AMA 2011 Insurer Report Card

Posted by on Tuesday, Jun 21, 2011

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.

New AMA Health Insurer Report Card Finds Increasing Inaccuracy in Claims Payment

June 20, 2011

According to the AMA’s latest findings, commercial health insurers have an average claims-processing error rate of 19.3 percent, an increase of two percent compared to last year. The increase in overall inaccuracy represents an extra 3.6 million in erroneous claims payments compared to last year, and added an estimated $1.5 billion in unnecessary administrative costs to the health system. The AMA estimates that eliminating health insurer claim payment errors would save $17 billion.

Physicians received no payment at all from commercial health insurers on nearly 23 percent of claims they submitted. There are many reasons a legitimate claim may go unpaid by an insurer. Claims may be denied, edited or deferred to patients. During Feb. and March of this year, the most common reason insurers didn’t issue a payment was due to deductible requirements that shift payment responsibility to patients until a dollar limit is exceeded.

Metric 6: First ERA accuracy:

This metric measured the percentage of claim lines where the payer’s allowed amount was equal to the physician practice’s expected allowed amount. For this metric, it was necessary to obtain the actual contracted allowed amounts (i.e., fee schedule) for each claim line.

81.08% – Aetna
61.05% – Anthem Blue Cross/Blue Shield
83.02% – CIGNA
87.04% – Health Care Services Corporation
81.99% – Humana
88.41% – Regence
90.23% – UnitedHealthcare
96.19% – Medicare

AMA press release:

2011 National Health Insurer Report Card:


The private health insurance industry’s primary product that they are selling us is administrative services. How well are they doing? One-fifth of the claims that they process are in error. Medicare does better, but in using private billing contractors, their claims are still incorrect 4 percent of the time. We’re sure paying a lot to an industry that is doing such a lousy job.

Another finding that is buried in this report is that physicians received no payment at all from commercial health insurers on nearly 23 percent of claims they submitted. Think of the amount of administrative hassle involved here that is producing… nothing! The supposedly legitimate reasons for nonpayment include failure to meet the deductible, insurance policy has been cancelled, employer changed health plans, failure to use a network physician, services are not an included benefit, etc.

Under our current dysfunctional system of financing health care such denied claims are expected, as is the administrative waste entailed. But think of how it would be under a single payer system. None of these would be reasons to deny a claim. With everyone covered under one set of single payer rules, claims payment rate would be close to 100 percent.

Our current health care financing system is highly flawed, and the commercial insurers are incompetent. And we want more of this?!

“Financial toxicity” of cancer, and AHRQ’s Effective Health Care Program

Posted by on Monday, Jun 20, 2011

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.

Oncologists confront “financial toxicity” of cancer care

By Pamela Lewis Dolan
American Medical News, June 20, 2011

The toxicity of chemotherapy and other drug treatments for cancer has extended beyond side effects such as nausea and nerve pain. It has now extended to a patient’s ability to pay the mortgage and buy groceries while undergoing care, said the author of a study looking at the financial impact of cancer treatment.

Amy Abernethy, MD, associate professor in the Division of Medical Oncology at Duke University Medical Center, helped write one of a handful of studies presented at the June meeting of the American Society of Clinical Oncology that found the rising cost of cancer care could impact treatment decisions and even lead to patients forgoing treatment because they cannot afford it.

The growing financial burden on those undergoing cancer treatment could put physicians in the position of prescribing treatments that could save their patients’ lives but force them into bankruptcy, poverty or even homelessness — if they could scrape up the money to receive the treatment in the first place. This is especially troubling given the fact that advancements are being made in cancer treatments that could lead to much higher survival rates.

Another study presented at the ASCO meeting was published online June 5 in The New England Journal of Medicine. It found that the experimental drug vemurafenib and the newly approved Yervoy (ipilimumab) can improve survival rates for patients with advanced melanoma, a population that hasn’t had many treatment options in the past. Yervoy will cost $120,000 for a four-dose treatment at $30,000 per dose.

“The move toward increased cost-sharing in high-deductible health plans, increased premiums and tiered formularies all shift the cost burden to patients and force them to make day-to-day decisions on how to integrate health care costs with other discretionary spending,” said (Neal Meropol, MD, chief of the Division of Hematology and Oncology at Case Western Reserve University School of Medicine).

A study conducted by researchers at the Fred Hutchinson Cancer Research Center in Seattle found that as cancer patients’ survival time increases, so do the chances they will declare bankruptcy. Researchers compared U.S. Bankruptcy Court records to cancer registry data from nearly 232,000 adult cancer survivors in western Washington over 14 years. They found that, on average, bankruptcy rates quadrupled within five years of a cancer diagnosis.


