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.
Insurers Push Plans That Limit Choice of Doctor
By Reed Abelson
The New York Times
July 17, 2010
As the Obama administration begins to enact the new national health care law, the country’s biggest insurers are promoting affordable plans with reduced premiums that require participants to use a narrower selection of doctors or hospitals.
The plans, being tested in places like San Diego, New York and Chicago, are likely to appeal especially to small businesses that already provide insurance to their employees, but are concerned about the ever-spiraling cost of coverage.
But large employers, as well, are starting to show some interest, and insurers and consultants expect that, over time, businesses of all sizes will gravitate toward these plans in an effort to cut costs.
The tradeoff, they say, is that more Americans will be asked to pay higher prices for the privilege of choosing or keeping their own doctors if they are outside the new networks. That could come as a surprise to many who remember the repeated assurances from President Obama and other officials that consumers would retain a variety of health-care choices.
But companies may be able to reduce their premiums by as much as 15 percent, the insurers say, by offering the more limited plans.
Many insurers also expect the plans to be popular with individuals and small businesses who will purchase coverage in the insurance exchanges, or marketplaces that are mandated under the new health care law and scheduled to take effect in 2014.
Prominent officials like Mr. Obama and Hillary Rodham Clinton learned to utter the word “choice” at every turn as advocates of overhauling the system.
But choice — or at least choice that will not cost you — is likely to be increasingly scarce as health insurers and employers scramble to find ways of keep premiums from becoming unaffordable. Aetna, Cigna, the UnitedHealth Group and WellPoint are all trying out plans with limited networks.
The size of these networks is typically much smaller than traditional plans. In New York, for example, Aetna offers a narrow-network plan that has about half the doctors and two-thirds of the hospitals the insurer typically offers. People enrolled in this plan are covered only if they go to a doctor or hospital within the network, but insurers are also experimenting with plans that allow a patient to see someone outside the network but pay much more than they would in a traditional plan offering out-of-network benefits.
The insurers are betting these plans will have widespread appeal in the insurance exchanges as individuals gravitate toward the least expensive options.
The new health care law offers some protection against plans offering overly restrictive networks, said Nancy-Ann DeParle, head of the office of health reform for the White House. Any plan sold in the exchanges will have to meet standards developed to make sure patients have enough choice of doctors and hospitals, she said.
How widespread these plans will become is anybody’s guess, and some benefits consultants wonder if these plans represent any real solution to high medical costs. The narrow network, if it is based on the insurers’ ability to demand low prices, may be “just another short-term fix,” warned Barry Schilmeister, a consultant at Mercer.
But many insurers say they are still figuring out how to persuade people to choose these plans rather than force them to enroll. “What’s not changed are the old techniques of black-belt managed care,” said Mark T. Bertolini, Aetna’s president. “We have to create the same kind of model without the ‘Mother, may I.’ What we want is the ‘Mother, should I.’ ”
The managed care revolution brought us restricted networks of physicians, hospitals and other health care services. These restrictions, which limited patients’ choices of their health care professionals and facilities, did produce a one-time notch in the curve of rising health care costs. The insurers did this by contracting lower rates with health care providers, and then imposing financial penalties on patients who chose their care outside of the networks.
Patients were not pleased with limitations placed on their choices, but generally were not rebellious since they were often able to continue to see their own physicians, or, if not, were usually satisfied with their in-network substitutes.
The major insurers have been experimenting for some time with much more restrictive networks – networks in which they could contract for much lower rates in exchange for a higher patient volume. Individuals and employers have not responded to these market efforts because the restrictions were too severe. They excluded popular health care professionals and hospitals, sometimes completely, or sometimes by requiring unaffordable coinsurance payments by the patients.
But the environment has changed. The premiums for health plans are now very close to being truly unaffordable for most individuals and employers. With individuals being mandated to purchase insurance, and employers being exposed to penalties if their employees purchase plans in the exchanges, the market for plans with affordable premiums is being forced. The insurers must come up with plans that will meet the test of the market. The deeply-discounted, more tightly restricted plans are now finding their market.
These plans are terrible. Many will lose their primary care professionals. They will often not be able to use their local hospitals and many of their local specialists. Most referrals to centers of excellence will be prohibited. Although the Patient Protection and Affordable Care Act (PPACA) will require that provider networks provide choice, the law does not prohibit intolerably Spartan networks.
This, of course, is a setup for the death spiral of adverse selection for the plans with more adequate networks. Individuals with more significant problems will select plans that can better meet their needs, while the healthy will flee to the plans with Spartan networks once the premiums skyrocket.
When individuals shift to the more restricted plans, what will happen to the large number of physicians and hospitals that are denied contracts? Obviously their financial viability would be threatened, and many would shut down. As if we didn’t already have enough problems with the deterioration in our primary care infrastructure, much of the entire health care delivery infrastructure could begin to crumble.
PPACA contains many measures designed to improve the functioning of the private insurers, but most of them will drive premiums even higher. Insurance innovations such as the Spartan provider networks were fully predictable.
What should really alarm us is that the business world thrives on innovation. Think of the possibilities that the private insurance industry can devise. Actually, it is very difficult for us who are trying to figure out how to get patients the care they need to come up with innovative concepts that will protect the business model of the private insurance industry, no matter the cost to patient care. It isn’t in our DNA.
