Insurers game risk against each other

Posted by on Monday, Jul 8, 2013

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.

Do Insurers Risk-Select Against Each Other? Evidence from Medicaid and Implications for Health Reform

By Ilyana Kuziemko, Katherine Meckel and Maya Rossin-Slater
National Bureau of Economic Research, Working Paper 19198, July 2013

Abstract

Increasingly in U.S. public insurance programs, the state finances and regulates competing, capitated private health plans but does not itself directly insure beneficiaries through a public fee-for-service (FFS) plan. We develop a simple model of risk-selection in such settings. Capitation incentivizes insurers to retain low-cost clients and thus improve their care relative to high-cost clients, who they prefer would switch to a competitor. We test this prediction using county transitions from FFS Medicaid to capitated Medicaid managed care (MMC) for pregnant women and infants. We first document the large health disparities and corresponding cost differences between blacks and Hispanics (who make up the large majority of Medicaid enrollees in our data), with black births costing nearly double that of Hispanics. Consistent with the model, black-Hispanic infant health disparities widen under MMC (e.g., the black-Hispanic mortality gap grows by 42 percent) and black mothers’ pre-natal care worsens relative to that of Hispanics. Remarkably, black birth rates fall (and abortions rise) significantly after MMC—consistent with mothers reacting to poor care by reducing fertility or plans discouraging births from high-cost groups. Implications for the ACA exchanges are discussed.

From the Introduction

In summary, under MMC, infants whose costs are likely to exceed the capitation payment die more frequently, experience worse health outcomes, receive diminished care, or are not born at all.

From the Conclusion

Introducing risk-adjustment could potentially address the risk-selection results we have presented, though, historically, governments have been reluctant to risk-adjust based on race. Adjusting based on past health conditions is very challenging in the MMC setting and, as previously noted, is rarely attempted. First, plans would have to submit some accounting of their clients’ health conditions to the government, so “intensive” coding becomes a problem, as it is in Medicare Advantage and the Medicare Prospective Payment System. Second, while Medicare can calibrate a risk-adjustment formula by regressing enrollee costs on dummies for past health conditions using cost and claims data from its FFS pool, state governments under MMC typically do not have a public FFS option and thus will not have the cost and claims data that Medicare uses. Third, risk-adjustment formulae typically document existing health conditions using twelve months of pre-data, and use this information to forecast costs for the following twelve months. A stable client population – as in Medicare – is thus required, a challenge in Medicaid given the “churning” of the client base.

Each of these three challenges would seem to apply equally to the ACA state exchanges. Regulators will rely on insurers’ accounting of client health conditions, and as there is no public FFS option they will not have their own cost and claims data. And as the exchanges serve those too rich for Medicaid but not so well off as to have employer insurance, their clients will likely come and go based on outside options – if their situation improves, then they will move into employer insurance; if their situation deteriorates, then they may need to switch to Medicaid.

With Medicaid Managed Care, the ACA exchanges, Medicare Part D and the prominence of Medicare premium-support proposals, the U.S. is moving rapidly toward providing public health insurance through a model of competing, capitated private insurance plans. Past work has identified challenges associated with this model, including the increase in costs that come with insurers losing monopsony bargaining power over providers and consumers’ cognitive overload from choosing among a large set of options. Our work points to an additional concern arising from consumer choice – it tempts insurers to under-serve high-cost clients in the hope they will switch to a competitor.

http://www.nber.org/papers/w19198

The conclusions of this study are shocking, even if predictable.

It has already been established that private Medicare Advantage plans engage in surreptitious activities that result in enrollment of lower-cost, healthier patients, while both avoiding higher-cost patients, and engaging in behaviors that cause higher-cost patients to disenroll (cherry picking and lemon dropping). This shifts higher-cost patients to the traditional public Medicare program, while the private insurers increase profits by continuing to game risk selection.

This study is different because all of the Medicaid patients who were formerly insured through a public program were transferred to private Medicaid managed care programs. Thus there was no public program where the private plans could dump their high-cost patients. So what did they do? They dumped them on their private Medicaid managed care competitors!

What is particularly shocking is the way they did it. They spent more money on the healthier patients to keep them contented so they would stay in their plans, while reducing spending and giving worse service to their higher-cost patients, ensuring dissatisfaction because of the worse outcomes that the patients suffered. Particularly distressing to advocates of social justice is that the high-cost patients discriminated against in this Texas study were predominantly black.