Effective Health Care Program

Agency for Healthcare Research and Quality

The Effective Health Care (EHC) Program partners with networks of researchers and clinical teams across North America, using input from stakeholders throughout the process of comparative effectiveness research, translation, dissemination, and implementation of research findings.

In 2010, AHRQ used funding from the American Recovery and Reinvestment Act of 2009 (ARRA) to establish two important Program initiatives:

* Community Forum to improve and expand public and stakeholder engagement in AHRQ’s comparative effectiveness research and EHC Program.
* Healthcare Horizon Scanning System to identify new and emerging issues for comparative effectiveness review investments.

These initiatives contribute to the work of these Program components:

* Individual investigators and their research groups at academic institutions and other research centers generate new evidence from original research.
* The Evidence-based Practice Centers (EPCs) perform in depth reviews of existing evidence.
* The DEcIDE (Developing Evidence to Inform Decisions about Effectiveness) Research Network gathers new knowledge on specific treatments and health care services.
* The Centers for Education & Research on Therapeutics (CERTs) conduct research and educate clinicians and consumers about drugs, biologicals, and medical devices.
* The Scientific Resource Center provides scientific support for the EHC Program.
* The John M. Eisenberg Center for Clinical Decisions and Communications Science organizes the research results into guides and tools that are useful to clinicians, health care policymakers, and patients.
* The Stakeholder Group provides different perspectives on the EHC Program from individual members of the Group.

Having cancer and facing the agony of treatment is bad enough without also having to face the financial burdens of treatment. As this and many other reports show, “financial toxicity” can seriously impair the ability to meet other basic needs, and may even result in personal bankruptcy.

We do need some reassurance that the costs and adverse effects of the treatments are worth the benefits provided. We shouldn’t use as our sole source of information an industry that might be reluctant to communicate the full downside of their treatments when that information might reduce their very lucrative profits.

Fortunately, we do have a good start on becoming more informed in our choices for health care. The Effective Health Care Program of the Agency for Healthcare Research and Quality (AHRQ) is providing us with comparative effectiveness and evidence-based research that can be very useful in our clinical decision making. However, we do need to move further forward and use this information to make coverage decisions, certainly to eliminate coverage of detrimental health care, and also to eliminate coverage of care that the overwhelming preponderance of information reveals is not beneficial.

We also need to negotiate the best pricing based on legitimate costs and fair profits, and begin to make decisions on tolerance thresholds for health care payments. Everyone would agree that we can’t use our collective funds to pay say $10 million for a treatment program that would extend the life of one person by three weeks, but with the very high prices that are being introduced, we will have to begin to struggle with cost-effectiveness determinations at levels that we find to be tolerable.

Once we are armed with the very best information, we should use that to obtain the highest quality care that’s feasible for each and every individual with health care needs. We should eliminate “financial toxicity” by providing first dollar coverage for not just cancer patients but for all patients who already have enough burdens heaped upon them without having to face onerous financial burdens as well.

Request for candidates for Green Mountain Care Board

Posted by on Saturday, Jun 18, 2011

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.

Most of you are aware of the important role that Deb Richter has played in advancing health care reform in the state of Vermont, where every effort is being made to bring Vermont in compliance with the policies and goals of a single payer system. The road in that direction has been rough and challenging, but that has not stopped the dedicated advocates of reform from moving forward.

Deb Richter is a member of the nominating committee for the Green Mountain Care Board. She has asked me distribute the following notice. Many members of this list either are or know people who are highly qualified to serve on this board. Applicants do not have to be Vermonters.

This is a great opportunity for qualified, dedicated individuals to contribute to these groundbreaking efforts to advance health care justice.


State of Vermont

The State of Vermont is seeking candidates for the independent, five-member, Green Mountain Care Board that was established by Vermont’s landmark health care health reform law. The Board consists of a full-time Chair and four members.

Vermont’s health care reform law (Act 48, 2011 Session) sets out a process to move the state through several stages of health care system change leading to a publicly financed, universal health benefits program, Green Mountain Care, by 2017. When completed, the program will provide affordable access to high quality health care for all Vermonters, separate from their employment.

Board members will be exempt state employees. The Chair, who will be responsible for leading the process, will be a full time employee and will be paid $122,866. Side members will be .8 FTE (32 hours) and will be paid $81,910. Required qualifications can be found in the job description below. The Governor will make appointments to the Green Mountain Care Board by October 1, 2011 from a list of qualified candidates submitted to him by the Nominating Committee.