But there is absolutely no doubt whatsoever that we will see innovation, and it won’t be healthy for patients, nor for their health care professionals.
TAKE ACTION: The article provoked a large number of responses on The New York Times website, many supportive of Medicare for all, single payer, national health program, and health care justice in general. ADD YOUR RESPONSE. Go to the article and post your opinion, even if only a sentence or two. If you are not registered, it is easy to do, so don’t let that deter you. The New York Times needs to hear from us so that they will investigate why there is such broad support for a national health program. (At least click “Recommend” on response #232.)
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.
Public sector workers paying more of their health care costs
By Bobby Caina Calvan
The Sacramento Bee
July 15, 2010
Workers in private industry have felt the sting of rising health insurance premiums and out-of-pocket costs for decades. Now, as government budgets bleed, public employees are starting to share the pain.
In the past year, Sacramento’s largest school districts have trimmed health care coverage. Local and state government officials also are looking for ways to save.
And while public employee unions have made preserving health benefits a priority, they have been pressed to give ground or face more layoffs.
In his proposed budget, Gov. Arnold Schwarzenegger is seeking to cut $152.8 million in health premium expenses by requiring the California Public Employees’ Retirement System to offer lower-cost coverage, possibly with fewer benefits, or give the state authority to do so.
Health insurance costs have “reached the point where we can’t sustain those benefits,” said Lynelle Jolley, spokeswoman for the state Department of Personnel Administration.
Private employers have continued to shift more of the costs of health care to their individual employees. This has had deleterious financial and health impacts since it has made health care access less affordable. Now, even with union representation, public employees also are experiencing deterioration in their coverage.
That’s a one-way street. Plans for public employees will never improve but will likely further deteriorate to match the 60 to 70 percent actuarial value plans to be offered by the state insurance exchanges.
“After all, why should we taxpayers have to buy these people good insurance when we have to put up with our lousy plans?” But those who express this sentiment have it backwards. Why should they have put up with crappy insurance when we could all have a program that works even better than most plans for public employees?
As we’ve said many times, the private insurance model doesn’t work anymore. We can have that program that works for all of us, if we, as voters, demand it.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Health Insurance Exchanges and the Affordable Care Act: Key Policy Issues
By Timothy Stoltzfus Jost, J.D.
The Commonwealth Fund
July 15, 2010
Health insurance exchanges are the centerpiece of the private health insurance reforms of the Patient Protection and Affordable Care Act of 2010 (ACA). If they function as planned, these exchanges will expand health insurance coverage, improve the quality of such coverage and perhaps of health care itself, and reduce costs. Previous attempts at creating health insurance exchanges, however, produced only mixed results. This report identifies the earlier attempts’ problems, enumerates the key issues that are critical for overcoming those problems, analyzes in detail the ACA’s provisions addressing these issues, and discusses further policy options.
As part of successfully implementing the new exchanges, the U.S. Department of Health and Human Services (HHS) and the states must address issues that undermined the earlier attempts. These issues are:
• Adverse selection.
• Numbers of participants.
• Market coverage and structure.
• Choice without complexity.
• Transparency and disclosure.
• Administrative costs.
• Market or regulator?
• Administering subsidies and mandates.
• State, regional, or national exchanges?
• Relationships with employers.
• Cost control.
“Health Insurance Exchanges and the Affordable Care Act: Key Policy Issues,” by Timothy Stoltzfus Jost, should be read in full (44 pages) by everyone who cares about the future of our health care system. The Executive Summary alone is not adequate to understand the implications of the issues he discusses. Every page requires attentive reading since each is covered with red flags, far too many to cover in a qotd commentary.
It is an especially important report for those who believe that the health insurance exchange model is a satisfactory compromise for moving forward, while dismissing further efforts to create a public national health program. It is also important for single payer advocates (improved Medicare for all) since it is important to understand the red flags raised by this report, and be able to debate them with others.
Many of the issues listed would disappear under a single payer system. For instance, in spite of the measures in the law, adverse selection (concentrating high-cost patients in health plans) cannot be eliminated by the insurance exchanges, yet it would disappear in a single universal risk pool. That is especially important since adverse selection has destroyed previous insurance exchanges in numerous states.
The numbers of participants in the exchange plans are also crucial. A few unhealthy individuals can wipe out a plan if there isn’t a large number of healthy individuals to absorb the costs through the plan premiums. It has been estimated that 24 million people will obtain their coverage through the exchanges. Distribute that amongst the fifty states, and then divide those numbers up amongst the “large” selection of plans in the “robust” markets of the exchanges, and you can see that many plans would likely fail due to the small numbers of insured.
Although an important goal of reform was administrative simplification, insurers will still have most of their administrative costs, as will the physicians and hospitals, and yet another layer of administration is added in the operation of the exchanges.
The premium subsidies, cost-sharing subsidies, and the mandates and penalties, in a system with ever-shifting eligibilities, creates a complex financing structure that is totally unnecessary. It is far simpler to finance the entire health care system through equitable taxes.
