By Jennifer Katzenberg
After listening to Dr. Rob Stone’s talk at the satellite “Rally to Restore Sanity/Keep Fear Alive” in Chicago’s Grant Park this past Saturday, I was impressed by his ability to succinctly explain the problems with the current state of health care and health reform in this country.
Stone began by saying, “I went to medical school so I could take care of people.” He talked about his years of experience as an emergency room doctor in rural Indiana where he sees everyone who comes in – insured, poorly insured or uninsured.
Appealing to the “fear” aspect of the rally, Stone shared the shameful statistic that “50 million, or 1 in 6 Americans, are uninsured” and said that “no other civilized country leaves 50 million people without coverage.”
He then asked how many people either know someone who is uninsured or are uninsured themselves. Shouts of “Yes!” erupted and hands flew up across the large crowd.
He then referred to President Obama’s interview on Jon Stewart’s “The Daily Show” last week, highlighting Stewart’s remark that some people think the new health law is too “timid.” It is clear that Stone, along with many others, feels the health bill was indeed timid because “Congress is afraid of big corporations.”
“We try to get health insurance in this country mostly from for-profit, Wall Street-driven companies,” he said. “Wall Street has taken over health insurance,” and it’s a big problem that the new law “keeps private insurance as a major centerpiece.”
“We have to speak up for what the people need and not what the corporations need,” Stone said. The audience cheered in response.
Speaking of the private insurers, Stone said, “We’ve got to find a way to move them aside and just make one big pool of all of us where we’re all covered. … That’s what we call single payer, that’s what we call an expanded and improved Medicare.”
Stone said single-payer health reform is what is “sane,” and the crowd clearly agreed. Who could argue with that? How could anyone honestly believe in keeping people uninsured or poorly uninsured?
As Stone walked off stage, he had the crowd chanting, “Everybody in, Nobody out!”
More Americans need to hear people like Stone talk about health care so that Medicare-for-All has a chance.
Jennifer Katzenberg is an intern at Physicians for a National Health Program (www.pnhp.org).
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.
Single Payer Ballot Questions Pass in All Fourteen Massachusetts Districts!
November 3, 2010
Massachusetts voters have, for the second straight election, overwhelmingly affirmed their support for single payer health reform by turning in majority ‘Yes’ votes in all fourteen districts where local single payer ballot questions appeared on November 2.
Single-payer health insurance
Should the state representative from this district be instructed to support legislation establishing health care as a human right regardless of age, state of health, or employment status, by creating a single payer health insurance system like Medicare that is comprehensive, cost effective, and publicly provided to all residents of Massachusetts?
222 of 228 precincts reporting
Yes – 63.5%
No – 36.5%
The day after the decisive Republican takeover of the U.S. House of Representatives some pundits are claiming that this shift in political power is, in part, due to the rejection of Obamacare – the Patient Protection and Affordable Care Act. This political message is not completely clear in that there was no national expression of what the public might want instead. But look at what the citizens of Massachusetts have to say.
The people of Massachusetts have been living with Romneycare, a model of health care financing that uses the same fundamental policies as are found in Obamacare. They now know what the nation will know after 2014.
What do they say about Romneycare and Obamacare? Almost two-thirds of voters in districts that considered this issue would reject Obamacare and Romneycare in favor of “creating a single payer health insurance system like Medicare that is comprehensive, cost effective, and publicly provided to all residents of Massachusetts.”
And, oh yes, the citizens of Vermont elected, as governor, Peter Shumlin, an outspoken advocate of single payer.
Some of the people do seem to be getting the message that single payer is for their benefit, but we have much more work to do to educate the others.
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.
Applying Value-Based Insurance Design To High-Cost Health Services
By James C. Robinson
Health Affairs, November 2010
Value-based insurance design programs have focused on reducing consumer cost sharing in health insurance for preventive tests and medications for chronic diseases. But for value-based design principles to have a stronger clinical and economic impact, they should be extended to expensive services and to those for which the evidence is limited or controversial. This paper proposes applying value-based insurance design principles to self-administered and office-administered specialty drugs, implantable medical devices, advanced imaging modalities, and major surgical procedures.
Applying Value-Based Insurance Design To Low-Value Health Services
By A. Mark Fendrick, Dean G. Smith and Michael E. Chernew
Health Affairs, November 2010
Value-based insurance design improves health care quality and efficiency by reducing cost sharing for services that have strong evidence of clinical benefit. The same goals can also be accomplished by increasing cost sharing for low-value services, which would ensure more effective care and achieve net cost savings. However, there are challenges in defining what is meant by “low-value services” and implementing programs to restrict such services’ use. This paper argues that investments in processes to define low-value care, comparative effectiveness research to identify services that produce harm or marginal clinical benefit, and information technology to implement findings can facilitate applying value-based insurance design to the low-value realm.
Assessing The Evidence For Value-Based Insurance Design
By Niteesh K. Choudhry1, Meredith B. Rosenthal and Arnold Milstein
Health Affairs, November 2010
High copayments for medical services can cause patients to underuse essential therapies. Value-based health insurance design attempts to address this problem by explicitly linking cost sharing and value. Copayments are set at low levels for high-value services. The Mercer National Survey of Employer-Sponsored Health Plans demonstrates that value-based insurance design use is increasing and that 81 percent of large employers plan to offer it in the near future. Despite this increase, few studies have adequately evaluated its ability to improve quality and reduce health spending. Maximizing the benefits of value-based insurance design will require mechanisms to target appropriate copayment reductions, offset short-run cost outlays, and expand its use to other health services.
