The Economist on the birthday of the Affordable Care Act

Posted by on Wednesday, Mar 23, 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.

A not very happy birthday

The Economist
March 17, 2011

As for costs, Mr Obama’s reforms deserve praise for expanding coverage, but they do this by adding millions of people to an unsupportably expensive system. Analysts estimate that America’s health spending will continue to soar under the reforms. That is a point hotly contested by Mr Obama’s team, who usually point to theoretical future efficiency gains and innovations that will save pots of money.

So it came as a shock when Deval Patrick, the governor of Massachusetts and one of Mr Obama’s closest friends, took a different tack. Asked recently about the pioneering health reforms in his state, which served as a model for the national reforms, he first gave a backhanded compliment to Mitt Romney. Mr Patrick then revealed the dirty little secret of Obamacare: “What these folks did in Massachusetts is frankly the same thing that the Congress did, which is to take on access first, and come to cost-control next.” In other words, America will soon have no choice but to come to grips with costs. Whatever one thinks of Mr Obama’s reforms, there is no denying that they have brought that day of reckoning closer.

The Economist joins the chorus of those who say that “America’s health spending will continue to soar under the reforms.” Many have contended that it was a mistake to have expanded coverage without first controlling costs. The real mistake was not in reversing the order of coverage expansion and cost containment, rather it was in the failure to do both simultaneously through the adoption of a national single payer program.

Health insurers initiating a takeover of health care

Posted by on Monday, Mar 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.

Health Insurers Respond To Reform By Snapping Up Less-Regulated Businesses

By Christopher Weaver
Kaiser Health News
March 19, 2011

Here’s one change few were talking about when the health overhaul law passed: It’s sent insurers – worried the law could stunt profits and growth – looking for new types of business.

Where are they investing? In less-regulated companies that could yield strong profits and make the main business – insurance – more lucrative. The purchases also could increase insurers’ control over more parts of the health system.

Insurers have moved into technology, health-care delivery, physician management, workplace wellness, financial services and overseas ventures in wide-ranging efforts to mitigate the new rules imposed by the law.

The current trend is largely driven by the health law, said Ana Gupte, an analyst with Sanford C. Bernstein & Co.

The newer ventures will not replace the core business of selling health coverage.

“They’re very synergistic with the health-insurance [product],” Gupte said, giving insurers more tools to control medical costs while potentially increasing earnings.

As more people receive insurance under the law, insurers would welcome 15 million new customers, according to the Congressional Budget Office. But the companies worry that the rules requiring most Americans to obtain coverage will prove too weak and allow many to go uncovered, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.

That could leave insurers with slim gains, even as they face regulations that could limit profits, prohibit the practice of charging sick people higher rates, and funnel individuals and small businesses into government-created exchanges to buy policies.

“I’ve seen a big trend in getting further down the supply chain towards the point of care,” said Sarah James, an insurance industry analyst at Los Angeles-based Wedbush Securities. “Everybody’s looking to add on staff physicians and clinics” that can help control medical spending.

For instance, OptumHealth, a UnitedHealth subsidiary, has quietly taken control of Memorial Healthcare IPA, a Los Angeles company that manages more than 400 doctors, according to a document filed with the California Secretary of State’s office. OptumHealth declined to discuss details of the deal.

With its recent acquisitions, Humana is dipping its hand directly into patient care, gaining more control over doctors. That’s what makes acquisitions such as Concentra a “two-for-one deal,” Kusserow said. Concentra will continue to generate “great margins” for the company as a stand-alone business, he said, but also will give Humana a workforce of physician gatekeepers controlling access to costly services.

In a sign of Aetna’s interest in future acquisitions, the company hired Charles Saunders, a physician and recent veteran of the private equity firm Warburg Pincus, in January to oversee “strategic diversification.”

Some analysts do not see much of a future for companies that just stick with the business of selling insurance policies.

“If you’re a health plan, you either become a care delivery system or an information services company,” said David Brailer, a former George W. Bush administration health official who now leads an investment firm. “The traditional business is dead.”