The reform act was designed to perpetuate the employer role in providing health care coverage, but increasing costs and increasing fragmentation through various public and private programs is increasing the complexity of the decision process for employers, creating an uncertain future for employer-sponsored plans. It would be far easier to remove the employer as keeper of the health plan, and simply provide a single, comprehensive public plan for everyone.
And cost control? It didn’t happen.
You likely don’t have time to read the full report now, but download it and read it this weekend, or at any other time that you have a break.
The Patient Protection and Affordable Care Act of 2010 (PPACA) is being touted by its proponents as moving the country to near-universal coverage and a great step ahead in U.S. health care. But what does this really mean? Are the many barriers to care almost a thing of the past?
On the plus side, the PPACA does offer these welcome provisions:
• Extending health insurance to 32 million more people by 2019.
• Allowing parents to keep their children on their policies until age 26.
• Expansion of Medicaid to cover 16 million more lower-income Americans.
• New funding for community health centers that could allow them to double their patient volume.
However, on the other side of the ledger, there are many problems that will render restricted access to care for tens of millions of Americans, an ongoing and even increasing problem. These examples show how far short of the mark the PPACA falls on access to care:
• There will still be 23 million people without any kind of health insurance in 2019.
• Federal support for Medicaid expansion will not kick in until 2014.
• More than 32 million other Americans will be under-insured in 2019, as a result of these kinds of circumstances:
Despite the hype we hear about “near-universal” access just down the road with PPACA, the above leads us to believe that access to care will remain inadequate for much of the population. In our next post, we will look at what this year’s health care “reform” legislation means for the quality of care Americans receive.
Adapted from “Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform,” 2010, with permission of the publisher Common Courage Press. www.commoncouragepress.com
What Conservatives Are Winning
By Drew Altman, Ph.D., President and CEO
Kaiser Family Foundation
July 14, 2010
But for all of the frustration and even anger within the conservative movement about where health care is headed, the fact of the matter is that they are winning more than even they may realize in the current health care equation. That’s because the nature of health insurance itself is being redefined and moving gradually but seemingly inexorably in the direction conservatives have long advocated: more consumer “skin in the game” through higher patient deductibles.
Item: In our recent survey of people in the non-group insurance market, we found that the average deductible for an individual policy is now $2,498, and for families it’s $5,149. These are very high thresholds by any standard. Consider, for example, that a family with median income facing such a deductible would be spending almost 10% of their annual income just for their deductible before their insurance kicked in.
Item: The percentage of workers facing high deductibles — $1,000 or more for single coverage — has been growing rapidly. It doubled from 10 percent to 22 percent between 2006 and 2009, and increased from 16 percent to 40 percent in small firms.
Item: Indications are that the share of workers with high deductibles is continuing to grow, a trend I expect our 2010 employer survey to confirm when we release it in September as we have every year for more than a decade now. And a substantial number of these high deductible plans are paired with tax-advantaged savings accounts, which conservatives have long advocated. Facing cost pressures without alternative answers, employers are moving to plans with less comprehensive coverage to reduce their expenses for employee benefits.
Item: Health reform is unlikely to reverse these trends. Large employers will continue to look for ways to address the rising cost of health care. And, for the basic “bronze” insurance plan that people will be required to buy, deductibles could run several thousand dollars for individuals and double that for families. To be sure, other aspects of health reform cut the other way. For example, there will be no cost sharing for preventive services in newly-purchased plans, and insurers will be required to cap consumer out-of-pocket costs at defined levels. And, of course, there are substantial subsidies to reduce premium and out-of-pocket costs for lower-income people. But, for the first time, the government will be defining the threshold that decent insurance must meet, and that minimum coverage will have the kind of high deductibles that conservatives favor.
For several years we have seen moderate increases in premiums for employment-based health insurance. I suspect that rising deductibles and other out-of-pocket costs are one explanation for this. It’s simple arithmetic that employers can buy down premium increases by switching to less comprehensive coverage and shifting more costs to workers. Plus, these higher out-of-pocket costs exert downward pressure on utilization – in some cases for the better, in some cases for the worse — and thus on premiums as well. At the same time, people have never been more upset about their own rising health care costs, as the coverage they get offers less and less financial protection.
Looked at through a political lens, liberals have gained through passage of major health reform legislation, including expanded coverage and increased government oversight of the health insurance system. But increasingly, the insurance itself is looking more and more like the vision advanced by conservatives – less comprehensive with more skin in the game. That’s where conservatives may be winning more than they realize in the ongoing battle over the future of health care.
Regular readers of the Quote of the Day have seen this theme expressed relentlessly in these weekday messages: We are experiencing a massive shift to underinsurance products, and this policy of making individuals sensitive to health care costs through greater out-of-pocket spending has long been on the agenda of the conservatives.
The importance of today’s message is that it comes from a highly credible individual, Drew Altman, President and CEO of Kaiser Family Foundation, which serves as a “non-partisan source of facts, information, and analysis for policymakers, the media, the health care community, and the public.” It is a very objective observation of the reality of the reform that is now law, and it’s the same message that we have been delivering over and over.
Building on the current system, which we just did, is the most expensive and one of the least effective models of achieving the goal of affordable, high quality care for everyone. Yet one of the least expensive and most effective models is a single payer national health program – an improved Medicare for all. Most of the measures in the enacted legislation have not yet taken place. We can still change course and do it the right way.