Impact Of Health Care Fragmentation
Payers have the greatest incentive to adopt plans using value-based insurance design when they stand to benefit from reductions in spending on medical care that is averted from the use of highly effective therapies. However, the fragmented nature of the US health care system may reduce the likelihood of this scenario. Payers often carve out certain types of benefits, most notably for prescription drugs. Similarly, pharmacy benefit managers often have little incentive to reduce cost sharing for fully insured people unless such terms are specifically negotiated. In addition, patients frequently switch insurers, such as when they change jobs. Thus, with the exception of very high-risk conditions where improved quality may be achieved quickly, payers face the possibility that they will bear the cost of therapy while other payers reap the savings from averted clinical events.
The implications of insurance “churn” — the switching and dropping out of plans as employment changes — are less relevant in systems with a single payer that provides comprehensive coverage over a longer period of time.
Value-based insurance design generally refers to the drafting of insurance benefits in a way that would improve health care value. Under this concept, financial disincentives such as deductibles, copayments and coinsurance should be reduced or eliminated for health care that has been proven to be beneficial, whereas these cost-sharing measures should be increased for “expensive services and those for which the evidence is limited or controversial.” Is this a good idea?
There is already considerable evidence that reducing cost sharing for proven drugs and for preventive services is of benefit for the health of the individual. Patients taking effective maintenance medications are more likely to fill their prescriptions, and patients are more likely to access preventive screening services. However, the evidence that this saves money is quite spotty and weak. Nevertheless, eliminating barriers to beneficial care is desirable, and our health care policies should be designed to encourage such improved access.
What about increasing financial barriers to expensive care, such as specialty drugs, implantable medical devices, advanced imaging modalities, and major surgical procedures? If these expensive services are beneficial, then higher cost sharing explicitly creates rationing based on the ability to pay. Those who can afford the high out-of-pocket expenses receive the care, and those who can’t afford the cost sharing don’t. Those of us who are passionate advocates of health care justice would find this to be totally unacceptable. We would support more equitable policies to address the cost issues.
What about increasing financial barriers to expensive care for which the evidence of benefit is marginal or controversial? Do we want to have a system in which the wealthy can spend whatever they want for try-it-and-see health care, while those of more modest income are not allowed that option? First of all, there is a lot of high-cost care that falls into this marginal category, much of which should probably be made accessible to everyone. So financial barriers would still be inappropriate from a policy perspective.
But what about the care that crosses the threshold of clearly being too expensive while likely of no value or perhaps even detrimental? Should that care still be available, if only for the wealthy? Should we even care? The problem is that the health care delivery infrastructure is a limited resource; it is expensive; and we all pay for it. Diverting our health care resources, at the whim of the wealthy and those who would profit from them, places stresses on our capacity that can have undesirable consequences such as unnecessarily expanding queues.
Value-based insurance design is a bad idea for three reasons: 1) we should not have financial barriers to beneficial health care services; 2) we should not use financial barriers that establish two-tiered or multi-tiered systems which favor the wealthy while neglecting our workforce; and 3) we shouldn’t continue with the creation of administratively burdensome policies made necessary merely because our Congressional leaders value our private insurers more than they value patients.
One statement pulled out of this special issue of Health Affairs carries a very pregnant message that the authors likely didn’t intend:
“The implications of insurance ‘churn’ — the switching and dropping out of plans as employment changes — are less relevant in systems with a single payer that provides comprehensive coverage over a longer period of time.”
Originally published in the Berkshire Eagle.
On Nov. 2, you will be able to vote for “single-payer” health care if you live in the 2nd or 4th districts of Berkshire County. This referendum is non-binding, but will send a strong message to our legislators and governor.
A single-payer health care program would be an expanded and improved Medicare system for everyone, not just senior citizens. The government would be the only administrator of the health care funds (the “single payer”), rather than the hundreds of for-profit health insurance companies which currently administer our health care dollars.
The insurance companies add to the enormous cost of health care by keeping 20-30 percent of our health care dollars for their administration, profits and exorbitant CEO salaries. In contrast, Medicare uses less than 1.5 percent of our health care funds for administration. “Single payer” refers only to the administration of health care dollars, not to the delivery of care, which would remain in the hands of health care providers.
Who will benefit from a single-payer system?
First, patients will experience cost-savings and better access to care. Rather than paying insurance premiums that increase in price each year for policies that provide less coverage with higher deductibles and co-payments, everyone will pay a modest income tax that will cost less than current premiums for health care insurance. Plus, patients will be able to choose their own doctors.
Second, doctors and hospitals will benefit, because they will no longer have to hire legions of office workers for administrative tasks. Doctors will be relieved of the onerous paperwork demands from multiple insurance companies, freeing them to spend more time with their patients.