One of the claims made by those supporting the health care legislation that placed the private insurers in the drivers seat is that these private firms would be masters at innovation. Well, we are now seeing some of that innovation as they are making their early moves to take over the health care delivery system. It might not be good for our personal finances nor our health, but it is going to give a spectacular boost to Wall Street.

A Medicare lesson for Dick Armey

Posted by on Thursday, Mar 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.

Civil Action No. 08-1715 (RMC)

United States District Court for the District of Columbia

BRIAN HALL, et al. (including Richard Armey), Plaintiffs,
KATHLEEN SEBELIUS, Secretary, Department of Health and Human Services, et al., Defendants.

Plaintiffs are retired Federal employees who have reached age 65 and have applied for, and are receiving, Social Security Retirement benefits. As a result, they are “entitled” to Medicare Part A, coverage. They do not, however, want Medicare coverage. And the only avenue provided to Plaintiffs to un-entitle themselves is to cease receiving Social Security Retirement benefits – and to repay all such benefits already received. Plaintiffs declaim that such a requirement is contrary to the Social Security Act, of which Medicare is a part. The Court concludes that Plaintiffs’ claims are without merit.


Plaintiffs Brian Hall, John Kraus, and Richard Armey share the following characteristics:

• They are retired from Federal employment and have attained the age of 65.
• They applied for, and are receiving, Social Security Retirement benefits.
• They are entitled to benefits under Medicare Part A.
• They had previously been enrolled in health plans under the Federal Employees Health Benefit (FEHB) program and wish to continue that coverage in full.
• They do not want to be covered by Medicare Part A and want to disenroll from Medicare Part A.
• They want to continue receiving their monthly Social Security Retirement benefits.

These facts are all undisputed and, for purposes of resolving this dispute, are the only facts that pertain.

ANALYSIS (excerpts)

Every individual who –

(1) has attained age 65, and
(2)(A) is entitled to monthly insurance benefits under section [42 U.S.C. § 402] of this title . . .

shall be entitled to hospital insurance benefits under part A of title XVIII [of this chapter] for each month for which he meets the condition specified in paragraph (2) . . . .

42 U.S.C. § 426(a). What this means is that an individual who has applied for Social Security Retirement benefits and qualifies to receive such benefits, so that he is “entitled” to Social Security Retirement benefits, automatically becomes “entitled” to Medicare Part A upon his 65th birthday. The only way to avoid entitlement to Medicare Part A at age 65 is to forego the source of that entitlement, i.e. Social Security Retirement benefits. There are but two ways to forego Social Security Retirement benefits: (1) fail to apply even though qualified, see 42 U.S.C. § 402(a) (requiring the filing of an application); or (2) withdraw one’s application and repay all retirement benefits already received, see 20 C.F.R. § 404.640.

Social Security regulations provide a means of avoiding entitlement to monthly Social Security Retirement benefits and thereby also provide a means of avoiding entitlement to Medicare Part A benefits. An individual may withdraw an application for Social Security Retirement benefits after it has been filed by submitting a written request and either repaying “[a]ll benefits already paid” or upon the SSA being “satisfied that they will be repaid.” See 20 C.F.R. § 404.640.3 These regulations are of no assistance to Plaintiffs, however, since they want to avoid Medicare Part A and retain their Social Security Retirement benefits.

There is a “dis-enrollment” possibility, albeit very unattractive, that allows a 65 year-old beneficiary to make himself un-entitled for Medicare Part A by foregoing one of the essential requirements to become entitled to Medicare Part A – receipt of Social Security Retirement benefits.

That Medicare entitlement has very specific consequences for a retired Federal employee: If a Federal retiree who has attained age 65 is “not covered” by Medicare Part A, perhaps because he withdrew his application for Social Security Retirement benefits, his FEHB “plan, other than a prepayment plan described in” 5 U.S.C. § 8903(4), “may not provide benefits . . . to pay a charge imposed by any health care provider, for inpatient hospital services which are covered for purposes of benefit payments” by Medicare Part A, “to the extent that such charge exceeds applicable limitations on hospital charges established for Medicare purposes.” 5 U.S.C. § 8904(b)(1)(A). Thus, even if Plaintiffs were to forego and repay all Social Security Retirement benefits, their FEHB-paid benefits would be no more, and no less, than what Medicare Part A would provide.

