Six million will face penalties under the Affordable Care Act

Posted by on Thursday, Sep 20, 2012

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.

Payments of Penalties for Being Uninsured Under the Affordable Care Act

Congressional Budget Office
September 19, 2012

Beginning in 2014, the Affordable Care Act (comprising Public Law 111-148 and the health care provisions of P.L. 111-152) requires most legal residents of the United States to either obtain health insurance or pay a penalty tax. That penalty will be the greater of: a flat dollar amount per person that rises to $695 in 2016 and is indexed by inflation thereafter (the penalty for children will be half that amount and an overall cap will apply to family payments); or a percentage of the household’s income that rises to 2.5 percent for 2016 and subsequent years (also subject to a cap).

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have estimated that about 30 million nonelderly residents will be uninsured in 2016, but the majority of them will not be subject to the penalty tax. Unauthorized immigrants, for example, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges, are exempted from the mandate to obtain health insurance. Others will be subject to the mandate but exempted from the penalty tax—for example, because they will have income low enough that they are not required to file an income tax return, because they are members of Indian tribes, or because the premium they would have to pay would exceed a specified share of their income (initially 8 percent in 2014 and indexed over time). CBO and JCT estimate that between 18 million and 19 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 11 million to 12 million uninsured people, some individuals will be granted exemptions from the penalty because of hardship, and others will be exempted from the requirement on the basis of their religious beliefs.

After accounting for those who will not be subject to the penalty tax, CBO and JCT now estimate that about 6 million people will pay a penalty because they are uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf) and that total collections will be about $7 billion in 2016 and average about $8 billion per year over the 2017–2022 period. Those estimates differ from projections that CBO and JCT made in April 2010: About two million more uninsured people are now projected to pay the penalty each year, and collections are now expected to be about $3 billion more per year.

Most of the increase—about 85 percent—in the number of people who are expected to pay the penalty tax stems from changes in CBO and JCT’s baseline projections since April 2010, including the effects of legislation enacted since that time, changes in the economic outlook (primarily a higher unemployment rate and lower wages and salaries), and other technical updates. A small share—about 15 percent—of the increase in the number of uninsured people expected to pay the penalty results from the recent Supreme Court decision. As a result of that decision, CBO and JCT now anticipate that some states will not expand their Medicaid programs at all or will not expand coverage to the full extent authorized by the ACA. Such state decisions are projected to increase the number of uninsured, a small percentage of whom will be subject to the penalty tax.

Among the uninsured individuals subject to the penalty tax, many are expected to voluntarily report on their tax returns that they are uninsured and pay the amount owed. However, other individuals will try to avoid payments. Therefore, the estimates presented here account for likely compliance rates, as well as the ability of the Internal Revenue Service (IRS) to administer and collect the penalty.

CBO and JCT have also updated their estimates of the distribution of those penalty tax payments by income category. Table 1 (in PDF available at link) shows how much of those payments are projected to be made by or on behalf of people who are uninsured in 2016 (which the IRS will collect in 2017) in each of several income categories, measured as percentages of the federal poverty level (FPL). In general, households with lower income will be subject to the flat dollar penalty (with adjustments to account for the lower penalty for children and an overall cap on family payments), and households with higher income will owe a percentage of their income. In 2016, households with income that exceeds 400 percent of the FPL are estimated to constitute about one-third of people paying penalties and to account for about two-thirds of the receipts from those penalties.

When it was decided to use the purchase of private plans as the model for insuring everyone, it was clear that the law must include a requirement to purchase plans and that the threat of assessing a penalty would have to be included to ensure compliance, otherwise adverse selection would have driven insurance premiums up even higher than their current intolerable levels. It was also clear that this still wouldn’t ensure universality because of various exceptions and non-compliance.

We now have a reasonably reliable estimate from the Congressional Budget Office that tells us that 30 million people will remain uninsured and that 6 million of them will be assessed penalties. That is a terrible outcome when considering that a single payer system would have covered everyone automatically, obviating the need for penalties.

Some will note that the penalty is not as onerous as it might have been since two-thirds of the total amount will be paid by households with incomes over 400 percent of the federal poverty level. The fact that more lower income households will be exempt from the penalty is hardly a reason to celebrate when considering that the price they do pay is remaining uninsured.

Medicare’s failure to protect personal finances

Posted by on Wednesday, Sep 19, 2012

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.

Out-of-Pocket Spending in the Last Five Years of Life

By Amy S. Kelley, Kathleen McGarry, Sean Fahle, Samuel M. Marshall, Qingling Du and Jonathan S. Skinner
Journal of General Internal Medicine, September 5, 2012



A key objective of the Medicare program is to reduce risk of financial catastrophe due to out-of-pocket healthcare expenditures. Yet little is known about cumulative financial risks arising from out-of-pocket healthcare expenditures faced by older adults, particularly near the end of life.


Using the nationally representative Health and Retirement Study (HRS) cohort, we conducted retrospective analyses of Medicare beneficiaries’ total out-of-pocket healthcare expenditures over the last 5 years of life.


We identified HRS decedents between 2002 and 2008; defined a 5 year study period using each subject’s date of death; and excluded those without Medicare coverage at the beginning of this period (n = 3,209).