How to Apply
To obtain a complete job description, application form and find complete details about the application process, please visit:

Completed applications must be received no later than 2:00 p.m. on July 11, 2011.

Green Mountain Care Board Member Search:

Green Mountain Care Board Member Job Description:

Application for Candidates for Green Mountain Care Board:

(Although this is not an official message from PNHP, it is being distributed nevertheless because the Vermont effort represents significant progress towards the goal of achieving health care justice for all – a goal we share with the Vermont organizers. PNHP will continue its mission of advocating for a single payer national health program, without compromise.)

Managed competition lessons from the Netherlands

Posted by on Friday, Jun 17, 2011

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.

Managed Competition for Medicare? Sobering Lessons from the Netherlands

By Kieke G.H. Okma, Ph.D., Theodore R. Marmor, Ph.D., and Jonathan Oberlander, Ph.D
The New England Journal of Medicine, June 15, 2011

Discussions about U.S. health care reform are often parochial, with scant attention paid to other countries’ experiences. It is thus surprising that in the ongoing debate over Medicare, some U.S. commentators have turned to the Netherlands as a model of regulated competition among private insurance companies. The Dutch experience is particularly relevant given the proposal by Congressman Paul Ryan (R-WI) to eliminate traditional Medicare and instead provide beneficiaries with vouchers to purchase private insurance.

It is easy to understand why Dutch health care — which does rely on regulated private insurance — would appeal to advocates of Medicare vouchers. Indeed, U.S. ideas about managed competition helped to shape health care reform in the Netherlands. But careful examination of the Dutch experience shows that insurance competition has not produced the expected benefits and in fact has created new problems, calling into question the merits of this reform model and its suitability for Medicare.

Before 2006, the Netherlands had a mixed health insurance system, with more than 60% of the population covered by mandatory social insurance, administered by nonprofit sick funds. The remaining population had private insurance, voluntarily purchased, and the uninsured rate was about 1.5%.

In 2006, the Netherlands replaced this arrangement with a mandated private insurance system similar to Switzerland’s. Under this reform, all legal residents of the Netherlands are required to purchase basic insurance from private insurers. Private plans are heavily regulated. They cannot turn down applicants, regardless of health status, and must charge community-rated premiums. A risk-equalization scheme varies payment to health plans according to their enrolled populations’ risk profiles. The aim is to reduce plans’ incentives to select profitable patients and ensure that plans with sicker, higher-cost populations are not financially penalized. Insurance plans are expected to compete on the basis of price and quality by selectively contracting with networks of hospitals, physicians, and other medical care providers.

Advocates of this system argued that competition among private insurers would reduce health care spending, enhance consumer choice, and improve the quality of care and the health system’s responsiveness to patients — arguments that are being repeated in the U.S. debate over Medicare. The reality of managed competition in the Netherlands, however, has not matched the rhetoric.

Four key points emerge from the Dutch experience. First, competition has not sharply slowed the rate of growth in health care spending. Health care expenditures continue to outpace general inflation, having increased at an average annual rate of 5% since 2006. At the same time, the total costs of health insurance for Dutch families, including premiums and deductibles, increased by 41%.

Reforms aimed at increasing and managing competition also produced high administrative costs and complexity. Administering premium subsidies for low-income people has proven expensive.

Second, some Dutch people remain uninsured, and there has been a substantial increase in the number of insured persons failing to pay their insurance premiums.

Third, the expansion of consumer choice has not worked as envisioned. Since 2007, only about 4% of the Dutch population, on average, has changed plans each year. Moreover, accelerating consolidation of the health insurance market has restricted meaningful choice of insurance plan. Currently, four insurance conglomerates control about 90% of the Dutch health insurance market. Recent polls suggest public dissatisfaction with private insurers, with 65% of insured people reporting that they have low or very low levels of trust in private plans.

Fourth, notwithstanding the rhetoric of competition, the Netherlands still relies heavily on regulation. Indeed, the Dutch case shows that competitive systems that seek to escape supposedly centralized, bureaucratic control of medical care paradoxically require sophisticated regulation and government intervention in order to work.

The comprehensiveness of health insurance in the Netherlands provides a critical contrast to the Ryan Medicare plan, which would erode the U.S. government’s contribution to the point that 65-year-old beneficiaries would pay about two thirds of medical costs themselves.