Plaintiffs argue that “entitled” to Social Security Retirement benefits does not mean “required to accept” so that “entitled” to Medicare Part A benefits does not mean “required to accept.” While the Plaintiffs’ plain-English reading of the word “entitled” has its attractions, in context the Medicare “entitled” does not actually mean “capable of being rejected.” An individual is “entitled” to Social Security Retirement benefits only after he has worked the requisite quarters, attained age 62 (or more), and filed an application. See 42 U.S.C. § 402. There being no affirmative filing of an application necessary for a Medicare Part A entitlement, it is a different type of entitlement because of its automatic nature. The Medicare Part A entitlement is tied exclusively to the fulfilment of two requirements: (1) receiving Social Security Retirement benefits; and (2) being age 65 – the removal of either having the effect of disestablishing that entitlement.


Plaintiffs are trapped in a government program intended for their benefit. They disagree and wish to escape. The Court can find no loophole or requirement that the Secretary provide such a pathway. Defendants’ Motion for Summary Judgment [Dkt. # 42], which was previously denied without prejudice, is reconsidered and will be granted and Plaintiffs’ Motion for Summary Judgment [Dkt. # 51] will be denied. A memorializing Order accompanies this Memorandum Opinion.

Date: March 16, 2011

United States District Judge

Although this looks like another cute trick that Dick Armey tried to pull off, it is much more serious than that. This is a another blatant effort to try to destroy Medicare as a social insurance program to which all people over 65 who are receiving Social Security benefits are entitled.

This was not a broad anti-government stance. Medicare was targeted specifically. In this civil action, the plaintiffs wanted to specify that they had the right to reject Part A of Medicare, but they weren’t rejecting government programs in general because, in the same civil action, they wanted to keep their Social Security benefits, and they wanted to keep their government-sponsored federal employee retirement health benefits program (as their primary coverage and not secondary to Medicare).

When Medicare was enacted, a decision was mode to be certain that absolutely everyone over 65 on Social Security would be enrolled in Part A – the hospital component. Enrollment would be totally automatic, so much so that an individual could refuse enrollment only by refusing Social Security benefits and refunding to the government any payments already made.

What Dick Armey was trying to do was to establish the principle that individuals could decline Medicare completely and choose a private option (though in this case his private option was a government-sponsored private plan). This would be another step beyond merely selecting a private Medicare Advantage plan, still subject to Medicare regulations. This would totally divorce private plans from Medicare. The intent of the conservatives all along has been to move Medicare patients into private plans and then destroy Medicare by drastically underfunding it (and “drowning it in a bathtub”).

One of the most fundamental principles of the single payer model is that absolutely everyone is automatically enrolled. Opting out is not an option for anyone. People would still have the freedom to not use the health care system, but they couldn’t opt out of enrollment any more than pacifists like me can opt out of paying for our wars.

The conservatives and libertarians oppose single payer, and they fear that Medicare will be improved and then provided to everyone, as a single payer system. They will not stop in their efforts to shred Medicare into tatters, and walk away with their affluent friends to obtain their boutique health care on their own, leaving the rest of us to fend for ourselves – as if “personal responsibility” could buy a ticket to health care.

Let’s fool them. Let’s fix Medicare and then enroll absolutely everyone – automatically!

Lowering mortality by adding more diagnoses (a game)

Posted by on Wednesday, Mar 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.

Geographic Variation in Diagnosis Frequency and Risk of Death Among Medicare Beneficiaries

By H. Gilbert Welch, MD, MPH, Sandra M. Sharp, SM, Dan J. Gottlieb, MS, Jonathan S. Skinner, PhD, John E. Wennberg, MD, MPH
March 16, 2011

Context: Because diagnosis is typically thought of as purely a patient attribute, it is considered a critical factor in risk-adjustment policies designed to reward efficient and high-quality care.

Objective: To determine the association between frequency of diagnoses for chronic conditions in geographic areas and case-fatality rate among Medicare beneficiaries.