A majority of doctors support single-payer health care. The annual study by the Massachusetts Medical Society found doctor shortages throughout our state, especially in the Berkshires, and especially in primary care. Doctors were asked about their preferences for a health care system: they picked single-payer health reform over a public option, over high-deductible plans, and over the Massachusetts health reform — in short, over every other option presented. The current Massachusetts health reform was least favored.
Third, business will benefit, especially small business owners who view rising health insurance costs for their employees as their greatest concern. If everyone were covered by a single-payer program, payment for health care would no longer be tied to employment, and business owners would be freed from an expensive, complicated responsibility.
Fourth, towns and cities will benefit because they will not need to provide health insurance for their active and retired employees; instead, that money can be used to improve other services such as education.
Fifth, our state will benefit. The recent health care legislation that extended health insurance to 97% of our state population has required enormous infusions of cash to provide subsidies for those unable to afford health insurance policies. As a result, we have filled the coffers of the private health insurance industry, while seriously straining the state budget.
Sixth, even though the Massachusetts referendum is not a national vote, the United States would benefit from a single-payer national health program by saving $400 billion per year in administrative costs alone; a serious consideration for a financially-strapped country. The legislation just passed by President Obama and Congress, the Patient Protection and Affordable Care Act (PPACA), makes only minor improvements to an unsustainable for-profit health insurance system. Similar to the Massachusetts legislation in its laudable attempt to provide universal coverage, this legislation is not cost-effective.
Our government will subsidize private insurance premiums for the “near poor,” channeling $447 billion of taxpayer dollars to private insurers over the next decade. As Drs. Steffi Woolhandler and David Himmelstein (founders of Physicians for a National Health Program) have written, “Morphine has been dispensed for the treatment of cancer — the reform (PPACA) may offer a bit of temporary relief, but it is certainly no cure.”
Another physician, Dr. Edward Ehlinger, wrote, “Insurance is a strange model for health care . (Insurance) is meant for life’s uncertainties, but illness is a pretty sure thing ” That’s why we don’t use the insurance model for fire and police protection or for education. Health care should also be in the category of essential services we will all need someday.
The only loser after single-payer health care is enacted will be the health insurance industry, the middlemen who provide no medical care and siphon our hard earned premiums into their own exorbitant profits.
If you are in favor of a single-payer health care system for Massachusetts, I urge you to vote “Yes” on Question 4 on Tuesday, Nov. 2.
Susanne L. King, M.D. is a Lenox-based practitioner.
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.
Fixing Flaws In Medicare Drug Coverage That Prompt Insurers To Avoid Low-Income Patients
By John Hsu, et al
October 28, 2010
Since 2006 numerous insurers have stopped serving the low-income segment of the Medicare Part D program, forcing millions of beneficiaries to change prescription drug plans. Using data from participating plans, we found that Medicare payments do not sufficiently reimburse insurers for the relatively high medication use among this population, creating perverse incentives for plans to avoid this part of the Part D market. Plans can accomplish this by increasing their premiums for all beneficiaries to an amount above regional benchmarks. We demonstrate that improving the accuracy of Medicare’s risk and subsidy adjustments could mitigate these perverse incentives.
Under the Medicare Part D program for prescription drugs, private insurers are paid more for lower-income subsidized patients with greater health care needs. Since the insurers find that the higher payments are still below what they find to be acceptable, they are setting their premiums at rates above the benchmark levels. This results in an automated transfer of these higher-cost beneficiaries to competitors’ programs.
As long as Congress continues to insist on using private plans for Medicare Part D, we will always see efforts by the insurers to enroll healthier patients while avoiding the sick – gaming by private insurers sometimes referred to as cherry picking and lemon dropping. (Of course, this is also true of private insurers throughout the individual, small group, and large group markets.)
The authors of this study recommend yet more administrative complexity by introducing additional modifications of the calculations in an effort to reduce these perverse incentives, but such changes certainly would not prevent the insurers from seeking other forms of gamesmanship. They owe it to their investors to game the system as much as possible.
How is the Patient Protection and Affordable Care Act addressing this problem? It isn’t. We could have had reform that would increase efficiency and equity while eliminating the private insurers, but Congress rejected that. It’s still not too late to change.
Profiling California’s Health Plan Enrollees: Large Enrollment in High-Deductible Health Plans
By Dylan H. Roby, Gina L. Nicholson, and Gerald F. Kominski
UCLA Center for Health Policy Research
Three million commercially insured Californians were enrolled in high-deductible health plans in 2007. High-deductible health plans (HDHPs) have been gaining momentum in the health insurance market as a way to encourage more rational use of health care services. However, HDHPs come with risks. While the plans offer lower monthly premiums than typical health insurance coverage, they carry much higher deductibles for health care services. For these plans, the average annual deductible for individuals with employer-based insurance is more than $1,800. Studies have shown that significant cost sharing may create disincentives for both necessary and unnecessary care. While individuals with high-deductible plans may be less likely to utilize the emergency room for care, they may also delay necessary treatment or doctor visits.
Another mechanism for improving the affordability of health insurance is the Health Savings Account (HSA), which allows individuals with high-deductible health plans to set aside tax-deductible funds for medical expenses. However, only 23% of commercial HMO and 20% of commercial Kaiser HMO enrollees with HDHPs reported having HSAs as well. Thirty-one percent of commercial PPO enrollees reported having a Health Savings Account in addition to their HDHP.