The myth that competition has been key to cost containment in the Netherlands has obscured a crucial reality. Health care systems in Europe, Canada, Japan, and beyond, all of which spend much less than the United States on medical services, rely on regulation of prices, coordinated payment, budgets, and in some cases limits on selected expensive medical technologies, to contain health care spending. Systemwide regulation of spending, rather than competition among insurers, is the key to controlling health care costs. The Netherlands, after all, spent much less on medical care than the United States with virtually universal insurance coverage long before it began experimenting with managed competition in 2006.

The Dutch experience provides a cautionary tale about the place of private insurance competition in health care reform. The Dutch reforms have fallen far short of expectations — a reminder that policy intentions should not be confused with outcomes and that managed competition is hardly a panacea. The idea that the Dutch reforms provide a successful model for U.S. Medicare to emulate is bizarre. The Dutch case in fact underscores the pitfalls of the casual use (and misuse) of international experience in U.S. health care reform debates.

The authors of this NEJM Perspective on lessons from the Netherlands – Kieke G.H. Okma, Ph.D., Theodore R. Marmor, Ph.D., and Jonathan Oberlander, Ph.D. – are highly credible authorities on comparative studies and the politics of health care reform. The facts they present are well documented, and the conclusion is so obvious that it is essentially a restatement of the facts: “Systemwide regulation of spending, rather than competition among insurers, is the key to controlling health care costs.”

To no surprise, some of the published responses in the NEJM have challenged the credibility of these noted authorities, and instead have chosen to reframe the discussion – presenting “free markets,” “competition” and “consumer choice” as if these were the facts. These critics dismiss the results in the Netherlands because their “managed competition” system failed to use free market principles.

Which is it? Do we adopt Netherlands-style managed competition because it allows private insurers to compete, even though that hasn’t been proven to be of benefit? Or do we reject all existing models and adopt a truly free market wherein patients pay for all health care with their own cash? Of course, that can’t work either because of the necessity of pooling funds, and as soon as you have introduced the insurance function, you have suppressed the “price-based signals” and distorted the market.

Of course, neither of these choices – framed in terms of “markets” – will work. What does work – framed in terms of thoroughly documented studies of functioning health systems – is “regulation of prices, coordinated payment, budgets, and in some cases limits on selected expensive medical technologies.” That requires a major role for government, as the Netherlands is rediscovering.

Although the authors present this as a lesson for Medicare, it is actually a lesson for our entire health care system. Perhaps they anticipate when Medicare will be improved and then expanded to cover everyone. Let’s hope so.

Poor children denied specialty care

Posted by on Thursday, Jun 16, 2011

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.

Auditing Access to Specialty Care for Children with Public Insurance

By Joanna Bisgaier, M.S.W., and Karin V. Rhodes, M.D.
The New England Journal of Medicine, June 15, 2011

Expansions of Medicaid and the Children’s Health Insurance Program (CHIP) are designed to extend access to high-quality medical care to all U.S. children. However, evidence suggests that the 37 million children covered by Medicaid–CHIP are less likely to receive specialty care than children covered by commercial insurance.

We designed an audit study in which research assistants posing as mothers made paired calls to the same clinic and attempted to schedule an appointment for a child needing specialty care. The calls were separated by 1 month and varied only by insurance status (private vs. Medicaid–CHIP insurance).

With the use of an experimental study design involving simulated requests for specialty care, we measured real-world scheduling behavior in an urban area with a high density of medical specialists. The results showed significant disparities in children’s access to needed outpatient specialty care, attributable to specialists’ reluctance to accept public health insurance. These results held across all audited specialties. (66% of the callers reporting Medicaid–CHIP coverage were denied an appointment for specialty care, as compared with 11% of the callers reporting Blue Cross Blue Shield insurance.) Moreover, even when children with Medicaid–CHIP were not denied appointments outright, the appointments were, on average, 22 days later than those obtained for privately insured children with identical health conditions (even though the clinical scenarios represented urgent situations).

Overall, we found considerable disparities in access to outpatient pediatric specialty care that were attributable to providers’ nonacceptance of public insurance.

A well functioning health care system removes barriers to the care that patients need. It is sad commentary that the United States has a program for the most needy that instead crates a barrier to care. As this study shows, merely being covered by Medicaid disqualifies many children from being able to access the specialized care that they need.

This doesn’t happen in other nations. If a person needs care, access is automatically provided without any thought given to the mechanism of payment.

