NCQA’s ‘medical home’ baffles RAND

Posted by on Friday, Aug 21, 2015

Evaluation of CMS FQHC APCP Demonstration: Second Annual Report

By Katherine L. Kahn et al.
RAND Corporation, July 2015

In December 2009, President Barack Obama directed … the Centers for Medicare and Medicaid Services (CMS) … to implement a three-year demonstration intended to support the transformation of federally qualified health centers (FQHCs) into advanced primary care practices (APCPs) in support of Medicare beneficiaries. … For the demonstration, CMS recognizes as advanced primary care (APC) the type of care that is offered by FQHCs that have achieved Level 3 recognition as a patient-centered medical home (PCMH) from the National Committee for Quality Assurance (NCQA).

RAND is conducting an independent evaluation of the FQHC APCP demonstration for CMS. The evaluation includes studying the processes and challenges involved in transforming FQHCs into APCPs and assessing the effects of the APCP model on access, quality, and cost of care provided to Medicare and Medicaid beneficiaries currently served by FQHCs. [p. xi]

As of the end of the demonstration’s ninth quarter, we know that costs for demonstration [PCMH] sites are higher than for comparison sites. [p. xvii]

In July the RAND Corporation released a report on the second year of CMS’s three-year “medical home” experiment with federally qualified health centers (FQHCs). The report concluded the clinics in the “medical home” arm of the experiment were spending more money than clinics in the control arm, and that this was unlikely to change by the end of Year 3.

Sad to say, we’re never going to know what it was the experimental clinics did that raised their costs. It may well be those clinics used their “care management fees” to hire more social workers who in turn persuaded more people living near the clinics to make appointments, and that in turn led to greater utilization of medical goods and services. Or perhaps the fees were used to hire more patient educators, and the patient education induced existing patients to visit their clinic more often, and that in turn caused more hospitalizations.

We’re never going to know. RAND may produce some anecdotal evidence that the hypotheses I suggested above are true, or any of numerous other hypotheses could be accurate. But RAND will not produce empirical evidence. The primary reason is the maddeningly vague definition of “medical home.” The “features” that “medical homes” are said to possess are so poorly defined they cannot be reduced to measurable components.

It didn’t have to be this way. When President Obama ordered CMS to study the “medical home,” CMS could have used its discretion to test a version of the “home” that was much more clearly defined than the amorphous version adopted by the Agency for Healthcare Research and Quality, the National Committee for Quality Assurance (NCQA), and other self-appointed arbiters of what the phrase means. Instead, CMS punted – they said a “medical home” would be whatever the NCQA says clinics must do to qualify as a “level 3 patient-centered medical home” (PCMH). But NCQA’s requirements for PCMH certification are as vague as the features NCQA and other PCMH advocates claim PCMH’s possess, and in most cases the requirements bear no relation to the alleged features.

The RAND Corporation either could not or would not insist that CMS or NCQA define the PCMH more precisely before signing a contract with CMS to “evaluate” the FQHC PCMH demonstration.

Thus did the impossible challenge of evaluating the amorphous, elusive PCMH bounce down from Obama to CMS to RAND.

To grasp the impossibility of the challenge RAND signed up for, run your eye over the two tables below. Table 1 lists the seven “features” of the PCMH according to NCQA. Table 2 lists NCQA’s ten “must-pass” requirements for PCMH certification. Put yourself in RAND’s shoes and ask yourself two questions: First, how would you operationalize (reduce to measurable components) the “features” listed in Table 1; second, can you discern any relationship between the ten “must-pass elements” and the seven “features”?