Conservative leader David Cameron on the NHS
Quote of the Day
August 17, 2009
“One of the wonderful things about living in this country is that the moment you’re injured or fall ill – no matter who you are, where you are from, or how much money you’ve got – you know that the NHS will look after you. That’s why we as a Party are so committed not just to the principles behind the NHS, but to doing all we can to improve the way it works in practice.”
(Since this quote, Conservative David Cameron was elected Prime Minister.)
NHS shake-up grants new powers to doctors and patients
By Rebecca Smith
July 12, 2010
GPs are to be handed £80bn of the NHS budget to buy care from hospitals and other doctors for patients in their area, as hundreds of middle-management organisations are swept away.
Family doctors will be responsible, in consortiums, for commissioning the care for patients in their area by buying treatment from hospitals, charities and other doctors.
Under the new Coalition government’s health white paper, ministers will step back from the day-to-day running of the health service and hand power to the front line.
Andrew Lansley, Health Secretary, said the white paper represented a “vision based on the principles of freedom, fairness and responsibility”.
However, there was immediate criticism from Labour and the unions, saying handing £80bn to GPs who are private contractors was a mistake and that the plan was a ‘Trojan horse’ for widespread privatisation.
The document entitled Equity and Excellence: Liberating the NHS includes wide-ranging reforms covering all aspects of the NHS and healthcare.
Mr Lansley said ‘process-driven’ Labour government targets, such as the 18-week waiting time between GP referral and hospital treatment, will be scrapped and the focus will instead be on quality of outcomes for patients.
All hospitals are to become a Foundation Trust or part of one, giving them far greater freedoms from Whitehall and allowing them to earn more money from private patients.
Management costs are to be cut in half but the Government has already admitted that the NHS would be forced to make staff redundant. It is estimated that around 25,000 jobs could be lost.
Nigel Edwards, acting chief executive of the NHS Confederation, which represents all NHS organisations, said the changes would represent a huge upheaval.
“It is hard to stress just how radical this is. The NHS will look much more like the gas, electricity or telecom’s market than it will the monolithic state bureaucracy we have come to understand,” he said.
Dr Jennifer Dixon, director of the think thank, the Nuffield Trust, said handing billions of pounds of taxpayer’s money to GPs was ‘risky’ and is a significant change from their current role.
Andy Burnham, Shadow Health Secretary, called the white paper a ‘giant political experiment’ and warned that the government were taking an ‘£80bn gamble with the great success story that is out National Health Service today’.
“At a stroke, you are removing public accountability and opening the door to unchecked privatisation; you are demoralising NHS staff at just the time you need them at their motivated best,” he told Mr Lansley in the House of Commons.
David Fleming of Unite, said: “This is an untested, expensive Trojan Horse in political dogma that will give private companies an even greater stake in the NHS – this way of operating has already happened in the USA.
“Before the election, the Tories promised no major reorganisation of the health service – within three months that pledge to the British people, the majority of whom did not vote for further privatisation of the NHS – has been broken. So much for the ‘new politics’.”
Equity and excellence: Liberating the NHS
Department of Health (England)
5. Cutting bureaucracy and improving efficiency
The scale of the NHS productivity challenge may prompt calls during this Parliament for even bigger increases in NHS resources; but the reality is that there is no more money.
So our first task is to increase the proportion of resource available for front-line services, by cutting the costs of health bureaucracy. Over the past decade, layers of national and regional organisations have accumulated, resulting in excessive bureaucracy, inefficiency and duplication. The Government will therefore impose the largest reduction in administrative costs in NHS history. Over the next four years we will reduce the NHS’s management costs by more than 45%.
The Department will shortly publish a review of its arm’s-length bodies. Subject to Parliamentary approval, we will abolish organisations that do not need to exist. We will streamline those functions that need to remain, to cut cost and remove duplication and burdens on the NHS. In future, the Department will impose tight governance over the costs and scope of all its arm’s-length bodies.
The Government will cut the bureaucracy involved in medical research. We have asked the Academy of Medical Sciences to conduct an independent review of the regulation and governance of medical research. In the light of this review we will consider the legislation affecting medical research, and the bureaucracy that flows from it, and bring forward plans for radical simplification.
We are moving to a system of control based on quality and economic regulation, commissioning and payments by results, rather than national and regional management. Within that context, we are committed to reducing the overall burdens of regulation across the health and social care sectors. We will therefore undertake a wide-ranging review of all health and social care regulation, with a view to making significant reductions.
Equity and excellence: Liberating the NHS (61 pages):
The British National Health Service (NHS) is one of the most effective health care systems in the world. That is a remarkable achievement considering that they devote only half as much funds to their health care as does the United States (percent of GDP in 2008: UK 8.7% versus US 16.0%). Yet in their white paper, “Equity and excellence: Liberating the NHS,” the Conservative government of Prime Minister David Cameron states, “the NHS productivity challenge may prompt calls during this Parliament for even bigger increases in NHS resources; but the reality is that there is no more money.”
No more money!? Excuse the vulgarity, but… bullshit!