Design, Setting, and Participants: Cross-sectional analysis of the mean number of 9 serious chronic conditions (cancer, chronic obstructive pulmonary disease, coronary artery disease, congestive heart failure, peripheral artery disease, severe liver disease, diabetes with end-organ disease, chronic renal failure, and dementia) diagnosed in 306 hospital referral regions (HRRs) in the United States; HRRs were divided into quintiles of diagnosis frequency. Participants were 5 153 877 fee-for-service Medicare beneficiaries in 2007.

Main Outcome Measures: Age/sex/race–adjusted case-fatality rates.

Results: Diagnosis frequency ranged across HRRs from 0.58 chronic conditions in Grand Junction, Colorado, to 1.23 in Miami, Florida (mean, 0.90 [95% confidence interval {CI}, 0.89-0.91]; median, 0.87 [interquartile range, 0.80-0.96]). The number of conditions diagnosed was related to risk of death: among patients diagnosed with 0, 1, 2, and 3 conditions the case-fatality rate was 16, 45, 93, and 154 per 1000, respectively. As regional diagnosis frequency increased, however, the case fatality associated with a chronic condition became progressively less. Among patients diagnosed with 1 condition, the case-fatality rate decreased in a stepwise fashion across quintiles of diagnosis frequency, from 51 per 1000 in the lowest quintile to 38 per 1000 in the highest quintile (relative rate, 0.74 [95% CI, 0.72-0.76]). For patients diagnosed with 3 conditions, the corresponding case-fatality rates were 168 and 137 per 1000 (relative rate, 0.81 [95% CI, 0.79-0.84]).

Conclusion: Among fee-for-service Medicare beneficiaries, there is an inverse relationship between the regional frequency of diagnoses and the case-fatality rate for chronic conditions.

This study from the Dartmouth Institute confirms the intuitive observation that the number of diagnoses of serious chronic conditions in Medicare beneficiaries has a positive correlation with case-fatality rates. The greater number of serious problems a person has, the greater the risk of death. But observation of the regional distribution of these serious diagnoses provides troubling results.

In this study, hospital referral regions varied in the average number of diagnoses per patient of these serious chronic conditions. There is an inverse relationship between the regional frequency of diagnoses and the case-fatality rate. As an example, if you had multiple serious diagnoses, your chances of dying are less if your diagnoses were made in a region where more people have a greater number of diagnoses than if the same diagnoses were made in a region where not as many people received multiple diagnoses.

The authors discuss possible explanations, but I’ll go out on a limb, and a very solid one at that, and give my opinion.  Assigning a greater number of serious diagnoses to a patient permits greater remuneration from upcoding, and it provides rewards for favorable quality and outcomes results since the patient is not as ill as the list of diagnoses would otherwise imply.

It is very difficult to differentiate a list of well documented diagnoses from an embellished list that may include some poorly substantiated notations in the record allegedly supporting the diagnoses. It would be very difficult to ferret out the claims that do not warrant additional consideration based on complexity or quality outcomes.

Reform was supposed to bring us higher quality at a lower cost, but it appears that continued gaming of the system will bring us higher costs with spurious results on quality and outcome assessments.

Much more work needs to be done before we could rely on these observations to improve quality and reduce costs. In the meantime, we could certainly tackle the issue of costs head on by the well proven method of enacting a single payer national health program. Quality and efficiency will be a continual work in progress.

Employer-sponsored health plans under the Affordable Care Act

Posted by on Tuesday, Mar 15, 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.

Health Policy Brief: Employers and Health Care Reform

Health Affairs/Robert Wood Johnson Foundation
March 9, 2011

To expand access and strengthen the employment-based health system, the Affordable Care Act of 2010 will require midsize and large companies to make payments to the federal government if they do not offer health insurance to their employees and dependents starting in 2014.

What’s in the law?

Under the Affordable Care Act, beginning in 2014 employers with at least 50 full-time employees (or equivalent full- and part-time workers) will have to provide “qualified” health insurance coverage to their full-time employees and their dependents. Qualified coverage means that plans are comprehensive (pay at least 60 percent of health care expenses) and affordable (cost less than 9.5 percent of employees’ household incomes).