Table 1: Seven “features” of the PCMH according to NCQA

(1)    Personal physician: Each patient has an ongoing relationship with a personal physician
(2)    Physician directed medical practice: The personal physician leads a team of individuals … who collectively take responsibility for ongoing patient care
(3)    Whole person orientation
(4)    Care is coordinated and integrated
(5)    Quality and safety are hallmarks of the medical home
(6)    Enhanced access to care is available through … innovative options for communication
(7)    Payment appropriately recognizes the added value provided to patients who have a patient-centered medical home


Table 2: NCQA’s ten “must-pass elements” for certification as a Level 2 or 3 PCMH

(1)    Written standards for patient access and patient communication
(2)    Use of data to show standards for patient access and communication are met
(3)    Use of paper or electronic charting tools to organize clinical information
(4)    Use of data to identify important diagnoses and conditions in practice
(5)    Adoption and implementation of evidence-based guidelines for three chronic or important conditions
(6)    Active support of patient self-management
(7)    Systematic tracking of tests and follow-up on test results
(8)    Systematic tracking of critical referrals
(9)    Measurement of clinical and/or service performance
(10)  Performance reporting by physician or across the practice

Table 1 is riddled with mushy, sometimes tautological phrases such as “ongoing relationship,” “physician-directed,” “whole person” and “hallmarks” (I have italicized amorphous phrases). How is RAND supposed to distinguish, for example:

* a doctor-patient relationship that is “ongoing” from one that is not going,
* a “personal physician” from an impersonal physician,
* a “team of individuals” from a plain-vanilla staff, or
* “whole person orientation” from, say, “half-person orientation”?

How does RAND determine when “quality and safety” have become “hallmarks”? If we stumbled upon a “hallmark” in a clinic, how would we know?

When you’re done struggling with the questions generated by the happy talk in Table 1, then ask yourself whether the ten requirements in Table 2 answer any of the questions generated by Table 1. The answer is no, they just add to the clutter.

There are two reasons for this. The first is that the ten requirements are almost as vaguely described as the seven “features” (I have italicized mushy phrases in Table 2). What sense, for example, is RAND supposed to make of requirement 6, the one about “active support of patient self-management”? How is RAND supposed to know:

* what a “self-managed” patient is as opposed to whatever the opposite of “self-managed” is,
* what constitutes “support,” and once that has been defined, what constitutes “active support” as opposed to (help me out here) inactive support?

What do “important diagnoses” (requirement 4) and “critical referrals” (requirement 8) mean? Why would some diagnoses be unimportant and some referrals uncritical?

The second reason for the disconnect between Tables 1 and 2 is that there is no obvious relationship between the seven “features” and most of the ten requirements. Which of the ten requirements would you say “transforms” a mere staff into a “team,” “transforms” an ordinary doctor-patient relationship into an “ongoing relationship,” or is remotely related to “appropriate payment”? Answer: None.

What I see in the ten requirements is an obsession with measuring and reporting. Nine of the ten requirements mandate measurement and/or reporting. (Only the “active support of patient self-management” requirement does not clearly require measurement, but it might. The phrase is just too vague to say for sure).[1] It is reasonable to conclude that the most accurate “definition” of a “medical home,” according to NCQA, is a clinic that agrees to measure and report on a few vaguely defined policies and activities. This would be like defining a “cargo-centered” trucking company as one that signs a document with the National Committee on Trucking Quality to obey the speed limits, to stop by the side of the road now and then to be weighed, and to limit the number of hours its drivers can go without sleep. These promises tell us nothing about what a “cargo-centered” trucking company does.

My characterization of NCQA’s “definition” is supported by RAND’s finding that PCMH staff felt overwhelmed by NCQA’s documentation requirements. As RAND put it at page 37:

The problem of documentation in general for the NCQA application process was mentioned as an overarching concern for a majority of the FQHC respondents. Not only was there a concern about documenting the specifics of the … NCQA PCMH standards, the respondents also described the demanding nature of documenting every task that a clinician or provider engages in during a patient encounter.

To return to the problem I raised at the outset: If NCQA’s “definition” of a PCMH is essentially a clinic that agrees to document vaguely defined standards and policies that have no obvious relationship with the “features” NCQA says PCMHs possess, how is a CMS contractor like RAND supposed to determine why PCMH clinics raised Medicare’s costs? They can’t. RAND can ask the same questions NCQA asks during its audits – do PCMHs have a document on file explaining their “standards for patient communication,” for example. But since this standard will vary by clinic (thanks to the vague definition of this NCQA requirement), and because it might not even be implemented effectively or at all, RAND has no usable data on this variable.  Ditto for the other requirements. With no useful data on the “standards for patient communication” and the other requirements, RAND cannot test these variables to assess their impact on the dependent variable – Medicare expenditures.