This study provides an important lesson for the insurance exchanges being established under the Affordable Care Act. Since a “public option” was rejected, the exchanges will include only private plans competing with each other. What kind of behavior can we expect? The most effective way for the private insurers to dump high-cost patients onto their competitors will be to give them worse care with terrible outcomes, causing their patients to flee. Of course, there is nowhere else to turn except to other private insurers, though some patients might even consider that paying a penalty for remaining uninsured might be a better option. Then again, remaining uninsured is not a realistic option for those who need higher-cost care.

It’s the same old bottom line. We can either have a publicly administered system dedicated to a patient service ethic, or we can have a privately administered insurance system dedicated to a common business ethic, no matter how cutthroat. Aren’t we making the wrong choice?

Increased risk of death among uninsured neonates

Posted by on Friday, Jul 5, 2013

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.

Increased Risk of Death among Uninsured Neonates

By Frank H. Morriss Jr
Health Services Research (HSR), August 2013

Abstract

Objective

To estimate the contribution of health insurance status to the risk of death among hospitalized neonates.

Data Sources

Kids’ Inpatient Databases (KID) for 2003, 2006, and 2009.

Study Design

KID 2006 subpopulation of neonatal discharges was analyzed by weighted frequency distribution and multivariable logistic regression analyses for the outcome of death, adjusted for insurance status and other variables. Multivariable linear regression analyses were conducted for the outcomes mean adjusted length of stay and hospital charges. The death analysis was repeated with KID 2003 and 2009.

Principal Findings

Of 4,318,121 estimated discharges in 2006, 5.4 percent were uninsured. There were 17,892 deaths; 9.5 percent were uninsured. The largest risks of death were five clinical conditions with adjusted odds ratios (AOR) of 13.7–3.1. Lack of insurance had an AOR of 2.6 (95 percent CI: 2.4, 2.8), greater than many clinical conditions; AOR estimates in alternate models were 2.1–2.7. Compared with insureds, uninsureds were less likely to have been admitted in transfer, more likely to have died in rural hospitals and to have received fewer resources. Similar death outcome results were observed for 2003 and 2009.

Conclusions

Uninsured neonates had decreased care and increased risk of dying.

From the Discussion:

Effects of Insurance Status

As expected, the predictors with the largest adjusted risks for death during hospitalization of neonatal patients estimated using the KID 2006 database were clinical conditions commonly encountered in neonatal intensive care units, that is, PT/LBW/IUGR, IVH, hypoxia, NEC, and congenital malformation. In this analysis, uninsured status was the next largest adjusted risk for death, for which the AOR, 2.6, was greater than those for sepsis, obstetrical conditions and complications, RDS, multiple birth, and male gender. Lack of insurance was also a significant predictor of death in analyses of both the 2003 and 2009 KID databases. The estimate of the effect of insurance was not changed in models for the outcome of death that excluded the hospital variable, indicating that the disparity is a within-hospital disparity.

Socioeconomic Position, Relative Isolation, and Race

Socioeconomic position, place of residence, race, and health insurance status are interrelated factors, each of which may independently predict the hospital death of a newborn, adjusted for clinical predictors and each other. However, it is difficult to separate the effect of lack of health insurance in the United States from socioeconomic conditions that may predispose to that condition. A significant unadjusted association exists in this analysis between uninsured status and the distribution of median household income indicated by ZIP code toward lower quartiles; a separate association exists between uninsured status and rural residence. Measures of poverty, income inequality, and social deprivation, not including health insurance status, have been associated with adverse neonatal or infant survival risks (Singh and Kogan 2007; Olson et al. 2010).

http://onlinelibrary.wiley.com/doi/10.1111/1475-6773.12042/full

Although socioeconomic factors play an important role in neonatal mortality, it is clear that lack of health insurance is an important contributor to these tragic deaths. We have much to do as a society to correct these injustices, but perhaps the easiest first step would be to ensure that everyone is automatically insured, including neonates. The Affordable Care Act will not do that, whereas enacting a single payer national health program would.

Transferring patients to Medicaid managed care

Posted by on Wednesday, Jul 3, 2013

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.

Transitioning Beneficiaries with Complex Care Needs to Medicaid Managed Care: Insights from California

The Kaiser Commission on Medicaid and the Uninsured, June 2013

Between June 2011 and May 2012, the California Medicaid program (known as Medi-Cal) transitioned just under 240,000 seniors and persons with disabilities (SPDs) from fee-for-service to mandatory Medicaid managed care (MMC) as part of its “Bridge to Reform” Medicaid Waiver. Goals of the transition were to increase plan and provider accountability and oversight, improve beneficiary access to care, and make costs more predictable. This study examined how health service providers, plan administrators, and community-based organizations (CBOs) in Contra Costa, Kern, and Los Angeles counties experienced the transition of SPDs to MMC. Below are some key study findings that may help inform future transitions to managed care for populations with complex health needs.