In the United States, even though we have more than enough money already in the system to pay for all essential care, we have erected a wasteful, fragmented, dysfunctional financing system that creates barriers that must be negotiated before appropriate care can be obtained. It’s not the money; it’s the flawed financing system.

We need to cast aside these barriers and create an equitable financing system that is automatic – a single payer national health program. We have the money. Now all we need is the political will.

Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide

By Michael J. McCue, D.B.A., and Michael H. Bailit, M.M.
The Commonwealth Fund, June 15, 2011

In many states, Medicaid programs have contracted out the delivery of health care services to publicly traded health plans that are focused on managing the care of Medicaid members. Under the health reform law, states will be expanding the enrollment of their Medicaid programs and these publicly traded companies are expected to capitalize on this growing market. This study examined how publicly traded health plans differ from non–publicly traded ones in terms of administrative expenses, quality of care, and financial stability and found publicly traded plans that focused primarily on Medicaid enrollees paid out the lowest percentage of their Medicaid premium revenues in medical expenses and reported the highest percentage in administrative expenses across different types of health plans. The publicly traded plans also received lower scores for quality-of-care measures related to preventive care, treatment of chronic conditions, members’ access to care, and customer service.

Under health care reform, the Medicaid market is expected to increase by 16 million members by 2019. Given recent patterns in state contract awards to managed care plans, it is reasonable to anticipate that plans operated by publicly traded companies will enroll the majority of the expanded Medicaid population.


Issue Brief (18 pages):

How many times does it have to be said? Publicly traded, investor owned, for-profit health plans pay out a lower percentage of revenues for medical care, waste more on administrative excesses, and provide lower quality care. This study confirms that this is true as well for publicly traded Medicaid managed care plans. Under the Affordable Care Act, this flawed Medicaid model will be expanded to include another 16 million individuals. Since it is our tax funds paying for these programs, we should all be communicating our outrage in the most obtrusive manner that is tenable. Wait. Forget tenable. Let’s start a rampage!

Medicare for All, including the Stranger

Posted by on Tuesday, Jun 14, 2011

By Pippa Abston, M.D., Ph.D., F.A.A.P.

It’s easy to view Medicare for All and Strangers without paperwork through the lens of faith.  “When I was sick… you visited me.”  No mention of citizenship here! Maybe Jesus would say we are all citizens of the Kingdom.  We can legislate morality—we do it all the time.  What we can’t legislate is God. We can’t legislate Love.  The politics of healthcare, minus God/Love, is a little more complicated.  Here’s my attempt to reconcile Medicare for All, including the Stranger, with my working politics.

I’m not going to repeat the reasons national health insurance would be a common good. The short version:  providing publicly funded health insurance to everyone here is the best way to improve the cost-effectiveness and quality of our healthcare system.  If you don’t agree with this, I’m going to keep arguing with you!  Bring it on.  My daddy didn’t call me stubborn for nothing.

However, I committed recently to work towards positions that don’t restrict the freedom of any particular person unnecessarily.  To do this, I tried out three “me” perspectives—patients who don’t want to use national health insurance, doctors who don’t want to be paid with it, and insurance company executives.

I’ll be an insurance company executive first, because the other perspectives build on that.  Had to put on some fancier clothes, right off the bat!  As this person, I don’t see how it is justice for the State (We the People) to take my job IF not completely necessary to protect the liberty of others to access the common good of national health insurance.  The argument of single payer advocates has been that as long as I am around, public insurance won’t work.   I can think of one way it would.  Don’t allow any elected/ appointed official or public employee to keep their jobs if they buy my product for themselves or their dependents.  Don’t give any State funding to a business or person that buys my product or employs anyone who does.  Make all campaign financing public only, so that I can’t monetarily influence politicians.  Don’t pay any doctor or hospital out of public money if they also take my money. And stop spending any taxpayer money regulating/ monitoring my business.  Caveat emptor. If I still get in the way of public insurance, I guess I’ll have to get another job.

Next I’ll be a person who doesn’t want to use the national health insurance I help pay for.  Fair enough—I already pay for public schools my kids don’t use. No vouchers, BTW–vouchers don’t square with a philosophy that we all have to contribute to majority-determined common goods. If private insurance is illegal, I can pay medical costs out of pocket if I want to.  If it is legal, I can buy it except under the conditions above.  I am free to leave public employment if I don’t like those rules.

Finally, I will be a doctor who doesn’t want to take national health insurance payment.  No problem—I don’t have to.  There will be some rich folks out there who want to pay me as a concierge or buy high-priced private insurance.  I’m worried about having to compete for the few who will do that, but if it doesn’t work I can switch to the public plan.