RAND offers no solution. Its analysts merely state they will compare outcomes of PCMH with non-PCMH clinics using claims data and answers from patient surveys about their “experiences with care.”[2] Claims data will tell RAND whether expenditures were higher for PCMH clinics, and patient surveys will answer general questions about patient perceptions, e.g., “satisfaction” with the timeliness of care and whether doctors were clear in their instructions or good listeners. But claims data and patient survey responses contain no information about what it is PCMHs do that makes them different from non-PCMHs.

This quandary is, of course, not peculiar to CMS’s FQHC “medical home” demo. It is afflicts every test of the “medical home” that uses NCQA’s flabby definition.

The inability of RAND, CMS or anyone else to determine what it is PCMH clinics do raises another obvious problem: If we cannot determine what PCMHs do, how do we know what PCMHs do with the “care management fees” CMS pays them? I’ll address that question shortly on this blog.


1. If evidence supported NCQA’s assumption that measuring and reporting improves quality, we could at least say the requirements have some link with the “quality and safety” feature in Table 1. But the evidence on that issue is mixed.

2. Here is a quote from the RAND study: “Key Policy Question 2 focuses on differences between demonstration and comparison sites. … To answer this policy question, the evaluation focuses on metrics spanning 12 research questions … including: (1) continuity, (2) timeliness, (3) access to care, (4) adherence to evidence-based guidelines, (5) beneficiary ratings of providers, (6) effective beneficiary participation in decision making, (7) self-management, (8) patient experiences with care, (9) coordination of care, (10) disparities, (11) utilization, and (12) expenditures. Some of these metrics are evaluated using claims data, others by beneficiary report.” (p. xvi)

Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.

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Over 2 million exchange enrollees forgo cost-sharing reductions

Posted by on Thursday, Aug 20, 2015

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.

More than 2 Million Exchange Enrollees Forgo Cost-Sharing Assistance

By Elizabeth Carpenter
Avalere, August 19, 2015

A new Avalere analysis finds that more than 2 million exchange enrollees eligible for cost-sharing reductions (CSRs) are not receiving the subsidies because they have selected a non-qualifying plan. In addition to the more publicized tax credits that lower consumers’ monthly premiums, exchange enrollees with incomes between 100 and 250 percent ($11,770 – $29,425) of the federal poverty level are eligible for CSRs. Exchange consumers must enroll in a plan on the silver metal level to access CSRs.

Specifically, the analysis finds that of the 8.1 million individuals enrolled in exchanges in 2015 who earn incomes that make them eligible for CSRs to reduce out-of-pocket costs to write my essay, only 5.9 million are actually receiving them. This leaves 2.2 million consumers who may be paying more out-of-pocket than intended under the Affordable Care Act (ACA) because they have selected a plan that does not qualify.

“Consumers are picking plans on exchanges based on premiums, rather than out-of-pocket costs,” said Dan Mendelson, CEO at Avalere.

The difference between the number of exchange enrollees eligible for CSRs and those enrolled may be a result of consumers’ focus on premiums. For example, some CSR-eligible consumers are likely enrolling in lower-premium bronze plans, rather than the required silver plans. Meanwhile, other consumers may not be aware that CSRs are available and the benefits they offer.

The Congressional Budget Office (CBO) estimates that consumers will continue to forgo CSRs in the future. Indeed, the CBO projects 3 million individuals  who are eligible for CSRs will forgo subsidies by signing up for a bronze plan in the years after 2015.…

One of the more prominent problems with our dysfunctional system of financing health care is that the first decision faced by health care “consumers” is how much they are willing to pay towards the insurance premium, whether paying in full or sharing the cost with an employer or public program. People who are relatively healthy and do not expect to need much health care and whose incomes are limited will tend to select a plan with a lower premium regardless of the plan benefits.

A prime example is found in this report from Avalere. More than 2 million people who would be eligible for cost-sharing reductions if they selected qualifying silver level plans instead select bronze plans with their lower premiums, disqualifying them for the cost-sharing reductions. If they either have or should develop significant medical conditions, they are much worse off financially by having selected a bronze plan.