Main Measures

We examined total out-of-pocket healthcare expenditures in the last 5 years of life and expenditures as a percentage of baseline household assets. We then stratified results by marital status and cause of death. All measurements were adjusted for inflation to 2008 US dollars.


Average out-of-pocket expenditures in the 5 years prior to death were $38,688 for individuals and $51,030 for couples in which one spouse dies. Spending was highly skewed, with the median and 90th percentile equal to $22,885 and $89,106, respectively, for individuals, and $39,759 and $94,823, respectively, for couples. Overall, 25% of subjects’ expenditures exceeded baseline total household assets, and 43% of subjects’ spending surpassed their non-housing assets. Among those survived by a spouse, 10% exceeded total baseline assets and 24% exceeded non-housing assets. By cause of death, average spending ranged from $31,069 for gastrointestinal disease and $66,155 for Alzheimer’s disease.


Despite Medicare coverage, elderly households face considerable financial risk from out-of-pocket healthcare expenses at the end of life. Disease-related differences in this risk complicate efforts to anticipate or plan for health-related expenditures in the last 5 years of life.


Grappling With Details of Medicare Proposals

By Roni Caryn Rabin
The New York Times, September 17, 2012

The (Medicare reform) proposals keep changing, and some are short on details. No one is certain what health care costs will be in the coming years.

Still, it’s clear the proposed changes would shift costs from the federal government to retirees. “All scenarios will require seniors to pay more,” said Robert Moffit, senior fellow at the Heritage Foundation, a conservative research organization in Washington. To think otherwise, he said, “is a fantasy.”

In spite of having Medicare coverage, out-of-pocket health care expenditures can be devastating for seniors. Current proposals to reduce government entitlement spending on Medicare would shift even more costs to our seniors.

Premium support voucher proposals for Medicare would create a defined contribution which would shift more costs to all Medicare beneficiaries, when only the wealthier could afford the increase. That won’t work.

Since many already can’t pay their current out-of-pocket costs, proposals have been advanced to index costs to income by charging higher premiums, higher cost sharing and/or reducing benefits for the wealthier. That process has already begun with Part B and Part D premiums now based on income. That risks reducing support by the politically connected affluent, which could clear the way for enactment of destructive government policies, especially if the conservatives gained control. The threat from the liberals is bad enough.

On the other hand, lower income individuals could be given support beyond that of Medicare. Again, that is already happening through the dual-eligible program for both Medicare and Medicaid. The risk is that the dual-eligible program would be considered a welfare program for the poor, and would be budgeted accordingly. That is already happening as the federal and state governments are well along in the process of herding these victims into underfunded, low quality, private Medicaid managed care programs (see…).

Obviously Medicare needs a lot of improvement before we convert it into a single payer national health program. We need to go in the opposite direction from where the politicians currently are headed. Instead of slashing it under the budget hawks’ call for cutting back on entitlements, we need to expand its coverage so that it doesn’t leave anyone with the devastating out-of-pocket expenses associated with complex and prolonged medical care.

Even though more would be spent through the Medicare program (i.e., through the tax system), the efficiencies of single payer would not increase our total health care costs, and, more importantly, would slow future health care cost increases to sustainable levels. It’s not that we can’t afford to expand Medicare; it’s that we can’t afford not to.

IT savings are little more than hype

Posted by on Tuesday, Sep 18, 2012

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

A Major Glitch for Digitized Health-Care Records

By Stephen Soumerai and Ross Koppel
The Wall Street Journal, September 17, 2012

In two years, hundreds of thousands of American physicians and thousands of hospitals that fail to buy and install costly health-care information technologies—such as digital records for prescriptions and patient histories—will face penalties through reduced Medicare and Medicaid payments. At the same time, the government expects to pay out tens of billions of dollars in subsidies and incentives to providers who install these technology programs.

The mandate, part of the 2009 stimulus legislation, was a major goal of health-care information technology lobbyists and their allies in Congress and the White House. The lobbyists promised that these technologies would make medical administration more efficient and lower medical costs by up to $100 billion annually. Many doctors and health-care administrators are wary of such claims—a wariness based on their own experience. An extensive new study indicates that the caution is justified: The savings turn out to be chimerical.

Since 2009, almost a third of health providers, a group that ranges from small private practices to huge hospitals—have installed at least some “health IT” technology. It wasn’t cheap. For a major hospital, a full suite of technology products can cost $150 million to $200 million. Implementation—linking and integrating systems, training, data entry and the like—can raise the total bill to $1 billion.

But the software—sold by hundreds of health IT firms—is generally clunky, frustrating, user-unfriendly and inefficient.

Now, a comprehensive evaluation of the scientific literature has confirmed what many researchers suspected: The savings claimed by government agencies and vendors of health IT are little more than hype.

To conduct the study, faculty at McMaster University in Hamilton, Ontario, and its programs for assessment of technology in health—and other research centers, including in the U.S.—sifted through almost 36,000 studies of health IT. The studies included information about highly valued computerized alerts—when drugs are prescribed, for instance—to prevent drug interactions and dosage errors. From among those studies the researchers identified 31 that specifically examined the outcomes in light of the technology’s cost-savings claims.

With a few isolated exceptions, the preponderance of evidence shows that the systems had not improved health or saved money.

