Low payment rates for exchange plans threaten adequacy of provider networks

Posted by on Wednesday, Nov 20, 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.

Doctors Complain They Will Be Paid Less By Exchange Plans

By Roni Caryn Rabin
Kaiser Health News, November 19, 2013

Many doctors are disturbed they will be paid less — often a lot less — to care for the millions of patients projected to buy coverage through the health law’s new insurance marketplaces.

Some have complained to medical associations, including those in New York, California, Connecticut, Texas and Georgia, saying the discounted rates could lead to a two-tiered system in which fewer doctors participate, potentially making it harder for consumers to get the care they need.

“As it is, there is a shortage of primary care physicians in the country, and they don’t have enough time to see all the patients who are calling them,” said Peter Cunningham, a senior fellow at the nonpartisan Center for Studying Health System Change in Washington D.C.

If providers are paid less, “are [enrollees] going to have difficulty getting physicians to accept them as patients?”

Physicians are uncomfortable discussing their rates because of antitrust laws, and insurers say the information is proprietary. But information cobbled together from interviews suggests that if the Medicare pays $90 for an office visit of a complex nature, and a commercial plan pays $100 or more, some exchange plans are offering $60 to $70.

Insurance officials acknowledge they have reduced rates in some plans, saying they are under enormous pressure to keep premiums affordable. They say physicians will make up for the lower pay by seeing more patients, since the plans tend to have smaller networks of doctors.


Insurers will be paying physicians less through their exchange plans than they do through their existing commercial plans. If the rates turn out to be typically 30 or 40 percent less, as this article suggests, they will have problems maintaining adequate provider networks. An insurance card is of little value if you cannot find physicians who will accept it.

As we said from the start, those designing health care reform were making a terrible mistake when they decided to make health insurance premiums affordable while largely ignoring health care costs.

Look what they did:

* They assigned very low actuarial values to the plans that most individuals will select, leaving 30 to 40 percent of health care costs to be paid by the patient, though some will receive inadequate subsidies.

* They designed plans with very high deductibles, causing the large percentage of patients who need less care to receive virtually no sickness or injury benefits from their plans.

* They reduced the size of their provider networks which will reduce spending by making care less accessible, especially specialized care.

* Now it appears that they will be reducing provider payments to levels that will be rejected by many physicians. Although employer-sponsored plans are moving in the same direction, it is likely that many physicians will limit their practices to these plans and cash-paying patients, while avoiding patients in the exchange plans and the chronically-underfunded Medicaid program.

* As part of the SGR fix, legislators are considering not allowing any inflationary increases in the Medicare program for the next ten years – keeping the payment rates flat. If so, physicians are apt to leave the Medicare program as payment rates approach that of Medicaid.

As we approach $3 trillion in health care spending, this is criminal! For that kind of spending, everyone could have high quality health care. Instead, we get a system that perpetuates disparities in health care while creating financial burdens for precisely those individuals who most need health care.

The entire health care system will not collapse, but this experiment will perform so miserably that most will consider it to be a failure. We don’t need to go back to the drawing boards. We merely need to enact a system that we already know will achieve our goals – an improved Medicare for all.

Obamacare adding to crisis of confidence in government

Posted by on Tuesday, Nov 19, 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.

Majority in U.S. Say Healthcare Not Gov’t Responsibility

By Joy Wilke
Gallup, November 18, 2013

Poll: Do you think it is the responsibility of the federal government to make sure all Americans have healthcare coverage, or that it is not the responsibility of the federal government?

Year   Yes No
2001   62  34
2002   62  35
2003   59  39
2004   64  34
2005   58  38
2006   69  28
2007   64  33
2008   54  41
2009   47  50
2010   47  50
2011   50  46
2012   44  54
2013   42  56
(Polls were taken in November each year)

The 56% of U.S. adults who now say it is not the federal government’s responsibility to make sure all Americans have healthcare coverage continues to reflect a record high. Prior to 2009, a clear majority of Americans consistently had said the government should take responsibility for ensuring that all Americans have healthcare.

The most recent data were collected in Gallup’s annual Health and Healthcare poll, conducted Nov. 7-10. The percentage of U.S. adults who said it is the federal government’s responsibility to ensure all Americans have healthcare coverage peaked at 69% in 2006. Attitudes began to shift significantly in 2007, and continued to change through the time President Barack Obama took office in 2009. Americans who feel healthcare coverage is not the federal government’s responsibility have been in the clear majority the past two years.

Attitudes across all three partisan groups have shifted away from the view that ensuring healthcare coverage is a proper role of government, but most significantly among Republicans and independents. In September 2000, 53% of Republicans believed the government should not be responsible for ensuring all Americans had health coverage; today, 86% feel that way, an increase of 33 percentage points in 13 years. Over the same period, the percentage of Republicans believing the government should ensure healthcare coverage for all has fallen from 42% to 12%.

Fifty-five percent of independents currently say the government should not be involved with healthcare — an increase of 28 points since 2000.

The percentage of Democrats who hold this view is now 30%, its highest level since Gallup first asked the question and an 11-point increase since 2000 — with the largest change in opinion occurring between 2006 and 2008.