With the recent passage of health reform, individuals and families will be mandated to have health insurance beginning in 2014. To comply with the mandate and attempt to save money, consumers may purchase plans with lower premiums. However, they could still face high deductibles and cost-sharing requirements, which would harm their ability to access health care.
Full UCLA report (35 pages):
This large study from the UCLA Center for Health Policy Research provides yet one more confirmation that the use of high-deductible health plans (HDHPs) continues to expand because of the very high cost of private health insurance, yet these high-deductible plans are causing patients to delay or decline necessary health care.
The supporters of HDHPs claim that health consumers can be protected by health savings accounts. Yet this study confirms that two-thirds to four-fifths of Californians with HDHPs do not have health saving accounts. They remain exposed to the full brunt of the deductible.
These findings are particularly applicable to the insurance exchanges which will be established in 2014. The subsidies to purchase plans within the exchanges will be targeted to the bronze and silver plans. These are plans with lower actuarial values – paying a lower percentage of the health care costs – but they will be the plans that most individuals will have to select because the more generous gold and platinum plans will be unaffordable.
How do the bronze and silver plans maintain a lower actuarial value? Primarily by requiring large deductibles. (Also they may apply greater coinsurance rates – a percentage of the health care costs for which the patient is responsible – and they may strip benefits down to the minimum permitted by government regulations.) Thus high-deductible health plans that reduce access to care will become the norm.
We can do better than that. We can improve Medicare by providing first-dollar coverage – eliminating deductibles and coinsurance – and expanding benefits to include all essential services, and then make it universal so everyone is covered. The near nominal cost of first-dollar coverage is well worth having the assurance that financial barriers to all necessary health care would be removed for everyone.
Medicare “Accountable Care Organizations”
Shared Savings Program – New Section 1899 of Title XVIII
Centers for Medicare and Medicaid Services (CMS)
Office of Legislation
Preliminary Questions & Answers
The Affordable Care Act (ACA) improves the health care delivery system through incentives to enhance quality, improve beneficiary outcomes and increase value of care. One of these key delivery system reforms is the encouragement of Accountable Care Organizations (ACOs). ACOs facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. This document provides an overview of ACOs and the Medicare Shared Savings Program.
Q: What is an “accountable care organization”?
A: An Accountable Care Organization, also called an “ACO” for short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.
For ACO purposes, “assigned” means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.
Q: What forms of organizations may become an ACO?
A: The statute specifies the following:
1) Physicians and other professionals in group practices
2) Physicians and other professionals in networks of practices
3) Partnerships or joint venture arrangements between hospitals and physicians/professionals
4) Hospitals employing physicians/professionals
5) Other forms that the Secretary of Health and Human Services may determine appropriate.
Q: What are the types of requirements that such an organization will have to meet to participate?
A: The statute specifies the following:
1) Have a formal legal structure to receive and distribute shared savings
2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
3) Agree to participate in the program for not less than a 3-year period
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
5) Have a leadership and management structure that includes clinical and administrative systems
6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.
Additional details will be included in a Notice of Proposed Rulemaking that CMS expects to publish this fall.
Q: How would such an organization qualify for shared savings?
A: For each 12-month period, participating ACOs that meet specified quality performance standards will be eligible to receive a share (a percentage, and any limits to be determined by the Secretary) of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount. The benchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO. The benchmark for each ACO will be adjusted for beneficiary characteristics and other factors determined appropriate by the Secretary, and updated by the projected absolute amount of growth in national per capita expenditures for Part A and B.
Q: What are the quality performance standards?
A: While the specifics will be determined by the HHS Secretary and will be promulgated with the program’s regulations, they will include measures in such categories as clinical processes and outcomes of care, patient experience, and utilization (amounts and rates) of services.
Q: Will beneficiaries that receive services from a health care professional or provider that is a part of an ACO be required to receive all his/her services from the ACO?
A: No. Medicare beneficiaries will continue to be able to choose their health care professionals and other providers.
Q: Will participating ACOs be subject to payment penalties if their savings targets are not achieved?
A: No. An ACO will share in savings if program criteria are met but will not incur a payment penalty if savings targets are not achieved.
Q: When will this program begin?
A: We plan to establish the program by January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.
Further details for the shared savings program will be provided in a Notice of Proposed Rulemaking which CMS expects to publish this fall.
Link to text of Sec. 1899 (under Sec. 3022) with a brief summary (plus text and summary of Sec. 2706 – Pediatric ACO Demonstration Project):
Since enactment of the Patient Protection and Affordable Care Act (PPACA) there has been considerable enthusiasm and hype over the provisions establishing accountable care organizations (ACOs). The purpose of today’s message is to look past the hype to see precisely what PPACA says about ACOs.
Today’s quote is the explanation of the applicable section of PPACA as provided by the Centers for Medicare and Medicaid Services (CMS). A link to the precise language of the section is also provided.
Sec. 3022 Of PPACA amends Title XVIII of the Social Security Act by adding Sec. 1899, the Shared Savings Program. The title alone provides a hint of what this really is about since it is not named Accountable Care Organizations.