It is already common knowledge in the health-care industry that a central component of the proposed health IT system—the ability to share patients’ health records among doctors, hospitals and labs—has largely failed. The industry could not agree on data standards.

Instead of demanding unified standards, the government has largely left it to the vendors, who declined to cooperate, thereby ensuring years of noncommunication and noncoordination. This likely means billions of dollars for unnecessarily repeated tests and procedures, double-dosing patients and avoidable suffering.

This article reinforces two points that we have made repeatedly about the application of information technology to health care: 1) The government needs to lead the process, and 2) We need to look elsewhere for means of controlling spending in health care.

Entrepreneurial approaches to health information technology are designed to make money – a lot of it. Competitors design their products to be incompatible with each other in hopes that one can dominate the market and crowd out the competitors. Public service approaches, such as the interoperable VistA system of the VA, are designed to help health care professionals give better and more coordinated care to their patients, but are not designed for profit. We already own the VistA system, and it could easily be adapted to become the national standard, at a small fraction of the costs of the private fragmented systems that are being forced on providers by the 2009 stimulus legislation.

Particularly annoying is the repeated claim that information technology and electronic records will save money. Not true. Yet the pursuit of these savings and the alleged savings from the various experiments in payment innovations found in the Affordable Care Act – which all experience to date has suggested have been and will be phantom savings – have distracted us from proceeding with reform that everyone knows would recover tremendous waste and ensure health care affordability for everyone forever – a single payer national health program, aka an improved Medicare for all.

Lower wage employees have greater out-of-pocket expenses

Posted by on Monday, Sep 17, 2012

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Health Benefits In 2012: Moderate Premium Increases For Employer-Sponsored Plans; Young Adults Gained Coverage Under ACA

By Gary Claxton, Matthew Rae, Nirmita Panchal, Anthony Damico, Heidi Whitmore, Kevin Kenward and Awo Osei-Anto
Health Affairs, September 2012 (online)

Health care premiums rose moderately for single and family employer-sponsored coverage this year, the 2012 annual Kaiser Family Foundation/Health Research and Educational Trust (HRET) Survey of Employer Health Benefits found.

In 2012 the average annual premium cost was $5,615 for single health coverage and $15,745 for family coverage. The average premiums were about 3 percent higher for single coverage and 4 percent higher for family coverage than in 2011. During the same period, general inflation was 2.3 percent, and wages rose by 1.7 percent.

There continue to be important differences between the health benefits offered by small and large firms. Workers at small firms (those with 3–199 workers) face higher cost sharing, including higher copayments for office visits and higher general annual deductibles for single coverage. These workers are also responsible for a larger premium contribution for family coverage than are workers at large firms (those with 200 or more workers).

Compared to workers in large firms, workers in small firms have a slightly lower average percentage contribution for single coverage but a far higher average percentage contribution for family coverage.

Workers in firms with a large share of lower-wage workers face higher contributions for family coverage than workers in firms with a small share of lower-wage workers.

The enrollment distribution varies by employer size, with preferred provider organizations being relatively more popular among large firms, and point-of-service plans and high-deductible plans with a savings option being relatively more popular among small firms.

Looking across all plan types, 49 percent of workers in small firms and 26 percent of workers in large firms are in a plan with a general annual deductible of at least $1,000.

The largest firms are much more likely than the smallest firms to offer health benefits: Virtually all firms with more than 5,000 workers offer benefits to at least some of their employees, whereas only half of firms with 3–9 workers do so. Firms with a smaller percentage of lower-income workers are more likely to offer coverage than firms with a larger percentage of those workers.

An employer-sponsored health plan can be grandfathered if it provided coverage to a worker when the act became law and if the plan does not make major changes that reduce benefits or increase employee costs.

From the Conclusion

There are important differences between the health plans being offered at small firms and those offered at large firms. Although the average family premium is lower at small firms than at large firms, workers at small firms are often responsible for paying a larger share of the premium than workers in large firms. Also, workers at small firms typically face higher cost sharing and out-of-pocket maximums—which means that in addition to higher premium contributions, they are also left with a higher financial burden when using services.

The Affordable Care Act was designed to perpetuate as much as possible enrollment in employer-sponsored plans. This study demonstrates that lower-income workers face greater out-of-pocket costs through a higher share of premiums and through greater deductibles and other cost sharing, especially if they are employed by a small firm. Private employer-sponsored plans do not serve well the needs of workers with lower incomes.

An improved Medicare for everyone would resolve these differences.

AHIP asks for further reduction of minimum benefits

Posted by on Friday, Sep 14, 2012

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.

Hearing: Implementation of Health Insurance Exchanges and Related Provisions

Testimony by Daniel T. Durham, Executive Vice President, Policy and Regulatory Affairs, America’s Health Insurance Plans (AHIP)
House Ways and Means Committee, Subcommittee on Health, September 12, 2012

Minimum Coverage Requirements

Beginning in 2014, the ACA will require health plans to provide coverage for an essential health benefits (EHB) package covering a broad range of mandated benefits, some of which are not typically included in individual and small group policies today. The ACA further requires that coverage sold through the exchanges must be at one of four actuarial value levels: 60% (bronze); 70% (silver); 80% (gold); and 90% (platinum). As a result of these provisions, millions of people may be forced to purchase health insurance that is more comprehensive – and more expensive – than they currently have.