Americans’ attitudes toward the government’s role in ensuring all Americans have access to affordable healthcare have changed substantially over the past decade. These changes began before the Affordable Care Act was passed in 2010, and concurrently with the financial crisis of 2008 and Obama’s first presidential campaign and election. Although Democrats are now somewhat more likely compared with 2000 to say the government should stay away from healthcare, much of the shift in attitudes against government intervention has stemmed from changes among Republicans and independents. It is possible that this sharp change has been caused by a politicization of the issue as it became a major part of Obama’s campaign platform, and as he and other Democratic leaders pressed for and passed the ACA, sometimes called “Obamacare,” in 2010.

The continuing implementation of the ACA over the coming months and years will surely continue to shape Americans’ attitudes toward the federal government’s role in this area. It is not clear how the ACA’s troubled rollout to date will affect attitudes over the next year. But as the debate about the implementation of the new healthcare law has unfolded, Americans have become less likely than ever to agree that the federal government should be responsible for making sure that all Americans have healthcare.


Link for graph of trend since 2000: http://content.gallup.com/origin/gallupinc/GallupSpaces/Production/Cms/P…

Obama’s Gift to the Republicans

By Robert Kuttner
Huff Post Politics, November 17, 2013

The Affordable Care Act, as a government mandate for people to purchase private insurance with an array of possible subsidies, had too many moving parts. It was an accident waiting to happen.

As many of us wrote at the time, Medicare for All would be simpler to execute, easier to understand, and harder for Republicans to oppose.

But this was not to be. Instead we got a program that was poorly understood by the public because it was almost impossible to explain and even harder to execute.

At the time the law was passed, administration leaders and many commentators compared the Affordable Care Act to Social Security and Medicare. The analogy was never apt. These great achievements are public programs, efficient to administer and testament to the fact that government can serve social objectives far more effectively than the private sector.

Obamacare, by contrast, is the inefficiency of “public-private partnerships” at its worst. It is a public subsidy for the private insurance industry. No fewer than 55 separate contractors were hired to design the software. Yet though it is not a true public program worthy of the name, Obamacare is being used to discredit government.


Although we always have to be careful that we don’t read too much into polls, this particular result showing that a majority of Americans have decided that health care is not the responsibility of the federal government does provide support to Robert Kuttner’s statement, “Obamacare is being used to discredit government.”

Looking at the graph (link above, or use the columns of numbers above), in November of 2009 opinions shifted. This was close to the completion of the enactment of the Affordable Care Act, following a summer of vicious, partisan and tea party “death panel” attacks on the proposed reform legislation. In the past two years, as opponents kept up their shrill attack on Obamacare, the divide became even greater. The last poll showing a 14 percent margin for those believing that health care coverage should not be a responsibility of the federal government was taken one month after the bungled rollout of Healthcare.gov.

Many have suggested that once the computer glitches are ironed out, people will be very pleased with Obamacare, and the surge in anti-government views will subside. Anyone who has followed the reform process knows that couldn’t be true. Anger will increase when people find out that their deductibles are unaffordable, that some of their hospitals and physicians have been shut out of the provider networks, and that costs will continue to escalate for lack of adequate policies to contain costs.

For us to remain on the sidelines to let this play out can only intensify the view of the public that the federal government should not be involved, considering how badly our leaders have screwed up this effort. Especially at this time of intense anger and disgust over the botched rollout, it is imperative that we immediately intensify our efforts to get the public to understand that they are right when they critique Obamacare. Much more importantly, we need for them to understand the differences between good governance, bad governance, and too little governance, when it comes to health care.

Decades of too little governance is why our health care system is in the mess it is. Further reducing the role of government can only compound the problems of high costs, poor quality, and impaired access. We need government to be involved, but in the right way, not the wrong way.

Since the neo-liberals took over the Democratic party, “the era of big government is over.” They rejected a model based on the most popular health care program this nation has seen – Medicare. They decided that we needed a public/private solution – private insurance with a welfare program for those who couldn’t financially support the insurance industry. The progressives lost their spine and joined in, realizing that the neo-liberals controlled their party. This set us up for bad governance. The blame does not lie with the institution of government, but it lies with bad decisions made by the people we selected to run the government.

So what should our message be to those who say that it is not government’s responsibility? The private insurers have had over half of a century to prove their worth, and they’ve failed us miserably. We need the government, but it needs to be OUR government. We need to demand Medicare for all from our politicians, or, failing that, we need to replace them.

We need the support of the people – the majority who now believe that the government isn’t the solution. Our most intensive efforts must be directed to educating people that they are spending far too much on the private insurers for too little in return. In contrast, Medicare offers us a much better deal, but it can be improved. After all, it is our government, and we should have control.

The responsibility lies with the people. We need to exercise that responsibility through a government that is of the people, by the people and for the people. We need to dump the anti-government rhetoric because we’re talking about ourselves.

Obamacare is the Trojan horse for what!?

Posted by on Monday, Nov 18, 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.

A Conservative Cure for Obamacare

By Paul Howard & Yevgeniy Feyman
Bloomberg View, November 18, 2013

The Patient Protection and Affordable Care Act is floundering.

Conservatives who take satisfaction in that should be careful not to get ahead of themselves. The rollout problems – however serious and continuing – shouldn’t be confused with the law’s outright collapse.

The reality is that large constituencies are in place to work to preserve Obamacare.

What strategy, then, would move us closer to the patient and consumer-focused health-care system that conservatives desire while also recognizing the facts on the ground?