If employers don’t offer qualified coverage, and if their employees purchase coverage instead through a new state insurance exchange with the assistance of federal subsidies, companies will have to make an “assessable payment” of up to $2,000 for every full-time employee beyond the first 30 employees. The amount of the assessment will be adjusted annually to reflect the growth in national insurance premium costs.

If employers do offer coverage, but the coverage does not meet certain parameters, they may still have to pay assessments. First, employers will be assessed if a plan is judged not to be comprehensive. This means the coverage must have an “actuarial value” of at least 60 percent. In other words, the employer pays on average at least 60 percent of health care expenses and the employee pays on average 40 percent of these expenses through deductibles and copayments.

Second, employers will be assessed if the employees’ premiums are considered unaffordable relative to their household incomes. Specifically, the employee’s share of the premium must not exceed 9.5 percent of his or her annual household income.

Starting in 2014, if either of these two conditions is not met, the employer must pay a $3,000 annual assessment for each employee who declines his or her employment-based insurance and obtains government-subsidized coverage through an exchange.

Small businesses with fewer than 50 full-time employees (or equivalent full- and part-time workers) don’t have to meet the requirement and are exempt from having to offer health insurance.

Many companies face payments:

A study by the Mercer consulting firm found that 38 percent of US employers may face paying assessments starting in 2014, because their coverage might not be considered affordable for at least some of their employees.

“Free-choice vouchers”:

Employees who earn less than four times the federal poverty level (in 2011, $43,560 for an individual and $89,400 for a family of four) and whose share of the premium is between 8 percent and 9.5 percent of his or her household income, can choose to enroll in an exchange instead of the employer plan. The employer must issue the employee a “free-choice voucher” equal to the amount the employer would have paid under the employer’s plan.

Tax on high-value health plans:

Beginning in 2018, “Cadillac” or high-value health plans will be subject to a 40 percent excise tax on premium amounts exceeding $10,200 for single coverage and $27,500 for families.

What’s the likely impact?

The Congressional Budget Office (CBO) and the Joint Committee on Taxation estimated that provisions of the Affordable Care Act, including the employer requirement, will result in 3 million fewer people having employer-provided coverage in 2019. This would be the net result of a series of big changes.

First, the CBO estimates that 6–7 million people would acquire employer coverage for the first time because the requirement would increase workers’ demand for coverage through their jobs. Second, another 1–2 million who currently have employment-based coverage would instead move to the exchanges because the coverage would be more affordable. Third, about 8–9 million others covered under an employer plan under current law would lose employer coverage because firms would choose to no longer offer coverage. These firms are likely to be smaller companies employing lower-wage workers who would be eligible for exchange subsidies.

In addition, according to the CBO, employers will pay about $52 billion in additional assessments between 2014 and 2019. Under the law, that money will be put toward the new subsidies for millions of workers and their families to defray the cost of purchasing health coverage through the exchanges.

“Pay and walk away”:

Among companies of all sizes currently offering benefits, 76 percent reported they would continue to do so in January 2014. Of the rest, 15 percent reported they would offer coverage to at least some full-time employees, and 9 percent said they would stop offering coverage altogether. Among firms with 200 or more full- and part-time equivalent employees, 7 percent planned to drop coverage. “For some large firms, in particular, there is a desire to pay and walk away,” said Susan McIntyre, senior vice president of Market Strategies International’s health care division, in a statement.

Tempted to drop coverage:

The math could make the idea to drop coverage tempting. In 2010, the average annual premium cost for employer-based coverage was $5,049 for a single person and $13,770 for a family, although employers generally do not pay the entire cost. Many employers might consider paying $2,000 or $3,000 in assessments to be more cost-effective. On the other hand, many large employers say they view offering health coverage to be an important part of their overall compensation strategy, and necessary to attract the best workers.

It is possible that employers will watch closely to see how their peer companies respond. In a July 2010 survey by Fidelity Investments, 65 percent of large employers said they were not seriously considering eliminating health care benefits because of the new law. But when asked what they would do if others dropped coverage, 36 percent said they too would consider eliminating coverage. Another 36 percent said they would not drop coverage and the remaining employers were unsure.