We believe that the EHB package must be affordable for families and small businesses and that affordability should be the cornerstone of consideration in defining the EHB package. The nonpartisan Institute of Medicine – in its recommendations to HHS – underscored the need to ensure affordability in defining the EHB standard and cautioned that “if cost is not taken into account, the EHB package becomes increasingly expensive and, individuals and small businesses will find it increasingly unaffordable. If this occurs, the principal reason for the ACA – enabling people to purchase health insurance, and covering more of the population, will not be met.”

The imposition of broader benefit packages than what consumers and small businesses are purchasing today will force consumers to “buy up” coverage that they may not want or need. In recent months, many state departments of insurance and state exchange boards have requested formal actuarial and economic forecasts of the impact of the new insurance reforms on their state. These independent studies have found that several provisions, including the EHB and actuarial value requirements, will result in higher premiums.

Recognizing that these ACA provisions will have a major impact on the cost of coverage, we believe that the important goals of the EHB package can be met if HHS and the states place a high priority on offering affordable coverage options to consumers. In addition, consideration should be given to lowering the minimum actuarial value for coverage sold in the exchanges to ensure the availability of affordable coverage options and to allow smoother transitions to the new benefits packages.

As the Affordable Care Act was being drafted, many of us in the policy community were very disappointed with the decision to include in the state insurance exchanges low actuarial value plans, as low as 60 percent (the plan pays 60 percent of covered costs and the patient pays the other 40 percent plus 100 percent of all services and products not covered). Even with the subsidies, the financial barriers to care will be too great for many patients. Now AHIP – the all-powerful health insurance lobby organization – is asking Congress to lower even further the minimum required benefits and the actuarial values of the plans.

The reason is obvious. They explicitly state that “affordability should be the cornerstone of consideration,” but they are not referring to affordability of health care, rather they are referring to the affordability of their own private health insurance plans. They want their premiums to be low enough for middle-income Americans to be able to purchase their plans. They remain silent on the fact that reducing minimum benefits and reducing actuarial values of the plans will shift large portions of the costs to those who need care. (Again, the cost sharing subsidies are not adequate for covered benefits, and the patient is responsible for 100 percent of the costs of excluded benefits which would increase with this proposal.)

The private insurance industry got virtually everything that they asked for when the bill was written. Now they are coming along with a pitch that appeals to members of both sides of the aisle – we should make insurance affordable by allowing individuals to “buy only the insurance you need.” For people who are healthy on December 31, 2013, can they really feel secure with a low actuarial value, minimal benefit plan that begins on January 1, 2014, when they have absolutely no idea what health problems they may face throughout 2014 and into the future? Of course not, though the high premiums of plans with adequate coverage may serve as enough of a deterrent that they would want to or may even have to take the risk that they will remain healthy throughout the year – a safe bet for the insurers but a big gamble for the patient. With time, it becomes even more treacherous for individuals to bet that they will remain healthy forever.

It is particularly appalling when they say that the principal reason for the Affordable Care act was to enable people to purchase health insurance. Some of us thought that the principal reason should have been to remove financial barriers to essential health care for everyone.

Really, haven’t we had enough of Congress and the Obama administration supporting the private insurance industry? How about demanding support for America’s patients instead? Throw out the insurers and enact an improved Medicare for all. We just might have to throw out the politicians to get there.

Changing the focus from profits to service

Posted by on Friday, Sep 14, 2012

Photo by Larry Canner

Dr. Garrett Adams, left, president of Physicians for a National Health Program, was honored as a Distinguished Alumnus of the Johns Hopkins Bloomberg School of Public Health at a program on Aug. 30 in Baltimore. Dr. Adams participated in a panel with two other award recipients titled “Access to Health Care Among Underserved Populations.” The event was chaired by the school’s dean, Dr. Michael Klag, right, who asked each panelist to open with a brief statement before addressing three questions.

By Garrett Adams, M.D., M.P.H.

I am deeply grateful to the JHU Bloomberg School of Public Health for this singular honor – grateful not only personally for the award, but for the validation that Dean Klag and the Award Committee have given to the related projects that have occupied my retirement: (1) advocacy for publicly funded national health insurance with the Physicians for a National Health Program and (2) free medical services at the Beersheba Springs Medical Clinic in Tennessee for persons who don’t have health care because they don’t have insurance and cannot pay expensive health care costs.

All health reform efforts must focus on what is best for the people. How do we relieve suffering? Former Surgeon General Julius Richmond said, “Statistics are people with the tears wiped dry.” There are stories illustrating this truth at the Beersheba Clinic website, For example, Clay Morgan, a successful automobile mechanic in Henry County, Kentucky, owned his business, but lost it and was bankrupted paying for treatment for malignant melanoma. He was cured, but the melanoma returned. Rather than bring more medical debt on his family, Clay went into the backyard and took his own life.

Question 1. What are the possible solutions to solving/addressing the problem of little to no access to health care in the U.S.?

Nearly everyone in this country is just one major illness or one job loss away from bankruptcy because the United States, an outlier among developed nations, is the only country that does not provide universal health care to all of its citizens. A recent Commonwealth Fund study showed that 42 percent of Americans do not believe they can afford health care if they have a major illness. One-third said they did not go to the doctor when sick, did not get recommended treatment, or did not fill a prescription because of cost.