The answer might be simple: Propose changes that will make plans more affordable and drive enhanced competition among insurers and providers. In other words, make Obamacare a Trojan horse for conservative health-care reform. The administration of President Barack Obama has quietly introduced regulatory decisions that have made the exchanges a viable market for high-deductible, health-savings-account-eligible health plans.

Shortly after the law passed, it looked like the administration would use regulatory rule-making to kill health savings accounts. But subsequent rules clarified that HSA-qualified plans were actually the default structure for bronze plans on the exchanges. (Some silver plans qualify, too.)

Far from being driven to extinction, high-deductible, HSA-eligible plans have an opportunity to capture significant new market share on the exchanges.

Conservatives aren’t going to repeal or replace Obamacare anytime soon. But they can propose smart fixes that build on the HSA-friendly exchange architecture to make the law more consumer- and patient-friendly. Reform from the inside can set the stage for even bigger changes in the not-too-distant future.


In recent months, many conservatives have been attacking Obamacare as being a Trojan horse that will open up health care to single payer, even though actually it has taken us further in the wrong direction to a private insurance-dominated market. This article from the Manhattan Institute more accurately describes Obamacare as a Trojan horse taking us to high-deductible, health-savings-account-eligible health plans, often referred to as consumer-directed health plans. But let me clarify that.

The low actuarial value plans that will dominate the Obamacare exchanges are high-deductible plans that already are or with very little tweaking will be eligible for associated health savings accounts (HSAs). HSAs work well for wealthier people who can take advantage of the tax incentives, and who remain healthy so that they can use the accumulated tax-advantaged funds in retirement. But families with more modest incomes will be selecting the low-actuarial value bronze and silver plans only because of the lower premiums. They will receive little or no tax benefit, and if major illness strikes, they may not be able to afford the out-of-pocket expenses, even if qualified for subsidies.

From a health policy perspective, the HSA component can be ignored. Except for tax incentives for the rich, the HSA is really only cash to be used for out-of-pocket payments. Even if funded by the employer, it is still paid by the employee in the form of forgone wage increases. So it is the high-deductible and not really the HSA that has such perverse consequences – patients forgoing care because of not having the money to pay the deductible, – whether having an empty pocket or an empty HSA.

What is particularly disconcerting is that it always was intended that the exchange plans be high-deductible plans, simply to control premium costs. Also, employers are now rapidly converting to high-deductible plans for the same reason. The consumer-directed advocates no longer need to hide in a Trojan horse since the deductibles are already highly visible. Right before our eyes, it has been the Trojan army of deductibles that has been conquering our health security, placing those with health care needs in servitude.

The Trojan horse came, and the neo-liberals pretend they didn’t even see it.

John Podesta’s Medicare experience

Posted by on Monday, Nov 18, 2013

By Harvey Fernbach, M.D.

“I just enrolled in Medicare. It took me 5 minutes. Single payer anyone?”
— John Podesta, Twitter, Nov. 14, 2013

The delays, glitches, complexity and time involved in enrolling in Obamacare is in sharp contrast to a America’s largest and premiere government financed and privately delivered health insurance program — Medicare.

With a reliable track record since 1965, Medicare quietly enrolled over 1.8 million people in 2012 — that’s over 150,000 per month, nearly 5,000 per day.

Medicare enrollment has been increasing as the American population ages.

From the 2012 numbers, Medicare enrolled at least 225,000 in the six weeks since ACA’s health exchanges went live on Oct. 1.

That is more than twice as many as those who enrolled in private insurance through the exchanges, as U.S. Department of Health and Human Services reported this week.

Enrolling all U.S. residents in Medicare — and expanding its benefits as proposed by the “Expanded and Improved Medicare for All Act,” a bill in Congress (HR 676) — would be relatively simple.

Polls report that a majority of people want the kind of program H.R. 676 offers: lifelong comprehensive coverage for outpatient visits, inpatient care, laboratory tests, dental care, mental health services and more (all necessary care).

The idea that people “like their health insurance” is a myth. People want health care, not insurance policies.

An improved Medicare for All would eliminate hundreds of billions of dollars now wasted on insurance company, hospital and clinic overhead. Those billions would be redirected to delivering actual care. It would also be much more effective in controlling rising health costs, using its bargaining clout to negotiate lower prices for drugs and other medical supplies.

Medicare for All would be much easier to administer nationally, would be accessed individually by patients, eliminate hassle for providers as well as employers.

Numerous economic studies comparing this approach to the current health care plan in America demonstrate huge saving and economical advantages for the nation.

No wonder John Podesta, former chief of staff for President Clinton and founder of the Center for American Progress, joyfully tweeted: “I just enrolled in Medicare. It took me 5  minutes. Single payer anyone?”

The answer is a resounding, emphatic, loud “Yes!” We need single payer for the health of everyone!”

Harvey Fernbach, M.D., M.P.H., is a member of Physicians for a National Health Program. He resides in Bethesda, Md.

The United States is worse in access, affordability and insurance complexity

Posted by on Friday, Nov 15, 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.