What will happen to employer-sponsored coverage under the Affordable Care Act? Perhaps one of the most alarming provisions of the Act is that plans with a 60 percent actuarial value (patients pay an average of 40 percent of their health care bills) qualify to fulfill the employers’ obligations to provide coverage or pay an assessment. Thus the Act is establishing under-insurance as the new standard.

Premiums on more generous plans are approaching a level that will trigger a a 40 percent excise tax. One way to avoid that tax would be to reduce the actuarial value of the plans to the minimum requirement. With employers’ aversion to taxes, many will surely consider that.

With these low actuarial value plans, employees will surely complain about the high out-of-pocket costs they will face when they need health care. Since employers won’t want to make their employees unhappy, they will be motivated to drop their plans altogether and pay the much lower assessments required by the Act. We already know that most employers may not want to lead on this, but a great many will certainly follow once a few do it, and they have said so.

It is frequently stated that employers will want to continue to offer plans in order to attract more qualified employees, but this argument seems rather disingenuous. Employers now have an out.

When employers drop their health plans, there is no assessment on the first 30 employees, and then only $2000 for each beyond the 30. Employers can use some of the savings for pay raises, and then the employees, most of whom will be eligible for government subsidies, can select their own plans in the exchanges. Why would employers use health plans as an enticement – plans that are otherwise readily available in the exchanges – when they can use higher wages to compete in the labor markets?

Our experience shows that plans with low actuarial values – usually high-deductible plans – still frequently have premiums that are unaffordable for many. Combining unaffordable premiums with low actuarial values, it won’t be long before middle-income Americans realize that the private insurers have foisted off on us a highly defective product: UNAFFORDABLE UNDER-INSURANCE. You go broke if you buy it, and you go broke if you need to use it!

Single payer, anyone?

Physicians and patients want greater compensation for moving to coordinated care

Posted by on Monday, Mar 14, 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.

Swiss Experiment Shows Physicians, Consumers Want Significant Compensation To Embrace Coordinated Care

By Peter Zweifel
Health Affairs
March 2011

Policy makers in several industrial countries are seeking to limit the rise in health care cost growth by supporting coordinated or integrated care programs, which differ from most prevailing forms of medical organization in how physicians are paid and how they work in groups. However, as long as fee-for-service payment systems remain an option, general practitioners will be reluctant to embrace coordinated care because it would give them less autonomy in how they practice. A study in Switzerland indicates that general practitioners will require a pay increase of up to 40 percent before they are willing to accept coordinated care, and a similar study found that Swiss consumers wanted a substantial reduction in premiums to accept it. These findings suggest that provisions of US health care reform designed to encourage the growth of coordinated care — such as accountable care organizations and medical homes — may face a challenging future.

This Swiss discrete choice experiment, evaluating willingness to pay, indicates that both physicians and patients want greater compensation if they are to shift from the traditional fee-for-service arrangement to a coordinated care program.

Although HHS has not yet released the proposed rules for accountable care organizations, they will be coordinated care entities. The release of the regulations has been delayed because of internal disagreements. The question is, will accountable care organizations be such a turnoff that physicians and patients will want to be compensated if they have little choice but to participate in them?

CBO options for reducing the federal deficit

Posted by on Friday, Mar 11, 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.

Reducing the Deficit: Spending and Revenue Options

Congressional Budget Office
March 2011

This volume — one of several reports that CBO produces regularly for the House and Senate Committees on the Budget — presents more than 100 options for altering federal spending and revenues.

The report begins with an introductory chapter that describes the current budgetary picture and the uses and limitations of this volume. Chapters 2 and 3 present options that would reduce mandatory and discretionary spending, respectively. Chapter 4 contains options that would increase revenues from various kinds of taxes and fees.

You do not have to read this entire 254 page report to have a good idea of some of the options to be considered to reduce our federal budget deficit. Pages viii-xiv of the Table of Contents lists the options for reducing mandatory spending, reducing discretionary spending, and increasing revenues. You can then proceed to read about any of the specific options that you my find intriguing to see what impact they might have on the deficit.