To reform the American health care system we must eliminate the business model approach, the profiteering and the investor-owned profit taking of the medical-industrial complex.

The Affordable Care Act is not the answer. The Congressional Budget Office estimates that if the ACA works as planned, 30 million people will still be uninsured in 2022. As Clay Morgan’s story illustrates, any number of uninsured people is unacceptable – hence the urgency of establishing a single-payer system. Furthermore, single payer is the only way to control runaway health care costs, consuming now $2.7 trillion and forecasted to consume nearly 20 percent of our GDP and $13,700/person by 2020.

In their book “The Spirit Level” Richard Wilkinson and Kate Pickett describe how “greater equality makes societies stronger.” Wilkinson and Pickett show that more equal societies have better health and fewer social problems. A single-payer national health system will immediately create a more egalitarian society in America and will lift all boats.

Question 2. What is the role of primary care in these situations?

Dr. John Geyman in his book “Breaking Point, How the Primary Care Crisis Endangers the Lives of Americans” states that all attempts to rebuild primary care are fruitless without fundamental system reform. Some of the ways that national health insurance will facilitate building primary care include:

* Expansion of primary care to meet the need of universal access for the entire population.

* Changing physician payments from the present skewed fee-for-service system favoring highly reimbursed specialty procedures to a system that favors generalist care.

* Accountability from providers, hospitals and other facilities working with annual budgets and negotiated reimbursements.

* Replacing our dysfunctional graduate medical education financing with new funding based on physician workforce needs.

* Covering the costs of malpractice liability insurance.

* Changing the focus from creating profits to providing service.

Dr. Geyman states, “As with other challenges to our democracy – from Social Security and civil rights to Medicare – this will be a class struggle pitting the majority against the power and money of the few, real people against corporations. Reforming the system and rebuilding primary care will take many years.”

Question 3. What do schools of public health need to do to help with the solution?

Clearly, the schools of public health can help the primary care crisis by encouraging generalist training and helping to devise creative ways to deliver primary care to all populations.

Today, Dean Klag, you and the Alumni Awards Committee took a step for health reform by honoring the Physicians for a National Health Program, an organization of 18,000 physicians and health professionals who advocate and educate for single-payer, publicly funded national health insurance (

The JHU Bloomberg School of Public Health is the world’s public health school. Today you recognize alumni addressing health needs in sub-Saharan Africa and other global populations, and also right here, in our own backyard. We look for your continued leadership in healing America’s suffering from its broken health care system.


Schoen, C., Osborn, R., et al. “How health insurance design affects access to care and costs by income in eleven countries.” Health Affairs, December 2010.

Wilkinson, R. and K. Pickett. “The Spirit Level: Why Greater Equality Makes Societies Stronger.” New York. Bloomsbury Press, 2009.

Geyman, J.P. “Breaking Point: How the Primary Care Crisis Endangers the Lives of Americans.” Friday Harbor, WA: Copernicus Healthcare, 2011.

How many “bundles” do we need in health care?

Posted by on Thursday, Sep 13, 2012

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.

The Arkansas Innovation

By Ezekiel J. Emanuel
The New York Times, September 5, 2012

(Arkansas) is moving toward ending “fee-for-service” payments, in which each procedure a patient undergoes for a single medical condition is billed separately. Instead, the costs of all the hospitalizations, office visits, tests and treatments will be rolled into one “episode-based” or “bundled” payment.

This is how it will work: Medicaid and private insurers will identify the doctor or hospital who is primarily responsible for the patient’s care — the “quarterback,” as Andrew Allison, the state’s Medicaid director, put it. The quarterback will be reimbursed for the total cost of an episode of care — a hip or knee replacement; treatment for an upper respiratory infection or congestive heart failure; or perinatal care (the baby’s delivery, as well as some care before and after).

The quarterbacks will also be responsible for the cost and quality of the services provided to their patients, and will receive quarterly reports on those metrics from the state (for Medicaid patients) or private insurers. If they have delivered good care based on agreed-upon standards, and if their billings come in lower than the agreed-upon level, they can keep a portion of the difference. If their billings come in above an acceptable level — usually because they have ordered too many unnecessary tests, office visits or inappropriate treatments — they will have to pay money back to the state or insurer.

Still, it will be a challenge. Bundled payments for hip and knee replacements, which have similar costs for all patients, have been previously tested. But for other conditions, not every patient’s needs are the same. Some pregnant women are healthy while others have diabetes. The state and insurers will have to provide “risk adjustment” payments — in which providers are reimbursed more for treating sicker patients — and some patients with especially complicated illnesses may need to be excluded from the bundling system.

Even some low-cost conditions, like upper respiratory infections, are treated at widely varying costs, mainly because physicians prescribe different tests, numbers of office visits and medications.

But this is exactly what the new program will work to change, by providing standards for appropriate care linked to the costs of treatment and the quality of the doctor’s performance compared with that of other doctors.


Is ‘Bundled’ Medical Care a Good Idea?