Access, Affordability, And Insurance Complexity Are Often Worse In The United States Compared To Ten Other Countries

By Cathy Schoen, Robin Osborn, David Squires, and Michelle M. Doty
Health Affairs, December 2013 (online November 13, 2013)

The United States is in the midst of the most sweeping health insurance expansions and market reforms since the enactment of Medicare and Medicaid in 1965. Our 2013 survey of the general population in eleven countries — Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States — found that US adults were significantly more likely than their counterparts in other countries to forgo care because of cost, to have difficulty paying for care even when insured, and to encounter time-consuming insurance complexity. Signaling the lack of timely access to primary care, adults in the United States and Canada reported long waits to be seen in primary care and high use of hospital emergency departments, compared to other countries. Perhaps not surprisingly, US adults were the most likely to endorse major reforms: Three out of four called for fundamental change or rebuilding.

Insurance Design And Affordability

In this study, US adults — both the insured and the uninsured — were more likely than adults in other countries to report going without care because of costs, having high out-of-pocket costs, and having difficulty paying medical bills.

Reforms scheduled under the Affordable Care Act provide for subsidies to lower cost sharing for those with incomes below specified thresholds as well as reductions in premiums for people with low or modest incomes. However, by international standards, cost-sharing exposure will remain high for those with low incomes. Also, states will have considerable leeway in insurance design for middle- and high-income families, with annual out-of-pocket maximums and deductibles that will continue to be high compared to those in other countries. For people with chronic, ongoing conditions, the result could be continued high medical cost burdens.

Insurance And Primary Care

Insurance design and payment policies also matter for access and countries’ primary care infrastructure.

The high rates of ED use associated with long waits for primary care in the United States (including among insured patients) and several other countries underscore the importance of 24/7 primary care coverage in terms of overall system cost and resource allocation.

Insurance Complexity

The experiences of patients and physicians in other countries regarding the time-consuming complexity of insurance also provide potential insights for the United States.

A recent Institute of Medicine study estimated that administrative layers throughout the US health insurance and care system add as much as $360 billion per year to the cost of health care — and much of that sum was deemed to be wasted, with little or no return in value. Evidence from other countries suggests opportunities to reduce such costs.

Cost Control

A key challenge for the United States is its already high level of health spending, which is 50–167 percent higher per capita than in the other study countries. These costs undermine the financial protections offered by insurance and drive premiums up.

Support For Reform

Polls in the United States show mixed public support and lack of knowledge about the provisions of the Affordable Care Act. Yet in the survey most US adults called for major change, with a minority preferring the status quo. People who had experienced problems with access to or affordability of care or who had time-consuming insurance problems had more negative views than people who had not had such problems.


This 2013 survey sponsored by the Commonwealth Fund is very helpful during the Affordable Care Act transition because it tells us how the United States is doing compared to ten other industrialized nations with universal systems. Our results are terrible, and when we look ahead at the changes yet to be implemented, it is clear that they will have an almost negligible impact on correcting the serious deficiencies in the United States.

Our per capita costs will remain far higher than those of other nations. Our insurance products will remain very expensive yet highly flawed in design since they leave those individuals who have significant health care needs with high medical cost burdens. The excessive complexity of our insurance products will continue to waste hundreds of billions of dollars that could be used on health care. Measures intended to provide much needed reinforcement of our primary care infrastructure are all too meager, so timely access to care will remain impaired for too many.

Three-fourths of Americans believe that we need fundamental changes or complete rebuilding of our health system. We have a far greater percentage dissatisfied than are in the other developed nations. Although it will be several weeks before the exchange plans and the Medicaid expansions will be in effect, most Americans will not be able to detect any improvements in their health care financing and access.

In fact, many will have greater out-of-pocket costs because of increased shifting of costs to patients through measures such as high deductibles, and others will lose access to their current health care professionals and institutions because of the greater use of narrow provider networks – further reducing choices in health care. In spite of the noble intentions of the Affordable Care Act, most of us will not see any correction of the serious flaws demonstrated in this international survey which shows how costly and dysfunctional our system is, and too many of us will be even worse off.

As we watch the 2014 implementation unfold, we have to keep in mind that it didn’t have to be this way. We could have had and still can have a single payer national health program – an improved Medicare covering everyone. With what we spend, we should be at the top in these international comparisons. Single payer would get us there.

AHIP statement on consumers keeping their current coverage

Posted by on Thursday, Nov 14, 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.

AHIP Statement on Consumers Keeping Their Current Coverage

America’s Health Insurance Plans (AHIP), November 14, 2013

America’s Health Insurance Plans’ (AHIP) President and CEO Karen Ignagni released the following statement on today’s announcement by the administration related to policy cancellations:

“Making sure consumers have secure, affordable coverage is health plans’ top priority.  The only reason consumers are getting notices about their current coverage changing is because the ACA requires all policies to cover a broad range of benefits that go beyond what many people choose to purchase today.

“Changing the rules after health plans have already met the requirements of the law could destabilize the market and result in higher premiums for consumers.  Premiums have already been set for next year based on an assumption of when consumers will be transitioning to the new marketplace.  If due to these changes fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase in the marketplace and there will be fewer choices for consumers.  Additional steps must be taken to stabilize the marketplace and mitigate the adverse impact on consumers.”


President Obama’s decision today to allow individuals to keep the insurance they have has devastating policy implications. It is no wonder that AHIP released this statement only minutes after the President’s announcement.