This is important. Right now measures are being advanced that would reduce discretionary spending, partially or completely defunding highly valued programs. Yet there seems to be a consensus that we must proceed next with reductions in mandatory spending, which includes Medicare, Medicaid and Social Security, since these programs constitute a larger and growing component of our federal spending.

As you review the list of options for health spending, it becomes obvious that these proposals are aimed at reducing government spending, but would do so by shifting more costs to patients, especially Medicare beneficiaries who already often bear excessive costs of their health care. We need better coverage for Medicare beneficiaries, not worse.

What almost no one is talking about, but should be our primary consideration for deficit reduction is improving revenues. Quoting from the report:

“Relative to the size of the economy, federal revenues are currently at their lowest level in 60 years. In both 2009 and 2010, revenues equaled 14.9 percent of gross domestic product (GDP). By comparison, they averaged about 18 percent of GDP between 1971 and 2010, peaking at 20.6 percent of GDP in 2000.”

That places us near the bottom of all industrialized nations in tax revenues. Yet we are cutting funding of programs at the same time that we are reducing taxes even further (e.g., failure to end the temporary tax cuts for the rich, or to restore reasonable estate taxes). We don’t have a spending problem; we have a revenue problem!

That said, there is one glaring deficiency in this report, and that is that there is no mention of the efficiencies that are characteristic of a single payer system. Single payer tools would slow future growth in health care spending to sustainable levels, and hasn’t that been what all of the Sturm und Drang has been about?

Commingling Carilion and Aetna

Posted by on Thursday, Mar 10, 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.

Aetna and Carilion Clinic Announce Accountable Care Collaboration

Carilion Clinic
March 10, 2011

Aetna (NYSE: AET) and Carilion Clinic, the largest health care provider in southwest Virginia, today announced their intention to collaborate in an accountable care organization (ACO) initiative. The new model of health care delivery will help lower costs through more effective patient outreach and engagement and a new payment model that rewards providers for the collective outcomes of patients.

“Working together with a shared vision, we believe we can develop a continuum of care that will be a game-changer in the industry and a great benefit to our patients,” said R. Wayne Gandee, M.D., Carilion Clinic’s chief medical officer.

The Aetna-Carilion relationship is ultimately expected to encompass the following key areas:

* co-branded commercial health care plans for businesses and individuals available later this year;

* joint opportunities to better meet the personalized care needs of patients, including  Medicaid beneficiaries in Virginia; and

* new payment models that encourage providers to share accountability to improve patients’ health, including rewards for meeting quality targets and shared costs savings.

“Aetna is exploring new ways to work with health care providers, and we’ve found that these discussions are positively received as we collectively seek to improve the health care system,” said Thomas Grote, president of Aetna’s Maryland, Virginia and Washington, D.C., markets. “Our arrangement with Carilion will provide a foundation to grow these new models of care.”

The patient service mission of not-for-profit Carilion Clinic would seem to have little in common with the for-profit insurance business of investor-owned Aetna. With the pressure on to beat the market by forming accountable care organizations called for in the Affordable Care Act, partnerships such as this that blur the distinction between health care delivery systems and private insurers were fully predictable.

Thank goodness we avoided “government-run” health care by rejecting up front the single payer model of reform. Now we can kick back and relax while we enjoy our “Aetna-run” health care. Or maybe “WellPoint-run.” Or “UnitedHealthcare-run.” Or “Cigna-run.” But we do lose that promise of “choice” since no region will be able to support a broad selection of these organizations accountable to the mega-insurance corporations.

What was it that health care reform was all about? I seem to have forgotten.

Massachusetts state employees being shoved into limited-network plans

Posted by on Wednesday, Mar 9, 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.

Plan with low rate hikes for health coverage has fewer choices

By Sean P. Murphy
The Boston Globe
March 8, 2011

At a time when most health insurance companies are raising premiums by 10 percent or more, the Group Insurance Commission, which insures about 185,000 state employees and their families, last week showed them all up by limiting 2011 increases to just an average 2.4 percent.

But to achieve that goal, the GIC is counting on thousands of subscribers to give up their present plans for much cheaper ones that limit their choices of doctors and medical facilities.