Letters, The New York Times, September 12, 2012

Despite Ezekiel J. Emanuel’s implication, Arkansas isn’t the only state to plan to substitute “bundled” medical payments for fee-for-service. Vermont, Massachusetts and Oregon have similar intentions. But without basic changes in the organization and delivery of care, it is doubtful that “bundled” payments can be successfully distributed among all the providers of care.

A stifling supervisory bureaucracy interfering with medical care and endless disputes among providers and between providers and payers are almost certain to develop. Physicians are unlikely to accept such an arrangement, and nothing can succeed without their agreement.

Eventually, they will accept a different health system in which a single public payer guarantees comprehensive care for all, and pays accountable multispecialty physician groups not by reimbursement for specific services but through prepaid budgets on a per capita basis.

Arnold S. Relman
Cambridge, Mass., Sept. 7, 2012

The writer, professor emeritus of medicine and social medicine at Harvard Medical School, is a former editor in chief of The New England Journal of Medicine.

What a simple idea. Instead of paying a fee for each itemized service – a payment model that supposedly encourages the delivery of excess services – a lump (bundled) fee would be paid for each episode of care. That episode might be as simple as a common cold, or as complex as extensive, prolonged care of a major trauma victim. But because of the single fee no excessive services would be provided, so the theory goes.

This does bring up a few questions. How many distinct episodes of care are there? How is each one defined? How is an appropriate bundled fee determined for each of these episodes? Which individuals and entities would share in each fee? Would the various providers be bundled together just as the fee for each episode of care is bundled? How many variations of bundled providers would you have? How many bundled groups would each individual provider belong to? How complex would the administrative task be to distribute the bundled fee within the bundled group of providers? Could an accountable care organization (ACO) serve as a single bundled group of providers that could care for each and every episode of care? Would each ACO include providers of tertiary services such as advanced cardiac or oncological surgeries? Would each ACO want to contract for bundled payments for common colds and other brief, single contact services? Would one ACO be the only bundled entity in a community, or could the community support multiple competing ACOs? Could the community support providers outside of the ACO and how would they be bundled? Would each payer – Medicare, Medicaid, and a multitude of private insurers – contract separately with each bundled group of providers for each separate episode of care? If instead the bundled payments were standardized, then why would you want the inefficiency of multiple payers when a single payer would simplify at least that part of the process? But then, why make it this complicated in the first place?

Arnold Relman is right. The bundling concept adds much more administrative complexity to a health care system that already has the world’s worst administrative excesses. Instead of playing more games with a dysfunctional, fragmented financing system, we should convert to a single payer national health program. Under such a system costs can be budgeted – whether it’s through global budgets for hospitals, capitation payments for integrated multispecialty physician groups, physician-hospital organizations, community health centers, or through fee-for-service when appropriate such as for solo, rural practices.

Our own public administrators of an improved Medicare for all would be free to cooperate with the health care professionals and institutions to establish the best payment arrangements to see that everyone receives the highest quality of care under a system that would provide the nation with greatest health care value attainable. One giant bundle for all of us.

New Census Bureau numbers on the uninsured

Posted by on Wednesday, Sep 12, 2012

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.

Income, Poverty, and Health Insurance Coverage in the United States: 2011

By Carmen DeNavas-Walt, Bernadette D. Proctor, Jessica C. Smith
United States Census Bureau, September 2012

Health Insurance Coverage – 2011

48.6 million or 15.7% – people without health insurance
• 7.0 million – children under 18 uninsured

193.7 million or 63.9% – people covered by private health insurance
• 170.1 million or 55.1% – people covered by employment-based insurance

99.5 million or 32.2% – people covered by government health insurance
• 50.8 million or 16.5% – people covered by Medicaid
• 46.9 million or 15.2% – people covered by Medicare


9.5 million or 11.8% – families living in poverty
• 31.2% – families with a female householder living in poverty

Income Inequality

Income inequality also increased between 2010 and 2011 when measured by shares of aggregate household income received by quintiles. The aggregate share of income declined for the middle and fourth quintiles. The share of aggregate income increased 1.6 percent for the highest quintile and within the highest quintile, the share of aggregate income for the top 5 percent increased 4.9 percent. The changes in the shares of aggregate income for the lowest two quintiles were not statistically significant.

The numbers of uninsured decreased from 50.0 million in 2010 to 48.6 million in 2011. That might be good news for the net 1.4 million newly insured, but it is terrible news for the 48.6 million who remain without health insurance.

These numbers, of course, are transitional since new private coverage through the state insurance exchanges and the greater expansion of coverage under Medicaid will not take place until 2014. Even then, the new coverage will be either with private underinsurance plans (low actuarial value and inadequate subsidies) or with the chronically underfunded Medicaid program, with even greater impairment of health care access likely. Worse, 30 million will still have no coverage at all (CBO).

Perhaps even more shocking is that 31.2% of families with a female householder live in poverty – right here in the United States!

And income inequality? The aggregate share of household income has decreased for the middle and fourth quintiles. The middle class is being wiped out!

Of course we knew all this. So why aren’t we doing something about it? Howling in the wind doesn’t seem to be getting us very far.

Jonathan Gruber gives qualified endorsement to premium support

Posted by on Tuesday, Sep 11, 2012

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.