Many entities already exist that can be called accountable care organizations. These include group practices, networks of individual practices, partnerships or joint ventures between hospitals and health care professionals, and hospitals employing health care professionals. Under PPACA, the Secretary of Health and Human Services (HHS) can include as ACOs any other group of providers and suppliers deemed appropriate.
What the law does is to add another administrative layer that is designed to reduce costs and promote quality. The existing entities plus any new ones formed have to meet certain requirements to qualify as an ACO, and then that allows them to participate in the shared savings program.
The specific requirements:
* Willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it
* A legal structure to receive and distribute shared savings
* A leadership and management structure that includes clinical and administrative systems
* A minimum participation of 5000 patients
* A sufficient number of primary care professionals
* Agree to participate for a minimum of three years
* Define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies
* Demonstrate patient-centerness criteria specified by the Secretary
* Measure quality of clinical processes and outcomes, patient experience of care, and utilization
This program applies to patients in the traditional fee-for-service Medicare program. Patients do not enroll in the ACOs. They are assigned by the Secretary based on utilization of primary care services. The patients may not even know that they have been assigned, as they are free to go to any providers of their choice, in or out of the ACO.
The ACOs are still paid fee-for-service by Medicare just as they always have been. That doesn’t change (though an amendment authorizes the option of a partial capitation model).
So how do ACOs achieve higher quality and lower cost?
The ACOs are not rewarded monetarily for meeting the quality standards. Their motivation to comply is to avoid being suspended from the program.
Costs are reduced by the shared savings program. A benchmark is established for each ACO “using the most recent available 3 years of per-beneficiary expenditures for parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO.” If the ACO can provide care for costs below the benchmark, the ACO then shares those savings with HHS. The benchmark is reset at the beginning of each 3 year agreement.
If the costs are above the benchmark, then the fees are still paid as usual, with no adjustments.
Think about this. The incentives continue to promote greater volume. There is no penalty for running the charges up. Is the reward for reducing the volume and intensity of services enough? Since fixed costs for the ACO are relatively unchanged, the reductions in marginal overhead expenses due to reduced volume must be greater than the amount of savings that HHS shares with the ACO in order to come out ahead. Since this is the opposite of “making it up in volume,” it is more likely that net income will be reduced. Further, since the benchmarks are reset every 3 years based on lower utilization, it is very unlikely that that the ACO could continue to ratchet down services to qualify for shared savings.
Some models of integrated health systems function well and should be encouraged as long as the goal is higher quality and greater value, while shunning policies that provide perverse incentives for greater profits by reducing beneficial health care services. But why would a well-functioning integrated health care system want to add an additional administrative layer, with additional quality-reporting requirements, just to be designated as an ACO, especially when the net result likely reduces the bottom line?
It is truly unfortunate that the fervor and hype over ACOs have provided yet one more distraction from the important task at hand. We need to replace our flawed health care financing system with one that works – a single payer national health program. That would include everyone of us in a quality system that we could pay for.
A Roadmap for America’s Future, Version 2.0
A plan to solve America’s long-term economic and fiscal crisis
By Representative Paul D. Ryan, Ranking Member, Committee on the Budget
A Medicare Program for the 21st Century.
The entire methodology of the program must be converted away from a program that shelters providers and consumers from prices – and is therefore inefficient in restraining rising costs – into one in which beneficiaries choose the most affordable coverage that best suits their needs.
For future Medicare beneficiaries who are now under 55 or younger, the proposal creates a standard Medicare payment to be used for the purchase of private health coverage. The payment will be made directly to the health plan designated by the beneficiary (similar to the administration of the refundable health care tax credit), with the beneficiary receiving any leftover amount as a payment from the health plan, or assuming financial responsibility for any difference in the payment and the total cost of the premium.
Each Medicare beneficiary becomes eligible for the payment by enrolling in a health insurance plan. Medicare will publish an annual list of plans that are “Medicare certified.” Medicare enrollees are able to use their payment to pay for one of the Medicare certified plans, or any other plan, such as those offered by former employers or available from the private market.
For affected beneficiaries, the payment replaces all components of the current Medicare Program (Medicare fee-for-service, Medicare Part B, Medicare Advantage, and Medicare Part D). Payment amounts are income-related and risk-adjusted.
For individuals now younger than 55 only, the proposal adapts Medicare’s eligibility age to reflect Americans’ improving lifespans, raising in gradually, and in modest steps, from the current 65 to 69 years and 6 months.
The proposal would establish a mechanism that would be activated if the Medicare trustees determined that the percentage of funding from general revenues exceeded 45 percent in the prior fiscal year. …the mechanism would apply an automatic 1-percent reduction in payments for services provided in Medicare’s fee-for-service sector.
Statement to the Commission on Deficit Reduction
By James K. Galbraith, Lloyd M. Bentsen, jr. Chair in Governnment/Business Relations, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin
June 30, 2010
You are plainly not equipped by disposition or resources to take on the true cause of deficits now and in the future: the financial crisis. Recommendations based on CBO’s unrealistic budget and economic outlooks are destined to collapse in failure. Specifically, if cuts are proposed and enacted in Social Security and Medicare, they will hurt millions, weaken the economy, and the deficits will not decline. It’s a lose-lose proposition, with no gainers except a few predatory funds, insurance companies and such who would profit, for some time, from a chaotic private marketplace.