TRANSITION READINESS: BENEFICIARY DATA AND INFORMATION SHARING

* Incomplete or out-of-date contact information for SPDs was an obstacle to notifying beneficiaries of the transition to MMC.

* Health plans experienced barriers contacting beneficiaries by phone to complete Health Risk Assessments.

* The transfer of health and prescription history information from the state to health plans and providers was not timely.

* The delay in obtaining medical records also made it harder for providers to effectively care for new patients.

* Delegation to other health plans or IPAs sometimes caused further delays in data transfer as well as confusion about which entity was responsible for covering certain types of care.

* The SPD transition disrupted established communication channels between primary and specialty care providers.

PROVIDER NETWORKS: BUILDING ADEQUATE CAPACITY

* Health plans experienced barriers recruiting primary care providers with expertise in complex care management.

* Health plans faced challenges recruiting specialty care providers, particularly given the wide range of conditions among the SPD population.

* The reluctance of FFS providers to join plan networks was a major barrier to network expansion.

CARE COORDINATION: NEW RESPONSIBILITIES AND EXPECTATIONS

* Primary care providers have more responsibility for care coordination for SPDs patients but feel unprepared and untrained for this activity.

* Health plans are providing care coordination to SPD who called the member services line up to 4 times as often as other beneficiaries.

* While care coordination has expanded on all fronts, the transition to managed care added complexities that generated even greater need for coordination.

* The mental health services “carve-out” poses barriers to care coordination.

ORGANIZATIONAL RESOURCES: ENSURING ADEQUATE TRANSITION SUPPORT

* Providers reported that the SPD transition taxed their staff resources.

* Providers reported providing unreimbursed care during the transition to prevent potentially dangerous disruptions in care.

* Some plans reported that Medi-Cal capitation rates for SPDs do not account for the much higher utilization rates of the population.

*  Community-based organizations (CBOs) used resources to assist SPDs with the transition to managed care.

The usage of Medicaid managed care delivery models have been increasing nationally, a trend which is likely to continue due to the coverage expansion under the ACA. Even when steps are taken to mitigate anticipated issues and concerns prior to the transition, as was the case with California, unanticipated challenges are likely to arise. Learning from California’s experience with their SPD transition, this brief presents considerations for states, health plans, CBOs, and providers as they prepare for managed care expansions. Particularly salient are the findings around timing, communication, and coordination, including the establishment of partnerships that enable plans and providers to deliver efficient and effective care that meets beneficiaries’ health care needs.

http://kaiserfamilyfoundation.files.wordpress.com/2013/06/8453-transitio…

Although transferring patients to Medicaid managed care plans is supposed to improve access to care, this report shows that access was impaired as patients lost the choice of their health care providers, and experienced disruption in the continuity of their care. Although some of the problems were transitional, many represent substantial impairment in the quality and delivery of health care services. It’s disgraceful.

We need to return these patients to the health care professionals and institutions of their choice, while providing first dollar coverage for their care. In fact, we need to do that for all of us. Think single payer.

Administrative costs and profits from crowdfunding

Posted by on Tuesday, Jul 2, 2013

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.

Turning To The Web To Help Pay Medical Bills

By Caroline Mayer
Kaiser Health News, July 2, 2013

Even with Stage IV lung cancer, there are moments when 32-year-old Chip Kennett feels blessed. Over the course of two weeks in April, those moments were many, as 325 friends and family members contributed $56,800 over the Internet to help defray his out-of-pocket medical costs.

The Kennett family of Alexandria is one of thousands turning to the Internet to raise money for medical bills. The sites that host these campaigns operate much like online business fundraising sites such as Kickstarter. It takes only a few keystrokes for a family to set up a Web page, where they tell their story and state a fundraising goal; later, they can spread the word on social media sites such as Facebook. Donations can be made with credit cards or via PayPal.

The contributions, which can be given by name or anonymously, typically range from the very small (as little as $5) to the extremely generous ($1,000 and up). In the Kennetts’ case, donations ranged from $10 to $2,000. Most sites are for-profit and charge a fee, between 3 and 12 percent of the money donated, to cover the processing costs and the expenses of running the Web site.