Mixed Message From Obama Advisers on Medicare

By Meghan McCarthy
NationalJournal, September 10, 2012

President Obama has seized on Republican proposals to overhaul Medicare as a top campaign issue, saying that the GOP plan to add a private insurance option would end seniors’ guarantee of government health care. But behind the election-season politics, influential experts who have advised Obama on health care are open to a future for Medicare that includes competition among private insurance plans.

In e-mail exchanges with the staff of the White House-appointed  fiscal commission  that were obtained by National Journal, David Cutler and Jonathan Gruber, who have both advised Obama, gave qualified support to a Medicare voucher plan offered by Ryan and former Clinton budget director Alice Rivlin in talks to reduce the deficit.

Cutler and Gruber are both hot shots of the health economics world. Cutler is a professor at Harvard, Gruber at MIT. Both advised Obama on health care in the 2008 campaign, and both had major roles in helping develop Democrats’ 2010 health care law. When they offer counsel, the White House is listening.

Cutler now says he was only proposing an idea for Medicare if insurance exchanges are “shown to work well for the non-elderly population,” by getting people into good plans and lowering costs.

Gruber also said he approved of the Ryan-Rivlin plan in 2010 e-mails to fiscal-commission staff, as long as the insurance market reforms of the Democrats’ health care law are kept in place.

Gruber now says that economists don’t know enough yet to move the majority of Medicare enrollees into private-insurance plans.  As part of the effort to expand coverage to the uninsured, President Obama’s health care law would establish insurance exchanges for people younger than 65 to buy private health care. Gruber said that this is a better way of testing out new approaches, adding that it would be “stupid” to experiment first on the older and sicker Medicare population.

“We are getting better, but we are not quite there yet,” Gruber said in an interview. “But premium support is ultimately where we need to be.”

There are three key problems that still must be worked out, Gruber said. First, policymakers have to figure out how to keep insurance companies from cherry-picking healthy people and essentially forcing the sickest patients on to traditional Medicare, which would drain the program of money. Second, policymakers must find a way to make sure insurance companies design benefits so they are easy-to-understand for beneficiaries, and don’t trick seniors into buying more expensive plans that aren’t suitable for them. Third, they have to figure out just how quickly government checks for seniors to buy coverage could grow.

Still, Gruber said he could see Medicare becoming a premium-support-style plan within a five-year timetable, after the Affordable Care Act’s health insurance exchanges start enrolling an estimated 30 million people into insurance plans in 2014.–20120910

So Obama advisor, MIT Professor Jonathan Gruber, says, “premium support is ultimately where we need to be.” In other words, we should replace the traditional Medicare program with vouchers that would be used to purchase private plans. Let’s look at the three problems which he says must first be addressed.

He says that policymakers must figure out how to keep insurance companies from insuring the healthy and sending the sick to the traditional government program. Actually that is only one behavior that private insurers engage in to enhance their success as private businesses. They are always going to do everything that they can to maximize revenues and minimize spending, as any reasonable business would do. The drive for profits for passive investors is not in itself inherently evil, except when it is applied to our health care system. Manipulating sick patients for the prime purpose of generating profits is immoral. Investor-owned insurance companies need to be removed from our health care system.

Gruber also says that we have to figure out “just how quickly government checks for seniors to buy coverage could grow” under premium support. This is a problem inherent with government vouchers that cover only a part of the costs. Instead of directing efforts to control total health care costs, government stewards tend to control just the government spending, passively shifting the costs of health care inflation onto the patients. The financial burden on individuals is already too great, and this would make it even worse.

More subtle, but perhaps even more important, Gruber says that the design of insurance products should be easy to understand so that seniors are not tricked into buying “more expensive plans that aren’t suitable for them.” This statement represents one of the great fallacies of private health insurance markets, that somehow there is an insurance product that is just right for you wherein you will not have to pay for benefits that you’ll never use.

There are two problems with this. The obvious one is that future health care needs cannot be predicted. Major acute disorders or the future onset of chronic disease are unknowns. Plans need to be comprehensive to insure against these potential losses, even if you hope that you won’t ever need to use the coverage that is providing you security, though you probably will someday.

The other problem is that an ideal insurance system pools all risks and funds the risk pool equitably. It is less expensive because of the much greater administrative efficiency of a universal risk pool. It also eliminates financial barriers to appropriate health care. Maybe males don’t want maternity benefits. Maybe females don’t want coverage for prostate cancer. Maybe young adults don’t want coverage for cataracts. Maybe the elderly don’t want coverage for organ transplants. Maybe children don’t want coverage for vaccines, even of their parents want them to have it.

The point is that when you start designing plans for different populations – “only the coverage you need” – you break up the universal risk pool and introduce many of the inequities and inefficiencies that characterize our current dysfunctional financing system. The administrative inefficiencies of buying “only what you need” increases costs over the entire system and redistributes those costs inequitably.

There is no substitute for establishing a single universal risk pool, funding the pool equitably based on ability to pay, and using the pool to fund health care based on medical need. And that, in a nutshell, is what a single payer national health program does.

Herding dual eligibles into low quality plans

Posted by on Monday, Sep 10, 2012

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.

Obama More Flexible on Medicare Than Rhetoric Suggests

By Margot Sanger-Katz
NationalJournal, September 8, 2012

In his convention speech in Charlotte, President Obama vowed to block the Republican Medicare reform plan because “no American should ever have to spend their golden years at the mercy of insurance companies.”