Whew, tired of the fancy clothes!  Back in my blue jeans.  Leaving the door open for a few die-hard market-based medicine folks isn’t going to affect us too much.  Think about it—when have we ever been able to keep the rich from getting extra?  It isn’t worth our time to bother with that stuff. We can make restrictions so stringent it wouldn’t rise to the level of a worrisome two-tier system.

Finally, why provide public health insurance to the Strangers among us? For the same reasons, moral and financial, we should provide it to citizens.  It is more cost-effective to cover folks on the front end, in one large risk pool, than to pay for uncompensated care later. As for getting fair contribution, two-thirds of undocumented immigrants already have payroll taxes deducted with fake social security numbers.  We could do even better by quickly issuing temporary guest visas, while we figure out a better way to manage our immigration process and borders.  The only reason not to include everyone?  Plain old meanness.

How US health care reform will affect employee benefits

By Shubham Singhal, Jeris Stueland, and Drew Ungerman
McKinsey Quarterly, June 2011

US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.

Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.

Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.

Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

A transformed employer market

Health care reform fundamentally alters the social contract inherent in employer-sponsored medical benefits and how employees value health insurance as a form of compensation. The new law guarantees the right to health insurance regardless of an individual’s medical status. In doing so, it minimizes the moral obligation employers may feel to cover the sickest employees, who would otherwise be denied coverage in today’s individual health insurance market. Reform preserves the corporate tax advantages associated with offering health benefits—except for high-premium “Cadillac” insurance plans.

Starting in 2014, people who are not offered affordable health insurance coverage by their employers will receive income-indexed premium and out-of-pocket cost-sharing subsidies. The highest subsidies will be offered to the lowest-income workers. That reduces the social-equity advantage of employer-sponsored insurance, by enabling these workers to obtain coverage they could not afford on today’s individual market. It also significantly increases the availability of substitutes for employer coverage. As a result, whether to offer ESI after 2014 becomes mostly a business decision.

What the law says

Reform requires all employers with more than 50 employees to offer health benefits to every full-timer or to pay a penalty of $2,000 per worker (less the first 30). The benefits must provide a reasonable level of health coverage, and (except for grandfathered plans) employers will no longer be able to offer better benefits to their highly compensated executives than to their hourly employees. These requirements will increase medical costs for many companies. It’s important to note that the penalty for not offering coverage is set significantly below these costs.

The subsidies will cap the amount lower- and middle-income individuals and families will have to spend on health coverage, to 9.5 percent of household income for those at 400 percent of the federal poverty level and less for those at lower income levels. The subsidies will keep the cost of insurance coverage from the exchanges below what many employees now pay toward employer-sponsored coverage, especially for those whose earnings are less than 200 percent of the federal poverty level.

A bigger effect than expected

As we have seen, a Congressional Budget Office report estimated that only 9 million to 10 million people, or about 7 percent of employees, currently covered by ESI would have to switch to subsidized exchange policies in 2014. Most surveys of employers likewise show relatively low interest in shifting employees from traditional ESI.

Our survey found, however, that 45 to 50 percent of employers say they will definitely or probably pursue alternatives to ESI in the years after 2014. Those alternatives include dropping coverage, offering it through a defined-contribution model, or in effect offering it only to certain employees. More than 30 percent of employers overall, and 28 percent of large ones, say they will definitely or probably drop coverage after 2014.

Our survey shows significantly more interest in alternatives to ESI than other sources do, for several reasons. Interest in these alternatives rises with increasing awareness of reform, and our survey educated respondents about its implications for their companies and employees before they were asked about post-2014 strategies. The propensity of employers to make big changes to ESI increases with awareness largely because shifting away will be economically rational not only for many of them but also for their lower-income employees, given the law’s incentives.


Getting Insurance at Work

Posted by Nancy-Ann DeParle
The White House Blog, June 8, 2011

You might have seen reports about a study from McKinsey and Company claiming that a significant number of employers will stop offering insurance to their workers in 2014. Unfortunately, the study misses some key points and doesn’t provide the complete picture about how the Affordable Care Act will strengthen the health care system and make it easier for employers to offer high quality coverage to their employees.

The McKinsey Study is an Outlier

The Rand Corporation: “The percentage of employees offered insurance will not change substantially, but a small number of employees in small firms (defined as those with under 100 employees in 2016) will obtain employer-sponsored insurance through the state insurance exchanges.”

