowered to set coverage and reimbursement policies based on clinical efficacy and cost-effectiveness.

So, back to our original question, in view of the above, we have to conclude that the new health care law, the PPACA, may make some marginal gains in a few areas, but will not remedy access and quality problems in cancer care, and will leave many patients and families in even more desperate straits than they are now. In essence—too little and too late. More fundamental reform will be required to redress the excesses of our market-based system, as we will consider in our next posts.

Adapted in part, with permission of the publisher, Common Courage Press, from The Cancer Generation: Baby Boomers Facing a Perfect Storm (2009) and Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform (2010).

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Rationing by inconvenience

Posted by on Friday, Aug 6, 2010

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.

Immigrants’ Experience with Publicly Funded Private Health Insurance

The New England Journal of Medicine
August 5, 2010

To the Editor:

On October 31, 2009, Massachusetts involuntarily transferred about 30,000 legal immigrants (mostly “green card” holders) from Commonwealth Care, the state-subsidized insurance program, to a new private insurance plan. CeltiCare, a subsidiary of the out-of-state, for-profit insurer Centene, agreed to take over their care for only $1,300 per person, one third of the state’s previous cost and well below the average cost of adequate care nationally. CeltiCare excluded several hospitals (and their affiliated community health centers) that have traditionally provided safety-net care for immigrants, including Boston Medical Center and Cambridge Health Alliance (CHA), where we work.

We used internal hospital data to determine the characteristics of patients who were transferred to CeltiCare and who had formerly received their primary care at CHA. A total of 1325 patients who had visited a primary care provider at CHA during the past year were moved to CeltiCare. Of these patients, 73% speak a primary language other than English, including Portuguese (24%), Spanish (20%), and Haitian Creole (9%); 19% have hypertension, and 10% have diabetes mellitus. A psychiatric disorder has been diagnosed in at least 9%.

We then evaluated the adequacy of the provider network for these patients. During the second and third months after the switch to CeltiCare, we searched CeltiCare’s Web site for primary care providers within 5 miles of CHA’s ZIP Code. The search returned 326 providers, of whom 217 were nonduplicate adult generalists. Of these providers, 25% could not be reached at the telephone number provided. Of those available by telephone, only 37% were actually accepting new CeltiCare patients, and the average wait for an appointment was 33 days. In all, only 60 providers were accepting new CeltiCare patients, and only 38 could provide service for even one of the three major linguistic minorities.

Given these findings, we believe that patients who were switched from Commonwealth Care to CeltiCare had inadequate access to primary care 3 months into this new program. We fear that such “rationing by inconvenience” shuts patients out of care to the detriment of their health but to the benefit of CeltiCare’s bottom line. Policymakers, in Massachusetts and nationally, should reassess the role of profit-driven insurers in the provision of safety-net care.

Ruth Hertzman-Miller M.D., M.P.H.
Malgorzata Dawiskiba M.D.
Cassie Frank M.D.
Cambridge Health Alliance, Cambridge, MA

http://www.nejm.org/doi/full/10.1056/NEJMc1005451

NEJM 1989: Health Care Rationing through Inconvenience, by Gerald W. Grumet, M.D.
http://www.nejm.org/doi/full/10.1056/NEJM198908313210909

Of all of the industrialized nations, the United States has the greatest amount of health care rationing, and we do that through a unique mechanism. We ration based on ability to pay. As this NEJM report shows, our flawed financing system also results in rationing by inconvenience. This is a unique tool used by the private insurance industry – a tool that serves the interests of the insurers, at the cost of the patients.

The 1989 NEJM article by Grumet describes some of the rationing-by-inconvenience mechanisms used during the managed care revolution. Not much has changed. The Patient Protection and Affordable Care Act calls for greater regulation of the private insurance industry, but it contains only a paucity of meager safeguards against policies of inconvenience. Therefore, it will be relatively ineffective in protecting us from this unscrupulous form of rationing.

Why do we leave the private insurance industry in charge?

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