If the Republicans regain control of the House of Representatives in the election next week, as some experts predict, Rep. Paul Ryan will likely become Chairman of the Committee on the Budget. This will coincide with the release of the report from the Commission on Deficit Reduction – a report that many fear will recommend changes that would make significant cuts in the Medicare program. Clearly, Medicare is under threat.
Rep. Ryan is being touted as a brilliant wonder boy who has crafted a budget proposal, “A Roadmap for America’s Future,” that would return the government to solvency. Not only is the fundamental premise incorrect, he has introduced no new concepts, but rather a rehash of old proposals to privatize programs which the government is better suited to deliver.
His proposal for Medicare is to eliminate the government program as a defined benefit and substitute vouchers for private health plans as a defined contribution that shifts more risks to Medicare beneficiaries. He would also postpone eligibility until age 69 and a half (even he choked on 70).
He claims that the problem is that Medicare “shelters consumers from prices,” but that isn’t true. Medicare has deductibles and coinsurance that can result in considerable out-of-pocket expenses. It is the private sector plans – Medigap, retirement plans, Medicare Advantage plans – that tend to reduce the out-of-pocket spending. Most Medicare beneficiaries have such coverage, especially the Medigap plans.
Rep. Ryan is not calling for more sensitivity to health care prices; he is calling for more sensitivity to insurance premiums. By holding down the government contribution, most Medicare beneficiaries will be forced to buy plans with fewer benefits because that is all that they can afford. What a cruel and inhumane approach to financing health care. As Prof. James Galbraith says, cuts in Medicare “will hurt millions.”
Almost everyone recognizes that Medicare benefits are insufficient, and that is why so many purchase Medigap plans. But are Medigap plans a reasonable approach to expand coverage? They provide one of the worst values in private insurance coverage. They are terribly overpriced considering the benefits provided. It would be far better and overall less expensive to roll over the Medigap and Part D drug benefits into the traditional Medicare program, and then eliminate Medigap, Part D, and the Medicare Advantage plans.
We need to change the national dialogue. The current discussion is about pulling back on Medicare – the wrong discussion. We need to get the word out about what a rip-off the private sector plans are. We need to get rid of them by improving Medicare and making them unnecessary. Once we’ve done that then we need to get the word out about how our improved Medicare would be a better program for everyone.
The price problem that health-care reform failed to cure
By Alec MacGillis
The Washington Post
October 24, 2010
The health-care law of 2010… sets us on the road to universal health insurance.
But the Democrats’ effort to sell the law to the public may be undermined by what even some ardent supporters consider its biggest shortfall. The overhaul left virtually untouched one big element of our health-care dilemma: the price problem. Simply put, Americans pay much more for each bit of care — tests, procedures, hospital stays, drugs, devices — than people in other rich nations.
Health-care providers in the United States have tremendous power to set prices. There is no government “single payer” on the other side of the table, and consolidation by hospitals and doctors has left insurers and employers in weak negotiating positions.
“We spend fewer per capita days in the hospital compared with other advanced countries, we see the doctor less frequently, and we swallow fewer pills,” said Jon Kingsdale, who oversaw the implementation of Massachusetts’s 2006 health-care law. “We just pay a lot more for each of those units than other countries.”
The 2010 law does little to address this. Its many cost-control provisions are geared toward reducing the amount of care we consume, not the price we pay. The law encourages doctors and hospitals to join “accountable care organizations” that have financial incentives to limit unnecessary care; it beefs up “comparative effectiveness research” to weed out inefficient treatments; and it will eventually tax the most expensive insurance plans to restrain consumers’ superfluous use of health care.
Such measures could reduce redundant tests, emergency room visits and hospital readmissions, which would help control the costs of Medicare, where the government sets rates. But they are less likely to lower prices outside Medicare and stem the growth of private insurance rates.
The main reason for this is politics. Remember how drawn-out the health-care battle was? It started in the spring of 2009 and was waged for a full year. The bill’s proponents in the White House and in Congress had some inkling of how tough the fight with the insurance companies would be. Taking on hospitals, doctors, and drug and device manufacturers as well — the people you’d face in a showdown over prices — might have been fatal.
So there was no price fight. It is one of those fine political ironies: The law derided as socialism may have had an easier time winning favor from a skeptical public if it was, well, a little more socialist.
Politicians wanted to avoid a confrontation over providers’ prices. So a different policy argument took hold: The real reason everything cost so much was the overuse of health care, not the actual prices of treatment.
This argument came primarily from Dartmouth College researchers who had amassed data showing wide disparities in Medicare spending among different regions. Hospitals in the lower-spending areas, mostly in the Upper Midwest and the Northwest, seized on the study to argue that the key to controlling costs was to reward providers like them.
The theory caught fire at the White House. It gave President Obama and his then-budget guru Peter Orszag a way to talk about costs without taking on doctors and hospitals; instead, the White House could simply differentiate between providers that offer “value” and those that don’t.
But the Dartmouth rankings, and the concept they supported, did a “disservice” to the debate, said Robert Berenson of the Urban Institute. For one thing, he and others say, the figures overstate regional differences in Medicare spending, which shrink when socioeconomic factors are taken into account. Second, rates of Medicare spending are not necessarily representative of health-care spending for people under 65. Some of the places that do well in the Dartmouth rankings charge high prices for non-Medicare patients — and were, not surprisingly, among those pushing hardest against a public option.