The insurance plans that were to be cancelled are plans that have fewer benefits than are now required by the Affordable Care Act. If the replacement plans have more comprehensive benefits, then why would people want to keep their old plan?

Individuals place a high priority on the premium to be paid when they select their plans. They will almost always select the plan with the lowest premium that at least superficially seems to meet their needs. If they have major health care needs, they will select plans with more comprehensive benefits, even if they are more expensive. On the other hand, healthy individuals who are watching their budgets will often select the cheapest plan – their old plan in this case, even though it has fewer benefits.

So what will happen when people are allowed to keep their old plans? Younger, healthier individuals will stay with those plans whereas older individuals with greater heath care needs will move into the new plans available in the exchanges. This adverse selection that concentrates expensive patients in the new plans will drive premiums up. When the premiums go up, more will drop out, causing the premiums to go up even further – so high that the plan has to be pulled from the market – the death spiral of adverse selection.

Karen Ignagni is right when she says that allowing people to keep the insurance they have will destabilize the insurance market and cause premiums to rise, but only for the new insurance marketplaces (exchanges) that the insurance industry is counting on for their expanded business opportunities, made possible by the insurance-industry-designed Affordable Care Act.

Although the spinmeisters are busy trying to discredit the President and his administration for the false promise of allowing you to keep your insurance, and for the rollout of the exchange website before it was ready, this noise is a distraction from the real problem here. The Affordable Care Act is an irreparably flawed model of financing health care, and no amount of patching is going to fix it. It is and always will be an unstable, expensive and inequitable model of financing health care.

You know what is stable? Medicare. And it is less expensive and more equitable. Yes, it needs continual oversight and refinements, but it has the support of the public. If it were our only health care financing program, in an improved single payer version, virtually all of us would be demanding to keep the insurance that we would then have – an Improved Medicare for All.

Kip Sullivan on the policy community’s compromised work on ACOs

Posted by on Wednesday, Nov 13, 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.

Accountable care organization formation is associated with integrated systems but not high medical spending.

By David I. Auerbach, Hangsheng Liu, Peter S. Hussey, Christopher Lau, and Ateev Mehrotra
Health Affairs, October 2013

“[P]roponents hope that ACOs will deliver better quality and outcomes … and have lower costs. Independent analysts have projected savings for ACOs [endnote 3], and a recent evaluation of an ongoing private prototype has found evidence of savings and quality improvement [endnote 4].”

Endnote 3: “Congressional Budget Office, Budget options, volume 1: health care: CBO;2008 Aug…..”

Endnote 4: “Song Z, …, et al. The “Alternative Quality Contract,” based on a global budget, lowered medical spending and improved quality. Health Aff (Millwood). 2012;31:1885-94.”



By Kip Sullivan, J.D.

The “accountable care organization” is the latest health policy fad to captivate lawmakers. The term was invented at a meeting of the Medicare Payment Advisory Commission on November 9, 2006. Despite the vague definition of ACO, and despite the absence of any evidence supporting claims made for ACOs, Congress included in the Affordable Care Act provisions authorizing the Centers for Medicare and Medicaid Services to initiate an ACO program. CMS has designated some 250 entities as Medicare ACOs.

The two sentences quoted above indicate that even as of mid-2013, seven years after the ACO label was invented and four years after Democrats inserted ACO provisions into the legislation that was to become the Affordable Care Act, ACO proponents must either leave their praise for ACOs undocumented or misrepresent the research on ACOs. The authors of these two sentences chose the latter approach. They cited a study by the Congressional Budget Office which found that ACOs would have almost no impact on Medicare spending, and they cited a study of an ACO-like entity in Massachusetts which found the entity is generating higher, not lower, total health care spending.

The two sentences quoted above are from a paper by David Auerbach and colleagues designed to determine where the 250 Medicare ACOs are forming. They reported they are more likely to form where provider consolidation is higher, notably the Midwest and the Northeast. Because the paper simply asked where ACOs are forming, there was no need for the authors to praise ACOs. However, as the quote above indicates, the authors chose to do so. And, given the state of the research on ACOs, they were reduced to exaggerating one study and misrepresenting another in order to “document” their praise.

The first study cited by Auerbach et al. was the 2008 report to Congress by the Congressional Budget Office. In that report, the CBO analyzed 115 health care reform proposals or “options.” Option number 37 was the ACO, although CBO didn’t label it that way. CBO called it a “bonus-eligible organization.”  The CBO stated: “Under this option, groups of providers meeting certain qualifications would have the opportunity to participate … in Medicare as bonus-eligible organizations (BEOs). The concept of BEOs is similar to the accountable care organization models proposed by some researchers” [p. 72]. After describing the BEO in the terms CMS would use several years later when it announced its definition of an ACO, the CBO concluded: “This option would reduce Medicare spending … by $5.3 billion over the 2010-2019 period” [p. 73].  http://www.brookings.edu/~/media/events/2009/3/11%20aco/cbohealthoption3…

Auerbach et al. should have known that five billion dollars is a minuscule portion of a decade of Medicare spending. The 2010 National Health Expenditure Accounts estimated total Medicare spending over the 2010-2019 period would be more than 7 trillion dollars — $7,135,000,000 to be more precise (my calculation using the numbers shown for Medicare in Table 3
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trend…)  If we divide $5.3 billion into $7.135 trillion, the savings CBO said ACOs would achieve turns out to be less than one-tenth of one percent of Medicare spending.