The Kennetts acknowledge they are lucky to have good health insurance. (Sheila has a federal employee policy through her job at the Senate.) Even so, the Kennetts have paid thousands of dollars in out-of-pocket expenses, including the insurance plan’s co-pay requirements and its $5,000 annual deductible ($7,000 for out-of-network doctors) for both 2012 and 2013.

Medical fundraising sites are growing in number and profitability. In the first 12 months after it launched in 2008, GiveForward raised $225,000 for 359 campaigns; this year, it raised more than $20 million for more than 15,000. Company officials said GiveForward had more than $1.4 million in revenue in 2012 and has raised more than $47 million for families since it began.

When it launched, GiveForward also raised money for other causes — “scholarships, art projects, whatever,” says co-founder Ethan Austin. But the “hugbacks” — calls or messages from users — from medical fundraisers were so appreciative, “we decided, ‘Why do anything else?'”

Austin says he is not surprised at the rapid growth of crowd-funding for medical costs, citing a 2011 National Bureau of Economic Research study that found that half of American adults say they would not be able to come up with $2,000 in the event of a medical emergency. This, taken along with another recent study showing that the average cancer patient incurs as much as $8,500 a year in expenses not covered by insurance, further explains why so many ailing Americans are seeking outside help to pay their expenses, according to Austin.

http://www.kaiserhealthnews.org/Stories/2013/July/02/online-fundraising-…

Crowdfunding: the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations (Wikipedia).

What a nice gesture – friends, acquaintances and caring strangers joining together to pay medical expenses not covered by a federal employee health policy available through the United States Senate (FEHBP), one of the highest quality private insurance plans available in the United States.

What? Cost sharing has become so prevalent – even amongst the best of our health plans – that people with significant health care needs insured by these plans have to turn to charity to pay their bills? Not even cake sales will do. They need real money. (Isn’t this what insurance is supposed to prevent?)

And who moves in? Entrepreneurs who set up for-profit organizations that provide administrative services for this crowdfunding. Just what we need in a health care system already tremendously overburdened with administrative waste – more administrators who profit from our highly dysfunctional, fragmented health care financing system.

PwC reports that next year 44 percent of employers are considering high-deductible plans as the only option for their employees. The benchmark plans in the Marketplaces (exchanges) are high-deductible plans. The new national standard in health care coverage will leave far too many individuals exposed to financial hardship in spite of having a health care plan.

The logical solution would be to reverse this trend and provide coverage that protects individuals from medical debt. But that’s not the American way. We bring in more administrators and pay them richly, further adding to our almost intolerable national health expenditures.

Hey! Is anybody reading these messages? Single payer. Single payer! SINGLE PAYER!

Hardship? No penalty, but no insurance

Posted by on Monday, Jul 1, 2013

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.

Guidance on Hardship Exemption Criteria and Special Enrollment Periods

Centers for Medicare and Medicaid Services, June 26, 2013

The Department of Health and Human Services (HHS) finalized provisions concerning how Marketplaces (also known as “Exchanges”) will determine eligibility for and grant certificates of exemption from the individual shared responsibility payment described in section 5000A of the Internal Revenue Code.

This guidance is intended to describe the circumstances that Marketplaces may use in determining what constitutes a hardship if they prevent an individual from obtaining coverage under a QHP.

We clarify that Marketplaces may consider the following circumstances in determining what constitutes a hardship under 45 CFR 155.605(g)(1) if they prevent an individual from obtaining coverage under a QHP, which include an individual who–

* becomes homeless;

* has been evicted in the past six months, or is facing eviction or foreclosure;

* has received a shut-off notice from a utility company;

* recently experienced domestic violence;

* recently experienced the death of a close family member;

* recently experienced a fire, flood, or other natural or human-caused disaster that resulted in substantial damage to the individual’s property;

* filed for bankruptcy in the last 6 months;

* incurred unreimbursed medical expenses in the last 24 months that resulted in substantial debt;

* experienced unexpected increases in essential expenses due to caring for an ill, disabled, or aging family member;

* is a child who has been determined ineligible for Medicaid and CHIP, and for whom a party other than the party who expects to claim him or her as a tax dependent is required by court order to provide medical support. We note that this exemption should only be provided for the months during which the medical support order is in effect; or

* as a result of an eligibility appeals decision, is determined eligible for enrollment in a QHP through the Marketplace, advance payments of the premium tax credit, or cost-sharing reductions for a period of time during which he or she was not enrolled in a QHP through the Marketplace, noting that this exemption should only be provided for the period of time affected by the appeals decision.