The Cameron government is using this false claim to dramatically pull back the government’s role in the NHS, and to push privatization. They are not only cutting back on essential government administrative functions (as opposed to the profound administrative waste in the U.S. system), but they are also failing to honor their duty as stewards of the taxpayers’ funds to maintain adequate regulatory oversight of their public health care system.
They are even going so far as to reduce the government’s role in medical research. Could you imagine the Congress of the United States defunding our National Institutes of Health merely because it is a composite of government bureaucracies?
Is this really what the people of England voted for?
Plan-Provider Collaborations Promise Improved Care Delivery
By Louise Kertesz
America’s Health Insurance Plans
July 12, 2010
“Despite many challenges, health plans are well positioned to drive improvements” in care delivery through collaborations with providers. “Health plans have an enormous amount of assets” in the form of data and relationships they can leverage to improve care, said Jeremy Nobel, MD, adjunct lecturer, health policy and management, Harvard School of Public Health.
To drive improvement, plans can contract with providers to deliver value-based care, with reimbursement linked to performance. Plans can help establish medical homes, accountable care organizations, and episode pricing, he said.
They can also offer providers online tools to improve care delivery effectiveness and efficiency, such as e-prescribing, registries, computerized order entry, and electronic health records. Plans can “be an active infomediary between members and providers, supporting collaborative and value-based care through care gap alerts and shared personal health records.”
Rushika Fernandopulle, MD, a principal at Renaissance Health, has been involved in installing disease management processes for patients with chronic conditions in physician practices in Seattle and Atlantic City. His group has used predictive modeling to identify patients, brought in health coaches, and set up a three-tier payment model (in Seattle) and global budgets (in Atlantic City).
Putting DM processes – usually reserved for health plans and DM vendors – into physician offices is “next-generation disease management,” he said.
“This sort of close payer-provider partnership is not easy, but it is very rewarding when done right. It’s a very active process—more than writing a check and walking away. Plans need to be willing to invest enough, and be patient. There needs to be strong, ongoing connections at multiple levels, including personal relationships; one person needs to own this and go between” physicians and plan, he said.
Now that Congress has codified a permanent role in health care for the private insurance industry, what will be the next entrepreneurial innovations of the private insurance/managed care industry? “Plan-provider collaborations” that are “not easy” but “very rewarding when done right.” Be afraid. Be very afraid!
In our last post, we looked at some of the uncontrolled drivers of rapidly rising health care costs despite all the assurances of our politicians supporting the new health care law, the Patient Protection and Affordability Care Act of 2010 (PPACA).
During the long run-up to this bill, President Obama told us that it would save the average American family $2,500 a year on insurance premiums (a claim that the Congressional Budget Office later dispelled as untrue, instead projecting a $2,300 increase in premium costs for the average family). (1) (Hemingway, M. Obama promised $2,500 health care savings; CBO says plan is $2,300 price increase. Washington Examiner on line, March 10, 2010)
The inconvenient fact is that premiums for families enrolled in employer-sponsored health plans from 2000 to 2008 increased by 97 percent, while those enrolled in individual plans increased by 90 percent; during this period, insurers’ payments to providers rose by 72 percent, medical inflation increased by 39 percent, wages grew by 29 percent and overall inflation went up by 21 percent. (2) (Health Care for America Now! (HCAN). Insurance industry inflates rates while falsely blaming new health care law. June 2010)
According to a recent survey by the Council of Insurance Agents and Brokers, more than one-half of smaller employers with 50 or fewer employees will face premium hikes for group policies in the 11 percent to 20 percent range for 2011. (3) (Wojcik, J. Group health insurance rates on the rise: Survey. Business Insurance, June 3, 2010)
So how in the world can we expect the new health care “reform” legislation to actually make health care and health insurance more affordable?
The new law promised not only cost savings but also provided for $476 billion (almost one-half of the total $1 trillion cost of the law in its first 10 years) in new federal subsidies to help lower- and middle-income Americans to pay for health insurance. We need to ask whether the promised cost savings are likely to materialize and whether the subsidies will help that much.
For openers, cost savings are an illusion. Supporters of PPACA assure us that several approaches will contain health care costs – such as an increase in wellness and prevention programs, wider application of health information technology, and experimentation with such initiatives as “accountable care organizations” and tweaks to the fee-for-service reimbursement system. Most are delayed for years into the future and none have yet been demonstrated to save money for patients and their families.
The cost of health care is certain to rise exponentially as far as we can see, since the market controls prices and the volume of services in a deregulated non-system. And insurance premiums are also certain to rise rapidly at rates way above the cost of living and median household income based on various industry-friendly loopholes in the law and gaming by the industry. These examples show how easy it will be for the industry to continue to exploit the public through both private and public programs:
• Under the new law, insurers can raise premiums based on age (by a 3:1 ratio), by geographic area, by the number of family members, and by tobacco use (by a 1.5 to 1 ratio).