The second paper Auerbach et al. cited – a 2012 paper published in Health Affairs by Song et al. – has already been the subject of two letters published in Health Affairs as well as a comment by Don McCanne on this blog http://www.pnhp.org/news/2013/june/academyhealths-ill-judged-choice-of-t…. The letter writers (I was one of them) pointed out an extremely obvious defect in the Song paper: The title of the paper claimed the ACO-like entity was saving money when the text stated it wasn’t. Despite the two letters and Don’s comment, Auerbach et al. chose to misrepresent the Song paper, and the editors of Health Affairs let them do it.

Auerbach et al.’s misuse of research is not an isolated example. Over the last several decades, a culture of permissiveness has developed within the US health services research community. This culture tolerates exaggeration and misrepresentation, especially when the exaggeration or misrepresentation promotes the managed care ideology that dominates the health policy debate in this country. As we contemplate how President Obama and the Democrats find themselves burdened by an Affordable Care Act that is not affordable, we should begin our analysis with this question: What role did the US health policy community play in causing policy-makers to think ACOs would make the ACA affordable?

Deloitte’s take on hospital mergers and acquisitions

Posted by on Tuesday, Nov 12, 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.

My Take: The art of becoming big: the dilemma of mergers & acquisitions in health care

By Mitch Morris, MD, Vice Chairman and National Health care Provider Lead, Deloitte LLP
Deloitte, Health Care Current, November 12, 2013

Consolidation has transformed nearly every U.S. industry—manufacturing, retail, life sciences and hospitality — you name it.

The U.S. health care industry is well into another round of consolidation. Already, according to the American Hospital Association, 3,007 hospitals (roughly 53 percent) are part of a health system. The industry went through a round of consolidation in the 1990’s but many would say that, other than better access to the debt market, the resulting health systems were, for the most part, holding companies and not operators that had a focus on economies of scale or reduced costs.

According to Irving Levin Associates, in 2012 there was twice the number of hospital mergers as compared to 2009 and this shows no sign of slowing down. The Affordable Care Act (ACA) has served as a catalyst to accelerate the consolidation movement, which seems to have taken on a life of its own. Several trends are beginning to emerge across the industry:

*  As reimbursement rates continue their downward trend and the costs of maintaining infrastructure and regulatory compliance march ever higher, the acute care industry seeks scale to better manage costs. Many acute care players are beginning to reduce costs through economies of scale, including the implementation of shared services, programmatic integration and consolidation, selective sourcing and addressing clinical effectiveness. The hope is that costs can be shaved by as much as 30 percent, which is certainly not a goal that can be achieved simply by headcount reduction.

*  The stand-alone hospital may be an endangered species—many smaller organizations simply cannot afford to invest in keeping up with facilities, upgrading IT capabilities, attracting the best clinicians, or playing an active role in the emerging payment model innovation game. Nor do they all have the market clout to be considered essential players in narrow health plan networks. As margins shrink and access to capital becomes more difficult, even hospitals in affluent communities are feeling the pinch.

*  Health plans, which also continue to consolidate, are dipping their toes into the provider business through the acquisition of medical groups. Many are also developing capabilities to manage population health.

So is bigger better? How big is big enough? And can a system be too big?

It’s not uncommon for mergers to fail to produce expected benefits for the new organization or the communities they serve. But there is some data to suggest that, by some measures of performance, hospital acquisitions do produce a benefit. A Deloitte Center for Health Solutions report, Hospital Consolidation: Analysis of Acute Sector M&A Activity, recently studied hospitals that were acquired in 2007 and 2008 and found that, over several years, the acquired hospitals had increased volumes and improved margins compared to a cohort of similar size (case mix adjusted) that was not acquired. The benefit was most pronounced when the acquirer was a national chain as compared to a regional system.

We are quickly moving toward needing a larger scale to successfully compete. In the 90’s we did not have the same economic or legislative imperative to achieve higher value in a lower cost structure. Now we do. And those organizations that don’t get both the art and science of this transition are likely to find themselves in a difficult position.


An online poll of Health Care Current readers (results as of 11/12/13, 1:47 PM EST):

There are many factors driving consolidation in health care, but I believe the greatest is…

37.84%  Margin constraints such as declining reimbursement rates and costs of infrastructure

10.81%  The increasing complexity of regulatory compliance

51.35%  Companies vying to remain in a competitive market position

00.00%  Consumer demand

00.00%  Innovation and new technologies


Deloitte report: “Hospital Consolidation: Analysis of Acute Sector M&A Activity” (26 pp): http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Document…

This Deloitte report reveals that hospital merger and acquisitions are occurring at an accelerated pace. Is that good or is that bad? The answer depends on whether you believe that hospitals should be run like businesses, trying to obtain competitive advantages in the health care marketplace, or if you believe that they should be run as a service organization, emphasizing patient care as its predominant role in the community.

Consolidation through merger and acquisition increases market clout. It is anti-competitive, giving the merged entity a larger share of the market. Because of the ability to negotiate better rates, prices go up without the need to provide additional services and amenities that might be more attractive to patients. There is less need to improve quality  when competitors are less able to increase revenues that might be allocated for their own quality improvements. Private sector consolidation leading to oligopolies or monopolies result in the opposite of what markets are supposed to bring us. They result in lower quality and higher costs. Yet health care reform is supposed to bring us higher quality at lower costs.