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ex…

The Affordable Care Act (ACA) requires that individuals who fail to enroll in a qualified health plan (QHP) be required to make a shared responsibility payment (a financial penalty for being uninsured). There are several exemptions that allow the penalty to be waived, and one of these is “individuals who experience a hardship.” This guidance defines what constitutes a hardship.

Supposedly a goal of health care reform was to be sure that everyone had health care coverage, but especially those whose personal finances made purchase of insurance prohibitive. That is why the most important provisions of ACA included the expansion of Medicaid for individuals at or near poverty and the establishment of income adjusted subsidies for purchase of private plans within the insurance exchanges (Marketplace).

The shared responsibility payment penalty was established to encourage those who could afford insurance to buy it, with a goal of approaching truly universal coverage.

When it was realized that there were many legitimate situations in which individuals would not qualify for either Medicaid or the subsidies for the exchange plans and yet could not afford to purchase plans, it was thought that it would be unfair to penalize these individuals for being uninsured, as if that were not enough of a penalty. Thus the exemptions from the penalty were established.

Of the exemptions, hardship is perhaps the most compelling. But think about that. These are individuals who have the greatest need to have the security of health care coverage, yet, instead of establishing measures that would bring them under the insurance umbrella, they are being left bare – exposed to greater financial hardship and greater barriers to health care access.

Is this the best that we can do for these people – waive a financial penalty for the sin of being uninsured – a penalty that they couldn’t pay anyway?

Absolutely everyone should be covered – automatically. How many times do we have to say it? Single payer.

By Leonard Rodberg, Ph.D.

Anthony Weiner, the former congressman and now candidate for mayor of New York, is gaining a lot of attention, but also creating a great deal of confusion, with his proposal for what he calls a “single-payer plan” for New York City.

Weiner has provided almost no details on his plan. In fact, the only document he has provided is his “Keys to the City: 64 Ideas for New York City.” In that document, the closest he comes to a description of the plan is that it would be “a single-payer plan like Medicare for all the uninsured and underinsured in our city.”

He elaborated a bit on his concept in a speech on June 20, where he said that (1) the objective would be to contain the cost to the city government of paying health care costs for its employees and for Medicaid, (2) city workers, retirees, and undocumented immigrants in the plan would be expected to pay part of the premium cost, and (3) the plan might be administered by an insurance company. He said he would appoint a task force to develop the actual plan.

This doesn’t bear much relation to PNHP’s concept of a universal, comprehensive, publicly financed single-payer plan having no out-of-pocket payments. It’s not universal, comprehensive, publicly financed, or without cost-sharing. In fact, 95 percent of city employees already are covered through a plan provided and funded by the city, with most paying nothing towards the cost of the plan. Weiner did not explain how his plan would improve on this in any way.

In fact, PNHP clearly rejects a central feature of his plan. In “Key 35,” he links his “single-payer model like Medicare” to a belief that premium payments by recipients of city coverage should be used to impose greater fiscal discipline on them in order to reduce health care inflation. He says “our present policy of having employees pay none of their premium costs should change. It is a driver of an unsustainable fiscal liability [for the city government] … it dilutes true accountability, since beneficiaries don’t feel the pinch of premium costs and demand efficiencies.” In other words, city employees use too much health care because they don’t have enough “skin in the game.”

While PNHP does not support or oppose any candidate for public office, we do periodically evaluate health reform proposals that emerge during election campaigns. Our conclusion in this case: we should not in any way give support to Anthony Weiner’s so-called single-payer plan.

Leonard Rodberg, Ph.D., is professor and chair of the Urban Studies Department at Queens College, City University of New York. He serves as coordinator of the N.Y. Metro chapter of Physicians for a National Health Program.

Why are health insurance premiums higher for public employers?

Posted by on Friday, Jun 28, 2013

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.

Why are Health Insurance Premiums So Much Higher for Public Employers Compared to Private Employers?

Co-author: Tom Buchmueller
Presenter: Alice Zawacki, Ph.D., Senior Economist, Center for Economic Studies, Bureau of the Census
AcademyHealth, 2013 Annual Research Meeting, June 23-25, 2013

Research Objective:

The Great Recession of 2007-2009, which took a major toll on the U.S. economy, was especially hard on state and local governments. The fiscal crises have led to increased scrutiny of public sector compensation practices and renewed debate about how the compensation of public sector employees compares to that of private sector workers. Employer-sponsored health insurance represents a substantial share of non-wage compensation and rising health care costs are a pressing concern for both public and private employers. According to data from the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC), average health insurance premiums in the late 1990s until 2000 were similar for public and private employers. In subsequent years, public sector premiums grew more than private sector premiums. In 2000, premiums for large public sector plans were $705 or 22% higher than premiums for large private sector plans. By 2009, this difference grew to $1580 or 35%. This paper examines changes in employee demographics, plan type and plan benefit design with the goal of explaining why premiums in the private and public sectors have diverged over the past decade.