More broadly, the skeptics argue that merely providing care in smaller quantities will not sufficiently lower costs. They note that Americans already have shorter hospital stays and fewer doctors’ visits than people in other advanced countries. What sets us apart is our high prices for these health-care “units” — a finding trumpeted in a landmark 2003 paper by Princeton’s Uwe Reinhardt and others titled “It’s the Prices, Stupid.” The price problem is only getting worse, researchers and antitrust investigators have found, because of consolidation among providers, and it could be exacerbated by goading them to form even bigger networks.
Many have commented on the fact that the Patient Protection and Affordable Care Act (PPACA) did little to address one of the most important drivers of the reform process – our unique problem of the outrageous costs of health care. We spend far more per capita on health care than any other nation. This article by Alec MacGillis is singled out as recommended reading on this topic, as he is one of the most credible and well-informed journalists who closely observed the reform process.
The important lesson that MacGillis provides us here is that we do not use more health care than other nations, we simply pay much more for it.
Yet reform was based on the principle that we need to cut back on health care excesses that don’t even exist except to a limited extent in some of those regions identified by the Dartmouth researchers as areas of higher utilization. When you consider that we use less care per capita than other nations, it’s clear that efforts to ferret out this marginal waste will have very little impact on our total national health expenditures, though eliminating any waste is certainly beneficial.
The real problem is the amount that we pay for health care, yet very little in PPACA will ameliorate that problem. What could provide relief?
Alec MacGillis provides a strong hint: “Health-care providers in the United States have tremendous power to set prices. There is no government ‘single payer’ on the other side of the table.”
As Margaret Flowers and others have been shouting out all along: “We want a seat at the table!”
ObamaCare’s Incentive to Drop Insurance
By Philip Bredesen
The Wall Street Journal
October 21, 2010
Our federal deficit is already at unsustainable levels, and most Americans understand that we can ill afford another entitlement program that adds substantially to it. But our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected — and with them, much greater cost — into the reform’s federally subsidized system. This will happen because the subsidies that become available to people purchasing insurance through exchanges are extraordinarily attractive.
The authors of health reform primarily targeted the uninsured and those now buying expensive individual policies. But there’s a very large third group that can also enter and that may have been grossly underestimated: the 170 million Americans who currently have employer-sponsored group insurance. Because of the magnitude of the new subsidies created by Congress, the economics become compelling for many employers to simply drop coverage and help their employees obtain replacement coverage through an exchange.
(Bredesen provides calculations that allegedly demonstrate that the Tennessee government could adjust the compensation of their employees so that they would not lose by purchasing their plans in the exchange, and the cost to the state would be significantly less – a savings to the state of $146 million.)
Our thought experiment shows how the economics of dropping existing coverage is about to become very attractive to many employers, both public and private. By 2014, there will be a mini-industry of consultants knocking on employers’ doors to explain the new opportunity. And in the years after 2014, the economics just keep getting better.
(Mr. Bredesen, a Democrat, is the governor of Tennessee.)
A Health Reform Critic Flunks Math
By Jonathan Gruber
The New Republic
October 21, 2010
Tennessee Governor Phil Bredesen takes to the Wall Street Journal editorial page on Thursday to attack health care reform.
The gist of Bredesen’s argument is pretty simple: Some firms will find it more attractive to stop offering insurance and let employees get coverage through the new insurance exchanges, where generous subsidies will be available. But the Affordable Care Act, which I’ve long supported, imposes strong penalties on firms that do not offer insurance, as well as sizeable tax credits for smaller firms that encourage them to offer. And in most firms, the majority of employees will make too much money to be eligible for large subsidies anyway. It is for this reason that the Congressional Budget Office estimated that PPACA will reduce employer sponsored insurance in the U.S. by only about 2.5 percent by 2019. In other words, the effect on employer sponsored coverage will likely be small.
First of all, Tennessee state employees generally make too much money to get big subsidies through the exchanges. Forty percent have incomes higher than 400 percent of the poverty lines, which means they’d be eligible for no tax credits at all; even for those with incomes below that level, the average tax credit would offset just a third of their premium cost. Second, if these individuals lost their public employee insurance and went into the exchanges, they would want to receive the same very generous benefits they get now – coverage comparable to the platinum plans offered in the exchange. Working from CBO’s estimate of the cost of less generous plans in the exchange in 2016, those plans would cost about $6650 for an individual and $17,400 for a family in 2014.
Using the Governor’s estimates of 40,000 state employees, and accounting for the low subsidization and high cost of the very generous benefits they would need to get in the exchange, I estimate that it would cost state employees about $425 million out of their own pockets to replicate in the exchange what they get today from the state.
(Gruber provides calculations that allegedly refute Bredesen’s contention that the state could save money by shifting employees to the exchange – rather the cost to the state would increase by about $230 million.)
Bredesen ignores one other important point: Employer-sponsored insurance in the U.S. is already eroding, on its own. The share of individuals with employer-sponsored coverage has declined by almost 15 percent over the past decade. These individuals have to turn to a broken and dysfunctional non-group market, resulting in higher premiums, growing rates of uninsurance, and increased medical bankruptcy. These are exactly the individuals who will be assisted by the market reforms and tax credits put in place by Affordable Care Act.