Maybe we overuse the example of a fire department, but it is a useful analogy. We think of the fire department as a service organization, always there when we need it to put out fires or to perform other community service functions. We don’t think of it as a business that competes in the marketplace. We don’t shop for fire services based on price and quality. We simply pay for them through the tax system, and we expect that the fire personnel will continue to take pride in the services that they provide to the community.

Health care should be the same. Hospitals should be service organizations, always there for when we need them. Instead of us shopping prices, whether directly or through our insurers, they should be financed through the tax system – using global budgets just as fire departments do. And quality? That is automatic and stems from the fundamental moral fiber of dedicated health care professionals, as long as they are not corrupted by the business element that is increasing its presence to fulfill its mission of using private market business tools, such as consolidation, to maximize market share. Yet, consolidation of a public service entity can be used to improve efficiency, quality, and value.

The readers of Deloitte’s Health Care Current likely represent the business oriented element in health care. It is interesting to see the response of the online poll of what they believe is the greatest factor driving consolidation. A majority believe that it is due to the business goal of trying to achieve a better market position. A large minority believes that it is due to declining margins – lower payment rates and higher infrastructure costs. A few believe that it is due to greater regulatory complexity. In general, these concerns that encourage greater consolidation are more business concerns rather than patient service concerns.

What is particularly revealing is what these health care businessmen do not believe are contributing to efforts to consolidate. They do not believe that innovation and new technologies are primary drivers, though they continually tout them as being one of the great products of a business economy. When service is the goal, new innovation would be adopted based more on patient benefit rather than on business opportunities afforded by the technology. In a service model, efficiency could be improved by consolidation if efforts are made to improve efficiency by assuring optimal capacity – neither excess nor deficient capacity.

Most impressive in the current phase of health care evolution, wherein the health care business community is foisting on us consumer-driven health care, is that not one of these businessmen believe that consumer demand is a major reason for consolidation. It is not about the patient; it’s about businesses and markets. We need to change that. We could if we adopted our own single payer national health program, dedicated to patient service.

Do MedPAC commissioners understand ACOs?

Posted by on Monday, Nov 11, 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.

MedPAC Toys with Asking ACOs to Assume Some Risk

By Kerry Young
The Commonwealth Fund, November 7, 2013

Medicare may need to ask accountable care organizations (ACOs) to accept some financial risk as part of a larger effort to make health care both more effective and less expensive, members of the Medicare Payment Advisory Commission (MedPAC) recently said.

While not making an official recommendation, many MedPAC members said that they favored increased use of a two-sided approach for accountable care organizations, meaning that they enter arrangements in which they would share in both potentials savings and losses. The alternative is a one-sided arrangement, with no potential for shared losses for the ACOs.

“Ultimately, these ACOs need to be accountable for delivering on outcomes including cost lower than fee-for-service,” which is Medicare’s more traditional payment model, said MedPAC member Scott Armstrong of Group Health Cooperative in Seattle.

Several MedPAC members said that medical practices and hospitals would need time to adjust to the notion of risk-sharing, and should be allowed some time to operate under agreements that only shared savings to adjust to this new model.

MedPAC members also stressed the need for ACOs to build greater ties with the people whose medical outcomes will determine the success of cost-sharing models.

“How in the world can a group be accountable for care for a population of patients that they don’t have a relationship with?” asked MedPAC Commissioner Armstrong.

MedPAC Chairman Glenn M. Hackbarth said that policymakers will need to keep in mind what payment alternatives remain for medical practices and hospitals in designing any changes for ACOs.

The old traditional Medicare fee-for-service model encourages “a volume-focused business,” he said.

“For a voluntary ACO, you have got to make the terms really delicious” to compete widely against the model, he said.

But, the success of the ACO program may not rest on how common they become, he said. The ACO programs may be most attractive to physician groups, and less so to hospital groups and larger university health programs, he added.

“If all of the academic medical centers are out, if there are no hospital based ACOs, if they are all sponsored by physician organizations, is that necessarily a bad thing?” Hackbarth said. “I could imagine that, in fact, that may be ultimately the most sustainable model on an ACO, and trying to jimmy the rules so that it attractive to academic medical centers may compromise your design.”


MedPAC, the Medicare Payment Advisory Commission, has the important function of providing to Congress and CMS advice regarding Medicare payments. Since MedPAC is where the action is, it is helpful to understand the committee members’ views on what has been touted as the most important provision of the Affordable Care Act that would provide greater efficiency and lower costs in health care – the accountable care organizations (ACOs).

Based on the members’ comments, it is not difficult to see why others are having difficulties designing ACOs.

Although they suggest that the ACOs should bear some financial risk for the services provided, they express caution in making the transition since physicians are apt to prefer the current fee-for-service model – a model that ACO advocates wish to replace – over a model that is designed to reduce spending partly by placing physicians at financial risk. Why would a physician who is being paid for all of the services being provided want to replace that with a model that extracts financial penalties for providing that same level of care? Also it is somewhat insulting to the physicians who believe that are trying to provide optimal care to be accused of pushing extra services purely for the money (likely some do, but my personal observation is that such behavior is uncommon).