But back in Washington, his Health and Human Services Department is launching a pilot program that would shift up to 2 million of the poorest and most-vulnerable seniors out of the federal Medicare program and into private health insurance plans overseen by the states.

The administration has accepted applications from 18 states to participate in the program, which would give states money to purchase managed-care plans for people who are either disabled or poor enough to qualify for both Medicare and Medicaid.

Obama’s 2010 health reform law allows experimentation in delivering health care at lower cost through demonstration projects. Many states would like permission to shift their entire population of so-called dual-eligible beneficiaries into the new plans. HHS has indicated that it will enroll about 2 million beneficiaries, out of about 7 million who qualify for full benefits from both government health programs.

California is already counting on more than $500 million in budget savings from its own program this year.

Potential cost savings are a big incentive for states. Patients who qualify for both federal health programs are a costly population and include many who need nursing-home care or other expensive services. About 40 percent of Medicaid’s costs go toward patients who are also eligible for Medicare. Advocates of the pilot program also say it could lead to better coordination of care for patients who often struggle to navigate the two different programs.

To get approval, states must guarantee that both Medicare and Medicaid would save money. They must also agree to accept a fixed payment to cover all care for each patient. While rules say the private plans must cover all standard Medicare benefits, they also waive many Medicare rules and leave insurer selection to the states.

Still, there is powerful opposition to the pilots among doctors, hospitals, nursing homes, patient groups, and key lawmakers, including Sen. Jay Rockefeller, D-W.Va., who wrote the provision in the health law that created the office in charge of the pilot program.

“I urge you to take immediate steps to halt this initiative as currently structured and to take the time necessary to develop a well-designed and thoroughly evaluated care coordination model for dual eligibles that meets the standards outlined in the law,” Rockefeller wrote in a letter to HHS.

The Medicare Payment Advisory Commission, a group of experts who advise Congress on Medicare policy, has also weighed in with an 11-page letter to HHS, warning that the speed and scope of the program raised questions about whether patients would receive the care they need.

The managed-care industry is gearing up for the expansion. Three large insurers have purchased companies that insure Medicaid beneficiaries. For years, states have been moving Medicaid patients into managed-care plans, with mixed results. But this pilot represents a new market: It is the first large program that would pool Medicare and Medicaid benefits in a single, state-administered plan.

“The problem with this population is that all the strategies that the health plans have been used to using historically are going to backfire,” said Chris Duff, executive director of the Disability Practice Institute, an umbrella organization for small programs that provide coordinated care to dual-eligibles. He warned that slashing provider rates, limiting visits, and using other conventional cost-control measures could lead to expensive hospitalizations for frail dual-eligible patients.

But the states are enthusiastic about the pilot programs and believe they will be able to provide better care at lower cost.


Assessing the Quality of California Dual Eligible Demonstration Health Plans

National Senior Citizens Law Center
May 2012

California has proposed a three-year demonstration project to enroll individuals dually eligible for Medicare and Medi-Cal (dual eligibles) into managed care. An analysis of both Medicare and Medi-Cal quality ratings for the eight health plans selected by the California Department of Health Care Services (DHCS) for the first phase of the project raises cause for concern.

Approved health plans in participating counties would be responsible for providing enrolled dual eligibles with all Medicare and Medi-Cal benefits and services, including all needed medical care, long-term services and supports, and behavioral health care, beginning in January 2013.

According to a DHCS report assessing the quality of health plans in the Medi-Cal Managed Care (MCMC) Program, seven of the eight plans received a global health plan rating of 1 out of 5 stars.

Looking at Medicare evaluations, two of the plans selected have received a notice of non-compliance from the Medicare program. One of those has been marked as a low-performing plan for three consecutive years and is at risk for termination of its Medicare contract. Another plan was recently sanctioned by Medicare as a result of beneficiary access problems. Medicare continues to restrict enrollment of dual eligibles into that plan. All eight proposed demonstration plans were found to be low-performing on a least one composite Medicare quality measure.

President Obama is currently campaigning against the Republican proposal to privatize Medicare through a voucher program that would move Medicare patients into private plans. Yet, based on provisions in the Affordable Care Act, the administration is moving Medicare patients whose coverage also is supplemented with Medicaid (dual eligibles) into private managed care plans.

California has been a leader in health care financing innovations. Look at the head start that they have on this program. Seven of the eight plans they have selected to initiate the program have a global health plan rating of only 1 star out of 5!

These plans greatly limit patients’ choices of their providers and will undoubtedly impair access by eliminating choices of most other health care providers within the state. Having to transfer buses three times when you are very ill can make you question whether you have the access that the state has promised to you. And quality ratings? Forget it.

These low-income patients, under the law, have more coverage than do traditional Medicare patients… more, but worse. We can do far better. We can improve Medicare so that it includes the additional benefits provided by Medicaid. Then you wouldn’t need a special “dual eligible” program.

If the improved Medicare program included everyone, then you wouldn’t have to herd patients into inferior managed care programs just to save money (precisely what this new dual eligible program is designed to do). As a beneficent public monopsony, the improved Medicare program would save us all money while being in a position to demand quality throughout the health care delivery system. We couldn’t ask for more – for all of us!

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