Study Design:

To study the premium differences between sectors, we conduct regression analyses on plan-level data from the 1996-2009 MEPS-IC augmented with additional worker demographic characteristics we impute from the 2000 Decennial Census and the 2009 American Community Survey. Population Studied: Health insurance plans offered by state and local governments and private sector employers with at least 100 employees.

Principal Findings:

Early work shows that over 40 percent of the premium difference for all plans in 2009 is attributable to demographic factors: public workers are older, more likely to be female and are more educated than workers in the private sector. Some of the gap is also explained by the fact that cost sharing increased more in the private than the public sector.

Conclusions:

These findings are consistent with the idea that private employers were more aggressive in increasing cost sharing in the health plans offered to employees. Increases in cost sharing can lead to lower utilization of services for which benefit is low relative to the cost, implying an increase in economic welfare. Alternatively, if utilization is not significantly affected, increases in deductibles, co-payments and co-insurance will merely shift costs from low risk employees who use relatively little care (but pay premiums in the form of reduced wages) to higher risk employees who use more care.

Implications for Policy, Delivery or Practice:

While the growing gap in health benefits spending in the public and private sector does not necessarily imply that public sector benefits are excessive, it is natural for policy makers to look to health insurance costs as a potential area for reform and savings. It is important that efforts in this area be guided by a clear and detailed understanding of the health benefits that are provided to public sector employees and how those benefits compare to those in the private sector.

http://www.academyhealth.org/files/ARM/2013/All%20Podium%20Presentations…

In the past decade, health insurance premiums for state and local government employers have grown more than premiums for employers in the private sector. Although some of this is due to demographic characteristics, a significant portion has been due to an increase in the use of cost sharing in the private sector. Plans for public employers have maintained the same level of benefits, whereas the coverage in plans for private sector employers has deteriorated.

The policy implications of this should have us concerned. As explained in a message earlier this week, the trend in the private sector has been to expand the use of cost sharing, especially high-deductible plans, with a detrimental impact on employees. It is highly unlikely that private employers would support a reversal of this trend.

State and local governments have faced difficult budget decisions, so it is logical that they would look at the high costs of their employee health benefit programs as a source for reducing budget deficits. Many have already tapped into their programs for retirees. Although unions for public employees have been more effective in protecting benefits, there will be considerable pressure to follow the lead of the private sector and expand the use of cost sharing.

There is a far better option other than simply trying to adjust the differences in plans for public and private employees. Instead of thinking about traditional private insurance design options, especially those that emphasize catastrophic coverage, we should consider changing everyone to a prepaid health care system in which financial barriers to care are removed – a single payer system.

Not only is single payer coverage much better, it also provides the greatest value in health care. If we adopted a single payer system, both public and private employers would no longer be placed in the role of trying to control their budgets by hacking away at employees’ well earned health benefit programs.

High-cost Medicare patients are wrong target for savings

Posted by on Thursday, Jun 27, 2013

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.

Contribution of Preventable Acute Care Spending to Total Spending for High-Cost Medicare Patients

By Karen E. Joynt, MD, MPH; Atul A. Gawande, MD, MPH; E. John Orav, PhD; Ashish K. Jha, MD, MPH
JAMA, June 24, 2013

Objective

To quantify preventable acute care services among high-cost Medicare patients.

Discussion

We found that more than 70% of the roughly $91.7 billion in acute care costs in the Medicare population in 2010 were for the 10% of patients that comprise the high-cost cohort. Approximately 10% of these costs were for what were deemed potentially preventable causes as calculated using standard algorithms; the percentage was slightly higher for the persistently high-cost cohort. Hospital referral regions with a higher primary care or specialist physician supply had higher annual preventable costs per capita.

The biggest drivers of inpatient spending for high-cost patients were catastrophic events such as sepsis, stroke, and myocardial infarction, as well as cancer and expensive orthopedic procedures such as spine surgery and hip replacement. These findings suggest that strategies focused on enhanced outpatient management of chronic disease, while critically important, may not be focused on the biggest and most expensive problems plaguing Medicare’s high-cost patients. Indeed, while a proportion of these very expensive inpatient episodes may be potentially preventable (such as acute myocardial infarction or degenerative joint disease leading to orthopedic procedures), their prevention would likely require a long time horizon and substantial investments in population wellness. Such investments are critically important for ensuring the health of the population, but the time frame needed to see cost savings is likely years, not weeks or months.