• Many insurers are now aggressively marketing “wellness plans” in both private and public plans. One example is the Healthways SilverSneaker’s membership fitness plan for seniors enrolled in Medicare Advantage plans. This is a clever strategy for insurers in two ways – they cherry-pick healthier seniors without infirmities that prevent their participation in such programs and then they charge 20 percent higher premiums to those seniors not enrolled in fitness programs. (4) (Blue Shield of California. Blue Shield of California to offer award-winning fitness program to Medicare beneficiaries in San Bernardino. January 18, 2010) (5) (Britt, R. Experts: Critical loophole in Senate health bill. Market Watch. January 7, 2010)
• Many healthier younger people will gamble with being uninsured until they get sick, in order to avoid paying fines for noncompliance with the individual mandate. This has already happened in Massachusetts over the four years since the “Massachusetts Miracle” was adopted in 2006. Since then, the number of short-term insurance buyers has increased by four-fold, getting insurance only after they have health care problems, then dumping coverage after they get care. This has increased the cost of insurance for other people and costs the state’s program an additional $300 million a year. (6) (Lazar, K. Short-term insurance buyers drive up cost in Mass. The Boston Globe, June 30, 2010) (6) (Lazar, K. Short-term insurance buyers drive up cost in Mass. The Boston Globe, June 30, 2010)
People with employer-sponsored group coverage will also take hits. As employers confront hikes in the costs of group coverage, they will pass along these costs to their employees in the form of increased co-payments and deductibles, often with other restrictions in coverage. Middle-income families will be especially hard-hit if they have so-called Cadillac plans – those with annual premiums in excess of $8,500 for individuals and $23,000 for families. Employers will be faced with a tax on such plans beginning in 2013, when we can expect them to avoid the tax by limiting coverage and forcing more cost-sharing on their employees. (7) (Herbert, B. Op-Ed. A less than honest policy. New York Times, December 29, 2009)
But won’t the nearly half a trillion dollars in federal subsidies over 10 years make health care affordable for lower- and middle-income Americans? Here too the story is not what we are being led to believe by pundits and supporting politicians. Subsidies will not start until 2014, and then are not available to people already covered by employer-sponsored insurance, those qualifying for Medicaid (incomes less than 133 percent of the federal poverty level, or FPL) and those earning more than 400 percent of FPL. Subsidies can only be obtained by those purchasing coverage on their own on an Exchange.
The Commonwealth Fund has established useful criteria to assess affordability of health care vs. other costs of living. When put up against other basic necessities of life, such as food, housing, and one car to get to work, health care costs above 10 percent of family income become a hardship level, as are medical expenses above 5 percent of family income for lower-income adults below 200 percent of the federal poverty level and those with health plan deductibles above 5 percent of income. (8) (Schoen, C, Doty, M, Collins, SR, Holmgren, AL. Commonwealth Fund. Insured but not protected: How many adults are underinsured, the experiences of adults with inadequate coverage mirror those of their uninsured peers, especially among the chronically ill. Health Affairs Web Exclusive, June 14, 2005)
The Kaiser Family Foundation has developed a useful Health Reform Subsidy Calculator, by which people can readily determine their own health care costs. As an example, a family of four with an income of $60,000 in 2014 will have an insurance premium of $16,858 (for which it will be responsible for $4,937, since the government will provide a subsidy of $11,921). That family will also be responsible for up to $6,250 in out-of-pocket costs, which together would account for 18.6 percent of its household income. And those costs may well be higher due to restricted coverage of their own plan and changes in cost-sharing requirements. By comparison, seniors were paying an average of 15 percent of their annual income on premiums and out-of-pocket health care costs in 1965 when Medicare was enacted. (Blumenthal, D., et al. “Renewing the Promise: Medicare & its Reform.” New York, Oxford University Press, 1988.)
So far we have found little evidence that health care “reform” circa 2010 will contain health care costs or make health care more affordable. In our next post we will consider how much we can believe about claims of improved access to care.
Dr. John Geyman is professor emeritus of family medicine at the University of Washington School of Medicine in Seattle, a past president of Physicians for a National Health Program and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.” This posting is partially based on materials in his forthcoming book, “Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform,” soon to be released by Common Courage Press in both print and e-book format. http://www.commoncouragepress.com
How The Center For Medicare And Medicaid Innovation Should Test Accountable Care Organizations
By Stephen M. Shortell, Lawrence P. Casalino and Elliott S. Fisher
The Patient Protection and Affordable Care Act of 2010 directs the Centers for Medicare and Medicaid Services (CMS) to create a national voluntary program for accountable care organizations (ACOs) by January 2012. ACOs are provider groups that accept responsibility for the cost and quality of care delivered to a specific population of patients cared for by the groups’ clinicians.
Accountable Care Models
Accountable care organizations will be largely based on physician practices that, in turn, may be organized as patient-centered medical homes. Many ACOs will also include hospitals, home health agencies, nursing homes, and perhaps other delivery organizations. There are at least five different types of practice arrangements that could serve as ACOs. These are the integrated or organized delivery system, multispecialty group practices, physician-hospital organizations, independent practice associations, and “virtual” physician organizations, all described below.
1. Integrated Delivery Systems
Integrated delivery systems involve a common ownership of hospitals, physician practices, and—in some cases—an insurance plan. Some examples are Kaiser Permanente, Group Health Cooperative of Puget Sound, and Geisinger Health System. These systems typically have aligned financial incentives, electronic health records, team-based care, and resources to support cost-effective care.