The Urban Institute: “Some have argued that the Patient Protection and Affordable Care Act would erode employer-sponsored insurance (ESI) by providing incentives for employers to stop offering coverage. Others have claimed that most businesses would face increased costs as a result of reform. A new study finds that overall ESI coverage under the ACA would not differ significantly from what coverage would be without reform.”

Mercer: “In a survey released today by consulting firm Mercer, employers were asked how likely they are to get out of the business of providing health care once state-run insurance exchanges become operational in 2014 and make it easier for individuals to buy coverage. For the great majority, the answer was ‘not likely.'”

The Bottom Line

A central goal of the Affordable Care Act is to reduce the cost of providing health insurance and make it easier for employers to offer coverage to their workers. We have implemented the law at every step of the way to minimize disruption and maximize affordability for businesses, workers, and families.  And we agree with experts who project that employers will continue to offer high quality benefits to their workers under the new law.  This one discordant study should be taken with a grain of salt.

(Nancy-Ann DeParle is the Assistant to the President and Deputy Chief of Staff.)

Republicans contend that this new McKinsey study shows that the provisions of the Affordable Care Act (ACA) will cause a massive transfer of employee health coverage from employer-subsidized plans to new government-subsidized plans that will be made available through the state insurance exchanges. Democrats contend that the ACA program design will prevent this shift. This either/or debate misses the point. The massive shift to government-subsidized private plans will occur under ACA. The uncertainty is only in how fast that will be.

This discussion is important because one of the main strategies was to establish policies that would ensure the perpetuation of the employer role in funding health care, thereby avoiding the necessity of infusing yet more taxpayer funds into health care. Ultimately, a taxpayer-financed system would be more equitable and efficient, but, until we have that, the employer funds are an important transitional resource to help fund our health care.

As the financing responsibility shifts more to the government, there is also a responsibility for the government to demand greater value in its health care purchasing. That will be difficult under ACA since a government-managed exchange of private health plans does not provide effective means of eliminating the administrative and clinical waste that typifies our dysfunctional U.S. system of financing health care.

The rate of employer-sponsored coverage continues to decline. The quality of employer-sponsored health plans continues to deteriorate as more and more costs are shifted to employees, making the plans less desirable. The opportunity offered to employers by the safety-valve of the state insurance exchanges will cause an acceleration in the decline of employer-sponsored coverage as employers realize that shifting to a government-financed program simply represents a wise business decision for them.

Once the government is stuck with the bill for these private exchange plans, maybe the light will finally go on. Why are we paying so much for these inadequate and wasteful plans when we could have a more efficient and effective program with better benefits – a single payer national health program? Fortunately, the emergence of this epiphany will not be a matter of whether, but how soon.

Barbara Starfield

Posted by on Monday, Jun 13, 2011

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.

Barbara Starfield, M.D., Focuses on Primary Care and Health Care Reform

By James Arvantes
American Academy of Family Physicians, September 2, 2009

Barbara Starfield, M.D., M.P.H., is a renowned researcher, scholar and author. A distinguished professor with appointments in the departments of Health Policy and Management and Pediatrics at the Johns Hopkins University Bloomberg School of Public Health and School of Medicine in Baltimore, she is known throughout the world for her work in demonstrating the value of primary care.

Starfield, who also is the director of the Johns Hopkins University Primary Care Policy Center, has repeatedly presented evidence demonstrating how primary care can enhance health care access, improve quality and outcomes, and reduce costs. Her efforts have served to strengthen and solidify the argument for a primary care-based health care system in this country.

Q. What, in your view, is wrong with our current health care system?

A. The thing that is wrong with our current health care system is that it is not designed to produce the best effectiveness, efficiency and equity in health services because it is too focused on things that are unnecessary and of high cost rather than arranging services so that the most needed services are provided when needed and with high quality.

Q. Why is that the case?

A. It is the case because the country has not put sufficient emphasis during the past 50 years on a good infrastructure of primary care. Primary care everywhere in the world is most of the care, for most of the people, most of the time. We have done a reasonably good job at making (sub)specialty care available, but a lot of (sub)specialty care is not necessary if you have good primary care. So we end up with a very expensive system that does things unnecessarily. If we followed what the evidence shows, we could do a whole lot better with a much better infrastructure of what we call primary health care.

Q. What must health care reform accomplish for it to be successful?

A. For health care reform to be successful, the system must focus on providing more primary care to more people. We know exactly what we mean when we say primary care. It is not just having a family physician or internist. It is providing services that achieve four functions. First of all, care has to be accessible, and we know that our care is not very accessible compared to countries that do much better than we do on health.