These findings may shed light on why many recent efforts to control costs for these very medically complex, high-utilizing patients, including the Medicare Coordinated Care Demonstration programs, have failed to do so, even in cases in which there was a small decrease in hospital admissions. The majority of these programs have focused on providing enhanced outpatient services, such as frequent telephone and in-person contact, patient education, enhanced medication management services, and assistance with transitional care following a hospitalization. These types of services are targeted toward reducing ambulatory care–sensitive hospitalizations, and investing further in disease management programs may lead to reductions in avoidable ED visits and hospitalizations. Although these visits are still very expensive in aggregate, our findings suggest that they make up a small proportion of the total acute care spending among the costliest of patients. As a result, while disease management may yield cost savings, even a substantial reduction in these preventable hospitalizations is unlikely to have a large effect on overall spending levels within this cohort.

Conclusions and Relevance

Among a sample of patients in the top decile of Medicare spending in 2010, only a small percentage of costs appeared to be related to preventable ED visits and hospitalizations. The ability to lower costs for these patients through better outpatient care may be limited.

http://jama.jamanetwork.com/article.aspx?articleid=1699911

The experts keep talking about the 30 percent of spending that is wasted on clinical services, and they keep proposing and implementing solutions to squeeze that waste out of our system. Yet when we look closer at the waste and at the methods being used to reduce it, we find that most efforts are relatively ineffective, and, further, that much of that suspect care may not be wasteful after all. This study adds to the data showing how elusive the goal of eliminating clinical waste has been.

Yet the savings that they are looking for are potentially recoverable, but not in the clinical services. They are to be found primarily in the financing infrastructure. The non-clinical administrative waste is profound in our current financing system. It could be dramatically reduced by adopting a single payer system (eliminating the administrative excesses of the private insurers and the administrative burden they place on the delivery system, placing hospitals on global budgets, negotiating rates with health care professionals, bulk purchasing of pharmaceuticals, and separate planning and budgeting of capital improvements).

We should continue to make efforts to improve clinical services. But we should not look upon these improvements as a source of savings that would allow us to continue to unjustly enrich the superfluous vested interests who are diverting our finite funds from health care. Why would we want to continue to reward them anyway? Let’s fix what we do know is wrong with the system… especially since we know how to do that.

Large employers moving en masse to high deductibles

Posted by on Wednesday, Jun 26, 2013

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.

Medical Cost Trend: Behind the Numbers 2014

PwC Health Research Institute, June 2013

Each year, HRI issues its projection for the following year’s medical cost trend based on activity in the market that serves employer-based insurance.

Consumer-driven health plans – insurance coverage with a high-deductible – are set to go mainstream in 2014. According to the 2013 PwC Touchstone Survey of major US companies, 44% of employers are considering offering high-deductible health plans as the only benefit option to their employees in 2014. Already, 17% of employers offer high-deductible plans as their only option in 2013, a 31% increase over 2012.

High-deductible health plans, which place greater responsibility on consumers, are designed to promote cost-conscious decisions. A recent study reported families that switched from a traditional health plan to a high-deductible plan spent an average of 21% less on healthcare in the first year.

The ACA, with its new insurance marketplaces, accelerates the move to consumer-driven plans. Many of the newly insured say they are willing to accept plan features such as higher deductibles in return for lower monthly premiums – as found in the new bronze and silver plans.

2013 – Average deductibles

$1,230 – In-network
$2,110 – Out-of-network

http://www.pwc.com/en_US/us/health-industries/behind-the-numbers/assets/…

The forces supporting consumer-driven health care (CDHC) have incessantly asserted emphatically that the answer to our health care spending problem is to place the consumer (i.e., patient) in charge of health care spending. Although some of us have been trying to explain the horrible consequences of this approach, the mainstream media disseminated the message of the CDHC advocates so effectively that it has now become a meme. The CDHC camp has won the policy battle.

How can we say this? CDHC has now become virtually synonymous with high-deductible health plans (HDHP). Whether or not the deductible passes through a health savings account or is paid directly really doesn’t make much difference since the designated cash account is simply a matter of tax policy rather than health policy. Let’s look at a very brief history of HDHPs to see if we can understand why we lost.