2. Multispecialty Group Practices
Multispecialty group practices usually own or have a strong affiliation with a hospital. Examples of this type of arrangement include Mayo Clinic and Cleveland Clinic. They usually do not own a health plan but, rather, have contracts with multiple health plans in their areas. Most have a long history of physician leadership and highly developed mechanisms for providing coordinated clinical care.
3. Physician-Hospital Organizations
These organizations are a subset of the hospital’s medical staff. One example is Advocate Health in Chicago. Most were formed in the 1990s in response to managed care pressures to negotiate with health plans. Some function like multispecialty group practices, focusing on reorganizing the delivery of care to achieve more cost-effective coordination. Although they may be less well suited than integrated delivery systems or multispecialty practices to qualify as ACOs, many could structure themselves to meet the criteria for that type of organization.
4. Independent Practice Associations
Independent practice associations consist of individual physician practices that came together largely for purposes of contracting with health plans. Over time, however, many of these have evolved into more-organized networks of practices that are actively engaged in practice redesign, quality improvement initiatives, and implementation of electronic health records. One example is Hill Physicians Group, in Northern California. Such organizations could qualify as ACOs, and that might encourage other independent practice associations to evolve similarly, given sufficiently strong financial incentives and technical assistance.
5. Virtual Physician Organizations
Finally, a number of small, independent physician practices, many located in rural areas, can organize to become “virtual” physician organizations, such as Community Care of North Carolina. This process can be led by individual physicians in rural areas or by a local medical foundation, state Medicaid agency, or similar organization that can provide the leadership, infrastructure, and resources to help small practices develop disease registries; implement electronic health records; share information; and provide better-coordinated, cost-effective care. These virtual networks could qualify as ACOs and serve as models for other groups of small practices.
Physicians can choose one or more of the above models, depending on what best fits their needs and local circumstances. But because there are so many options, the payment systems that the CMS creates for ACOs should evolve with the models chosen. Specifically, the more-integrated forms of accountable care, such as integrated delivery systems and multispecialty group practices, are capable of assuming the greatest risk. This would make them natural candidates for capitation or bundled payments, in which providers assume a relatively greater share of risk.
In contrast, less structurally integrated forms of ACOs, such as virtual physician organizations and more loosely organized independent practice associations, are best suited—at least initially—to low degrees of risk. For them, a form of limited, partial capitation for selected illnesses may be most appropriate.
To facilitate delivery system transformation and focus attention on desired health outcomes, payment systems need to change. Payment based on outcomes achieved, rather than on volume of services provided, will be the motivation for providers to focus their attention on improving the underlying systems of care.
Considerable technical assistance will be needed to implement the learning system for the development of ACOs. This will be particularly true for loosely organized independent practice associations and virtual physician networks, which currently lack the size and resources to become ACOs.
Analyzing Shifts In Economic Risks To Providers In Proposed Payment And Delivery System Reforms
By Jeff Goldsmith
These innovative payment methods all share the assumption of broader responsibility — either formally or informally — by hospitals or physicians for reducing Medicare expense through better coordination and management of care. Sadly, these diverse approaches do not appear to fit together seamlessly to encompass the entire continuum of health care.
Policy makers are unlikely to find a single “silver bullet” they can use to replace Medicare fee-for-service payment. They might have to tolerate multiple, overlapping, and partial solutions, and substantial regional variation in the mechanisms that are feasible.
Nonetheless, for better or worse, hospitals are going to play a much larger role in organizing or reorganizing care in their communities. The most promising innovations are those that build on hospitals’ existing information technology and organizational infrastructure. The key to successful innovation will be extending risk assumption to follow suit.
“Accountable care organization” (ACO) is an abstract concept of organizing health care providers into single entities that are responsible for delivering a broad continuum of care for specific patients, while bearing financial risk for the care provided. Moving beyond that abstraction, there really isn’t much new on the policy front.
Most of the types of entities that might actually be able to serve as ACOs already exist, ranging from independent practice associations to fully integrated delivery systems. Even the concept of bundling payments already has applications ranging from Medicare’s DRG prospective payments (diagnosis related groups) to capitation payments for comprehensive health care services.
So what is new? Would payment systems be designed to require that all reimbursement be provided through ACOs? If so, what would happen to the sector of the health care delivery system that would be excluded from the ACOs that controlled the health care delivery in a given region? Would those providers simply become bankrupt and shut down? Could we afford to lose them, especially with the existing deficiencies in our primary care infrastructure?
Shortell, Casalino and Fisher suggest that the establishment of “virtual physician organizations” would address that concern, but here “virtual” seems to refer to the computer term of “not physically existing as such but made by software to appear to do so.” Of course, the providers would actually exist, but they would never function as a unified ACO providing the full range of services, including hospital services, for a given population requiring at least 5000 patients with accountable care protocols for each clinical entity.
Basically, the concept of the accountable care organization is merely a relabeling of various existing policy efforts to try to control inappropriate spending in our dysfunctional health care system. Since our goal is to provide health care for everyone while slowing the growth in spending to sustainable levels, clearly these policies have failed us.
Let’s go with a system that actually works to achieve the goal of affordable health care for everyone – a single payer national health program.