ACOs are also a bizarre model of coordinated care since the participating providers are selected by the providers themselves and not by the patient. It is difficult to see how the ACOs could be fully accountable for the patients’ care when the patients are not bound to the ACOs. How can you make the physicians responsible for the spending when the patient is referred for a $400 imaging study within the ACO, but the patient decides to get a $2000 study outside of the ACO?

MedPAC Chairman Glenn Hackbarth even suggests that academic medical centers and other hospitals should be left out of the ACOs, leaving them to physician organizations. When the ACOs are supposed to achieve success by bundling services for a given clinical circumstance, such as heart valve replacement or a kidney transplant, how do you leave the hospital out of the bundled package? And do we really want academic medical centers to be excluded from the financing model?

Of course, the insurers have been very interested in taking over the management of the ACOs, but their concept is not much different from their old managed care models in which the patients are made captive through the insurance plans they have – a model that angered patients and physicians alike.

It is fine to look for efficiencies and quality improvement in health care delivery, but we should not let the ACO craze distract us from advocacy for a model that we already know improves quality and contains costs – a single payer national health program.

Editorial: Who first said, “You can keep the insurance you have”?

Posted by on Friday, Nov 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.

Editorial: Who first said, “You can keep the insurance you have”?

By Don McCanne
November 8, 2013

Considering our national health expenditures, our health care financing and delivery systems are a disaster. It is fully apparent that the Affordable Care Act will fall woefully short of what is needed, and even offset some of the minimal gains with changes that will make many of us worse off by passing more costs directly onto us when we become ill (higher deductibles and other cost sharing), and by further limiting our choices of physicians and hospitals (shifting to narrow provider networks).

At a time that it is imperative that we address policy issues to try to straighten up our system, we abandon reason and propel forward with politics as usual.

President Obama’s political enemies, well supported by the media – including editorialists – are now expressing shock, shock that he lied to us when he told us that we could keep the insurance we have, if we like it. He was not the author of this sound bite provided to him for political campaigning, so where did it come from?

Let’s go back five years, beginning before Sen. Obama was even the Democratic nominee for president, and look at some of our Quote of the Day messages beginning then:

Is “keeping the insurance you have” your choice?

By Don McCanne
February 6, 2008

How many of you, under age 85, have the same health insurance plan that you had twenty years ago? None?

Why did you change? (Several possibilities listed.)

What is the obvious conclusion? Health insurance coverage on a continual basis is practically non-existent in the private insurance market. In almost all of the instances listed, the insured individual was not granted the option of “keeping the insurance you have.”

Most polls on health care reform continue to ask many of the same questions as they have over the past couple of decades, but there is one new question. The pollsters are now asking if you support reform that would allow you “to keep the insurance you have.” For healthier individuals who believe that they have good insurance, this concept polls very well. In fact, the other questions in the polls are now tailored to reinforce this simple concept.


Statement of Common Purpose

Health Care for America Now!
(Undated, but referenced in 2008)

A choice of a private insurance plan, including keeping the insurance you have if you like it…


“Keeping the insurance you have” – Don’t believe it!

By Don McCanne
July 11, 2008

Pause for a minute. Think back to the insurance you had twenty years ago. Remember? Now do you still have precisely that same coverage? Unless you are over 85 and have been in the traditional Medicare program for the past twenty years, it is highly likely that you do not.

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


Will grandfathering save our current private plans?

By Don McCanne
June 23, 2010

The opponents of reform, especially the Republicans in Congress, are making a big deal out of the fact that the Affordable Care Act breaks President Obama’s promise that you will be able to keep the insurance plan you have. The Obama administration is countering by publicizing the new regulations that will allow plans in place on March 23, 2010 to be grandfathered, supposedly assuring that you will be able to keep your plan if you had it on that date.

Actually, this is a silly debate. As explained in my comment two years ago, except for those individuals on Medicare or other fiscally sound retiree programs, almost no one gets to keep the insurance he or she has. Rather than stabilizing existing coverage, the regulations that would grandfather plans make it less likely, in an environment of increasing health care costs, that existing plans would continue to be offered without significant changes.

In an effort to make the insurance plans more affordable, further adjustments in deductibles and coinsurance are almost inevitable, and the ever-changing insurance marketplace will surely result in changes in insurance companies selected. Insurance price shoppers, who are mostly healthy, will be much more sensitive to size of the premiums than they would be to cost sharing; this is precisely what has happened throughout the individual market. These pressures would accelerate the decline in grandfathered plans.

“Keeping the insurance you have” was only a slogan used to market the reform proposal. It wasn’t a serious long term strategy. Instead of wasting time in another political dogfight – this time over grandfathering – we should move forward with supporting policies that will work for everyone – like a single payer national health program.



Is that the best lesson that we can learn from President Obama’s decision to accept the recommendation of his political advisers to use the sound bite, “You can keep the insurance you have, if that’s what you want”?

The fact that this is the framing of the current keep-the-insurance-you-have discourse demonstrates not only how acrimonious the Washington political environment has become, it also shows the ineptitude of the media. Not only do they buy this framing when there is a far more compelling message in this mess, they also serve as dupes, propagating the biting, counter-productive message of the Obama opponents.

Repeating my comment from 2010, “Instead of wasting time in another political dogfight… we should move forward with supporting policies that will work for everyone – like a single payer national health program.” That’s the lesson we should learn.

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