Large employer-sponsored group plans have been the mainstay of health coverage in the United States for decades. They have provided comprehensive coverage through high actuarial value plans which required only modest cost sharing by the patient. As health care costs increased, large employers depended more on controlling spending by creating networks of providers with contracted rates. In contrast, individuals, and to a certain extent smaller employers, were unable to afford the premiums for high actuarial value plans and so the insurers heavily marketed high-deductible plans that had much more competitive premiums; so that’s what people bought.

When the Affordable Care Act was written, it was recognized that high actuarial value plans would be unaffordable unless the government subsidies were much larger than members of Congress were willing to budget. Thus the decision was made to make the benchmark plan for the insurance exchanges a low actuarial value plan (silver), made possible only by using high deductibles.

Large employers have been looking for relief from the very high costs of their employee health benefit programs. It looks like they’ve found it, now that HDHPs are becoming the new standard set by our government for the plans in the exchanges. This report from PwC shows that 12 percent of employers used HDHPs as their only option in 2012, and that may increase to 44 percent next year! That is a phenomenal shift in such a short period, and is the basis for saying that the CDHC (HDHP) camp has won the policy battle.

Not only are patients assessed a significant financial penalty for seeking health care (an average $1,230 deductible), that penalty is almost doubled if the patient obtains care out of network ($2,110 deductible) – a greater likelihood as narrower networks become more prevalent.

HDHPs have become popular for one reason only, and that is not because they make patients better shoppers. It is only because the premium to purchase the health plans is more affordable (or for self-insured employers the amount paid out in benefits is less).

There are two important trade-offs for the lower premiums. One is that people will decline to obtain appropriate health care since they will have to pay full fees until the deductible is met. A properly designed financing system should make it easier for people to obtain the care they need, not more difficult. The other is that far too many people have little or no discretionary income, and high deductibles create a financial hardship for them. The health care financing system should reduce or eliminate financial hardship, not create it.

And the out-of-network penalties? A financing system should increase health care choices for patients, not reduce them.

This boat is not going to turn around. Within two or three years, HDHPs will be the standard for employer-sponsored coverage. More people will suffer. The media knew that this change had to come, but only because they didn’t listen to us. They simply dismissed single payer because of another meme – “it isn’t feasible.”

I’m not a violent person, but the next time I hear, “skin in the …,” watch out!

Swiss support single payer

Posted by on Tuesday, Jun 25, 2013

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.

Swiss voters back single-payer health insurance

Swiss Broadcasting Corporation
swissinfo.ch, June 24, 2013

The proposal of creating a single fund for health insurance would be accepted by voters if the ballot for the initiative were held today, according to a poll commissioned by the pharmaceutical lobby group Interpharma.

About 65 per cent of the population would approve the proposal and 28 per cent would reject it, according to the first poll conducted on the issue. The result is still not very conclusive, as only about 31 per cent of people surveyed said they would actually participate in the vote.

In 2014 or 2015, the initiative for public health insurance will be put to a nationwide vote, which if accepted will see current providers of basic cover replaced by a single public fund. Under Swiss law, health insurance is compulsory, and residents currently may choose between offerings of about 60 companies which provide coverage.

The initiative – supported by the centre-left Social Democrats and by the Greens as well as by patient and consumer organisations – would leave only supplemental insurance in the hands of private companies.

The survey was conducted as part of the 2013 Health Monitor by GfS Bern research and polling institute.  The Health Monitor also showed that three out of four people in Switzerland view the health system in Switzerland positively, the highest share ever.

http://www.swissinfo.ch/eng/swiss_news/Swiss_voters_back_single-payer_he…

swissinfo.ch, April 19, 2013

According to the 2012 Health Monitor of the GfS Bern research and polling institute, 40 per cent of those questioned were in favour of a change, while 45 per cent preferred to stick with the current system.

http://www.swissinfo.ch/eng/swiss_news/Seeking_a_political_cure_for_risi…

Whereas last year 40 percent of Swiss voters supported change in the health insurance system, the same poll this year shows that 65 percent support a single fund for health insurance – single payer. It is difficult to know if this support is malleable, and whether it would hold up under the political rhetoric of campaigns. A similar measure in 2007 was rejected by 70 percent of their voters.

Nevertheless, it should make us challenge those who keep telling us that we need a system just like the Swiss have – a mandate to purchase plans from a market in which about 60 insurers participate. Clearly, though they view their system positively, there is very strong support for a single public health insurance program.

CMS’s new website (https://www.healthcare.gov/) promotes the “Health Insurance Marketplace.” Sounds sort of like the Swiss system. If we’re going copy the Swiss, why don’t we skip their mistakes and go directly to single payer?

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