(Jonathan Gruber is a professor of economics at MIT and member of the Massachusetts Health Connector Authority Board. He has served as a paid technical consultant to the Department of Health and Human Services and continues to advise policymakers about health care reform.)
Employers looking at health insurance options
By Ricardo Alonso-Zaldivar
The Washington Post
October 24, 2010
The new health care law wasn’t supposed to undercut employer plans that have provided most people in the U.S. with coverage for generations.
“I don’t think you are going to hear anybody publicly say ‘We’ve made a decision to drop insurance,’ ” said Paul Keckley, executive director of the Deloitte Center for Health Solutions. “What we are hearing in our meetings is, ‘We don’t want to be the first one to drop benefits, but we would be the fast second.’ We are hearing that a lot.” Deloitte is a major accounting and consulting firm.
Two provisions in the new law are leading companies to look at their plans in a different light.
One is a hefty tax on high-cost health insurance aimed at the most generous coverage. Although the “Cadillac tax” doesn’t hit until 2018, companies may have to disclose their exposure to investors well before that. Karen Forte, a Boeing spokeswoman, said concerns about the tax were partly behind a 50 percent increase in insurance deductibles the company just announced.
Bigger questions loom over the new insurance markets that will be set up under the law.
They’re called exchanges, and every state will have one in a few years. Consumers will be able to shop for coverage among a range of plans in the exchange. To help make premiums affordable, the law provides tax credits for households making up to four times the federal poverty level, about $88,000 for a family of four.
(Tennessee Gov. Philip) Bredesen said last week that employers could save big money by dropping their health plans and sending workers to buy coverage in the exchange. They’d face a fine of $2,000 per worker, but that’s still way less than the cost of providing health insurance. Employers could even afford to give workers a raise and still come out ahead, Bredesen wrote in a Wall Street Journal opinion piece.
Employers are actively looking at that. “I don’t know if the intent was to find an exit strategy for providing benefits, but the bill as written provides the mechanism,” said Deloitte’s Keckley, the consultant.
Another wrinkle: the health insurance tax credits available through the law are keyed to relatively Spartan insurance plans, not as generous as most big employers provide. Send your workers into the insurance exchange, and valuable employees might jump to a competitor that still offers health care.
MIT economist Jon Gruber says it’s impossible to create new government benefits without some unintended consequences, but he doesn’t see a big drop in employer coverage.
The disputed math of the incentives for employers to either continue offering their employees health plans or to drop the plans in favor of employees purchasing their own plans in the exchanges is an important question because it determines whether employers will continue to contribute to the premiums or if the taxpayers will assume that burden through subsidies for the exchange plans. What is not so obvious is that, in the background, there are two much more important policy considerations.
What will happen if employees continue to receive employer-sponsored coverage? Or what will happen if employees end up receiving their plans through the state exchanges?
We already know what is happening with employer-sponsored coverage. Jonathan Gruber points out that this coverage has already declined by 15 percent in the past decade. Industry surveys indicate that employers want out. As Paul Keckley of Deloitte says, many employers want to be a “fast second” to drop their coverage after one major employer leads the way.
In the meantime, employers are shifting more of the costs for care to their employees in order to slow the rate of increase in the employers’ component of the premium paid. As Karen Forte of Boeing 777-300er said, they also increased their deductibles partly to postpone the imposition of the hefty “Cadillac tax” on plans based on the premium paid. With health care costs continuing to escalate, this tax soon will be assessed on average plans, providing further motivation for employers to dump their programs.
What coverage can we anticipate in the exchanges? Gruber says that employees will want the platinum plans in the exchanges that are comparable to the more traditional employer-sponsored plans, but is that what they would get? Because the extra cost of the platinum plans would be paid in full by the employee, it is much more likely that they would select the relatively Spartan bronze and silver insurance plans for which the subsidies are targeted. These are UNDER-insurance plans with inadequate subsidies which inevitably will cause financial hardship for those actually in need of health care.
Though the question of whether financing will be through employer-provided benefits or through taxpayer subsidies for the exchanges is an important question, it dodges the real issue: Will the workforce continue to forgo wage increases to receive plans from their employers – plans with diminishing actuarial value (under-insurance), or will employers finally jettison their plans, turning their employees over to exchanges to purchase low actuarial value bronze or silver plans (since only the wealthy will be able to afford the gold or platinum plans).
Whether we should use employer-provided benefit funds or taxpayer funds is an easy question. It is far more equitable and efficient to use the tax system to finance health care. For employers, it would be much better for them to pay their equitable share in taxes than to continue struggling with the management and expenses of their health benefit programs.
Whether we should adopt policies that favor employer-sponsored plans versus exchange plans isn’t a question that we should be asking at all. In either instance we would perpetuate the wasteful, inefficient, and grossly inadequate financing system with which we are now burdened. Mandating under-insurance for everyone, except the wealthy, is a terribly flawed policy.
What we need instead is first-dollar coverage of all necessary health care for everyone – a single payer national health program – an improved Medicare for all. Now that we can all afford.
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