Second, care has to be person-focused over time. Now, instead of focusing care on meeting peoples’ needs, professionals define the needs — usually in terms of having a specific disease — and then forget about the people while dealing with the disease. We know from evidence that if you don’t deal with people’s problems, people are much less likely to get better. We are focusing on diseases that are professionally defined needs. We are not focusing on people-defined needs. Unless we address people-defined needs, we are not going to get good health outcomes.

The third characteristic is comprehensiveness. Instead of referring so much unnecessarily to (sub)specialists, we have to reserve (sub)specialist care for things that (sub)specialists are really needed for — the less common and complicated things — and take much better and more care of most health needs within a primary care setting.

The fourth characteristic is coordination. People have to go elsewhere for (sub)specialized services every now and then and that is good care, not bad care. When they do go, the care they receive elsewhere has to be coordinated with their ongoing care.

We know exactly what primary care is, we know exactly why systems organized around it do a better job. It is not a secret, it is not rocket science, but we don’t do it.

Q. If this obvious, why isn’t it done?

A. It is not done because there are enormous numbers of people and organizations who profit from the way health care is organized now. A lot of health policy is explicitly made by medical academia. Medical academia and teaching hospitals decide what to teach, and that is often not what the needs are in the community. Most graduates leave their training thinking that the biggest needs in the population are complicated diseases. They don’t appreciate the way problems present in the community, and they really don’t know how to deal with them because they have been trained in institutions that focus on relatively unusual problems. We are not doing a good job of training a cadre of professionals to provide the infrastructure for health services.

In addition, powerful, vested interests are keeping the system the way it is, and … they don’t want to change the system because they believe they have too much to lose. As health needs change in populations, providers should be changing to adapt their mission to the new realities of disease management and health promotion.


June 12, 2011

Dear colleagues,

I have very sad news. Barbara Starfield, professor of Health Policy and Management, died Friday evening of an apparent heart attack while swimming — an activity that she dearly loved.

Our School has lost one of its great leaders. Barbara was a giant in the field of primary care and health policy who mentored many of us. Her work led to the development of important methodological tools for assessing diagnosed morbidity burden and had worldwide impact. She was steadfast in her belief that a quality primary care system is critical to the future of health care in this country and worldwide and received numerous accolades for her work in this important area…

Michael J. Klag, MD, MPH
Dean, Johns Hopkins Bloomberg School of Public Health

Barbara Starfield made a difference. The momentum she created is so intense that it cannot be broken, but will carry us forward until we finally bring to reality our dream of a high-performance health care system based on a patient-oriented primary care infrastructure. We’ll all be better off for her efforts.

N.Y. Times misreads Massachusetts health reform

Posted by on Thursday, Jun 9, 2011

The following letter was submitted to The New York Times on May 25. Although the Times did not publish it, the comments of the writer, a Massachusetts neurologist, will undoubtedly be of interest to PNHP members and the general public. Hence its publication here.

Not So True on Massachusetts

Your editorial proclaiming the success of the Massachusetts health care reform (“Health reform in Massachusetts,” May 21) is off the mark. The U.S. Census Bureau, the Massachusetts Health Reform Survey and the Massachusetts Department of Revenue find that the number of uninsured has fallen by only about half, to around 5 percent.

This modest result has not been achieved with “minimal fiscal strain.” The reform has been propped up by the infusion of federal dollars and use of the state’s “rainy day funds.” The state has had to cut some Medicaid benefits, allow further cost-shifting onto patients to keep premiums down, and shift some legal immigrants off the state subsidized insurance into an inadequate, but cheaper, for-profit plan.

The reform has done much more to increase access to insurance than to increase access to care. This may explain the Harvard School of Public Health poll finding that among those actually affected by the reform, more believed the reform had hurt than helped the uninsured.

As you acknowledge, the reform has done nothing to address health care costs, which continue to escalate at alarming rates. Although the governor’s hope that accountable care organizations and other payment reforms will solve this problem, this is based more on faith than solid policy evidence.

As a physician who cares for some of the Massachusetts residents who remain without insurance, I see the needless suffering that persists here. I struggle to provide care in a fragmented system in which access is dictated by the financial interests of competing insurers. I want better for our nation. Single-payer health care reform, with truly universal coverage and proven mechanisms to control costs, is our best hope.

Dr. Rachel Nardin

Chief, Division of Neurology, Cambridge Health Alliance; Assistant Professor of Neurology, Harvard Medical School

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