The passage of the Patient Protection and Affordable Care Act of 2010 (PPACA), our new health care legislation, in March was hailed by its supporters as an historic event of the magnitude of Social Security and Medicare. But four months later, it remains controversial, with repeated polls showing three large groups of divisive opinion, including those who would work to repeal it and others who believe that it will make no difference. The Democrats have launched a $125 million PR campaign to defend the new law amidst growing signs that many Democrats facing re-election are failing to get political traction on the issue. (1) (Allen, M. Dems launch $125 M health campaign. Politico, June 7, 2010)
We are being advised by many to “wait and see” how this complex new bill plays out over the next five to ten years, but we can already know what its outcomes will be. More than 30 years of health policy science, including documentation of the repeated failures of incremental changes built into the new law, together with well-entrenched trends in our market-based system, allow us to project its outcomes with confidence. For this legislation has been molded and crafted by the political power and money of corporate stakeholders in the medical-industrial complex.
Five previous posts in 2009 described the uneasy “alliance” of the five biggest players—the insurance industry, the drug industry, the hospital industry, business and organized medicine. They will do just fine with the new law at the expense of patients, families and Main Street.
Health care “reform” this time around was intended to address these four basic system problems: (1) containing health care costs, (2) making health care more affordable, (3) increasing access to care, and (4) improving the quality of care. This post introduces a series of five that will examine how well the PPACA will do on each of these four goals, followed by an overall assessment of the law. These posts will draw in part from my new book Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform, soon to be released by Common Courage Press in both print and ebook format.
CONTINUED UNRESTRAINED DRIVERS OF HEALTH CARE COSTS
These are some of the many reasons that we can already conclude that health care costs will continue to run out of control at rates far exceeding the costs of living and median household incomes.
• No price controls. Wall Street has already factored in rapid expansion of markets for drugs, medical devices and other services in a system of expanded access. There is also a long line forming of providers of information technology and administrative services that will exploit the complex implementation of this law.
• No bulk purchasing. The PPACA has prohibited the government from negotiating the prices of prescription drugs and retains a ban on importation of drugs from Canada and other countries.
• Lack of control over perverse incentives that drive increased volume of services. These in turn are driven by retention of fee-for-service (FFS) reimbursement that encourages physicians and other providers to offer more services than are medically appropriate or necessary.
• No effective mechanism to rein in marginal or ineffective technologies. Coverage policies for new drugs and medical devices are still lax and not subject to rigorous evidence-based criteria for either efficacy or cost-effectiveness.
Although the PPACA does call for a Patient-Centered Outcomes Research Institute, its role is already neutered by not having the power to mandate or even endorse coverage or reimbursement rules for any particular treatment. (2) (Kaiser Health News staff. True or false: Seven concerns about the new health law, March 31, 2010)
• The dominant business model of health care prevails, with many facilities and services remaining for-profit and investor-owned and with an ongoing trend for increasing consolidation within industries.
• The PPACA has grandfathered-in specialty hospitals, typically physician-owned facilities that focus on well-reimbursed procedures in such areas as cardiology and orthopedics, whereby physicians can “triple dip”, earning high incomes as providers, owners and investors.
• More preventive services will further fuel health care inflation. While the PPACA does provide new coverage for many preventive services, this will lead to increased costs due to additional diagnostic and treatment services engendered. (3) (Russell, L. Preventing chronic disease: An important investment, but don’t count on cost savings. Health Affairs 28 (1): 42-5, 2009)
• Private insurers can’t contain health care costs, even where they have dominant market power. A 2009 report by the Congressional Research Service, The Market Structure of the Health Insurance Industry, concludes that “The exercise of market power by firms in concentrated markets generally leads to higher prices and reduced output—high premiums and limited access to health
insurance—combined with high profits.” (4) (Austin, DA, Hungerford, TL. The Market Structure of the Health Insurance Industry. Washington, D.C. Congressional Research Service, November 17, 2009)
• There are no controls over premium rate increases by insurers. Despite the outcry by government officials, annual premium rates are escalating at rates up to 56 percent (5) (Johnson, A. Fight over health-care premiums heats up. Wall Street Journal, February 19, 2010: A6), and there is no end in sight for continued exorbitant rate increases. Insurers will continue to game the system by extracting
maximal profits and offering reduced coverage with actuarial values (the amounts insurers actually pay in coverage) as low as 60 or 70 percent.
• National health care spending will grow unabated despite the passage of PPACA. The Centers for Medicare and Medicaid Services (CMS) projects that overall national health expenditures (NHE) will increase from its present 17 percent of GDP to 21 percent in 2019, a total of $4.470 trillion. (6) (Foster, RS. Office of the Actuary. Estimated financial effects of the “Patient Protection and Affordable Care Act,” as Amended. Centers for Medicare and Medicaid Services, April 22, 2010)
These well-documented trends leave no room to think that health care “reform” will have any chance to contain health care costs. Instead, health care inflation will be exacerbated by all the new incentives and inefficiencies in the new “system”. In our next post we will examine the impact of these trends on affordability of health care.
Dr. John Geyman is professor emeritus of family medicine at the University of Washington School of Medicine in Seattle, a past president of Physicians for a National Health Program and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.” Buy John Geyman’s Books at: http://www.commoncouragepress.com
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