The GIC has offered limited-network plans for years, but fewer than 10,000 of GIC’s 350,000 members have joined so far. Last year, the GIC added new limited-network plans offered by Harvard Pilgrim Community Health and Tufts Health Plan, but those plans, too, attracted limited interest.

To help jump-start migration to the less costly plans, the GIC, beginning April 9, will require every subscriber to pick from among the GIC’s 19 plans, which include preferred-provider organizations (PPO) that allow wide choice and health maintenance organizations that allow moderate choice but charge higher premiums than the more restrictive limited-network plans.

Any subscriber who fails to designate a plan in the one-month period ending May 9 will be dropped from their present plan and automatically enrolled in the cheapest — and most limited — plan on the GIC menu.

We keep looking at Massachusetts since it serves as a prototype for national reform under the Affordable Care Act. Under this latest development in Massachusetts, state employees are being shoved into limited-network plans – significantly limiting their choices of health care professionals and institutions.

One of the primary defects with the insurance exchange model of reform is that emphasizing affordability of health plans rather than health care itself results in a transformation to ever more inferior insurance products.

The goal of reform should not be to take away choices in actual health care, nor to shift more of the costs to those who need health care. Yet those are precisely the trends that we are seeing and will continue to see under a model of competition between private health plans.

Under a single payer national health program we would have free choice of our health care professionals and hospitals, and financial barriers to care would be removed. No wonder that we keep hearing that if (whatever) we’re going to end up with single payer. Can hardly wait.

Reform in Massachusetts fails to reduce medical bankruptcies

Posted by on Tuesday, Mar 8, 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.

Medical Bankruptcy in Massachusetts: Has Health Reform Made a Difference?

By David U. Himmelstein, MD, Deborah Thorne, PhD, Steffie Woolhandler, MD, MPH
The American Journal of Medicine
March 2011

Despite a marked declined in the uninsurance rate in Massachusetts since the implementation of health reform, the proportion of bankruptcies that occurred in the wake of medical problems has not decreased significantly, and the absolute number of medical bankruptcies has actually increased by one third.

What accounts for the seemingly paradoxical trends of increasing coverage yet stable, or even increasing (on a per capita basis), medical bankruptcy rates? Health costs in the state have increased sharply since reform was enacted. Even before the changes in health care laws, most medical bankruptcies in Massachusetts, as in other states, affected middle-class families with health insurance. High premium costs and gaps in coverage — copayments, deductibles, and uncovered services — often left insured families liable for substantial out-of-pocket costs. None of that changed.


The recently enacted national health reform law closely mirrors Massachusetts’ reform. That reform expanded the number of people with insurance but did little to upgrade existing coverage or reduce costs, leaving many of the insured with inadequate financial protection. Our data do not suggest that health care reform cannot sharply reduce the number of medical bankruptcies. Indeed, medical bankruptcy rates appear lower in Canada, where national health insurance provides universal, first dollar coverage. Instead, these data suggest that reducing medical bankruptcy rates in the United States will require substantially improved — not just expanded — insurance, as well as better disability insurance programs to provide income support to ill individuals and family caregivers.

“Unaffordable underinsurance” is rapidly becoming the new standard in the United States. Even with subsidies, insurance premiums are ever less affordable, and for those who need health care, out-of-pocket spending creates significant financial hardships. Since reform under the Affordable Care Act closely mirrors that of Massachusetts, their current experience with medical bankruptcy portends the future of medical bankruptcy throughout the United States.

The Massachusetts experience shows that merely providing insurance coverage to the majority of the population is not enough. The quality of the insurance coverage is crucial. In 2009, 89% of Massachusetts debtors and all their dependents had health insurance at the time of filing, yet the insurance was not effective in reducing the rate of medical bankruptcy below levels that already existed before the full implementation of the Massachusetts health reform program.

Other nations with first dollar coverage do not see medical bankruptcies, even though they cover everyone at a much lower cost. We could do the same here. In fact, we most likely will once the nation understands that “unaffordable underinsurance” is rapidly becoming the new national norm – now carved in stone by the Affordable Care Act. We just need more highly skilled artisans to rework that stone.

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