Another example of selecting plans based on the premiums has been the increase in the prevalence of high-deductible plans, selected because of their lower premiums. Once again, those who develop significant problems with dissertation on are worse off financially with high-deductible plans.

Shopping for cheaper premiums does not exist in a single payer system since the entire system is financed through equitable taxes rather than being financed on an individual basis, and there is no need to shop for plan benefits since everyone receives the same comprehensive benefits.

Instead of having a system wherein individuals are cornered into selecting a plan that is not in their best interests, everyone could participate in a system that is efficient, equitable, comprehensive and affordable for all – a single payer national health program.

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Fundamental flaw of Republican health reform proposals

Posted by on Wednesday, Aug 19, 2015

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.

Scott Walker, Marco Rubio Propose ‘Plans’ to Replace Obamacare

By Jonathan Chait
New York Magazine, August 18, 2015

Today, Scott Walker and Marco Rubio have published plans — really, not so much plans as skeletal descriptions of planlike concepts — to replace Obamacare. Appealing to the general election requires them to promise something to compensate the victims of repeal. How will they fund that something? This is the basic problem that for decades has prevented Republicans from offering a health-care plan. Rubio and Walker show that they still have no answer.

The main reason people lacked insurance before Obamacare is that they did not have enough money to afford it. Some of those uninsured people had unusually high health costs. Some of them had unusually low incomes. Boiled down, Obamacare transferred resources from people who are rich and healthy to people who are poor and sick, so the poor and sick people can afford insurance.

Walker and Rubio are fairly clear about their plans for regulating the insurance market. They want to go back to the pre-Obamacare, deregulated system. They’d eliminate the requirements that insurance plans cover essential benefits, and let them charge higher prices to sicker customers. That’s good for people who have very limited medical needs (as long as they never obtain a serious medical condition, or have a family with somebody with a serious medical condition). It’s bad for people who have, or ever will have, higher medical needs.

Both Walker and Rubio promise to take care of people with preexisting conditions by creating separate “high-risk pools.” That is a special kind of insurance market for people with expensive medical conditions. As you may have guessed, insurance for people with expensive medical needs is, well, expensive. Making that insurance affordable therefore requires lots of subsidies from the government. Where would Walker and Rubio get the money for that? They don’t say.

Both Walker and Rubio propose to cut funding for Medicaid, but this doesn’t create much room to subsidize coverage, since Medicaid is already much cheaper than Medicare or private insurance. Republicans are willing to cut Medicaid because they’re generally willing to cut programs that focus on the very poor, but there’s not much blood to be drawn from this stone.

It is tempting to treat the lack of specifics in the Republican health-care plans as a problem of details to be filled it. But it is not a side problem. It is the entire problem. They will not finance real insurance for the people who have gotten it under Obamacare, nor will they face up to the actual costs they’re willing to impose on people. The party is doctrinally opposed to every available method to make insurance available to people who can’t afford it. They have spent six years promising to come up with an alternative plan, and they haven’t done it, because they can’t.…

Much has been written this week about the proposals of presidential candidates Gov. Scott Walker and Sen. Marco Rubio for replacing the Affordable Care Act (ACA or Obamacare) once it is repealed. Most articles discuss the few specifics of their proposals that they have provided, but Jonathan Chait’s stands out because he describes the underlying fundamental flaw common to all conservative proposals for reform: for everyone to have affordable access to health care, there must be a large transfer from the healthy to the sick and from the wealthy to those with lower incomes, and the conservative proposals fall far short on the size and direction of the transfers that are needed.

Chait exits the topic leaving ACA in place, but there is more to be said. Although ACA actually did expand the necessary transfers, it still falls short of what is needed, plus too many inequities are perpetuated. Patches to ACA would still leave in place the fundamentally flawed infrastructure, and the Republican replacements are even more fundamentally flawed because they would worsen the financial barriers to care, especially by failing to include adequate transfers in their models.

A much more efficient and equitable method of achieving the necessary transfers would be to enact a single payer national health program. If the Republicans really do want a better replacement for Obamacare, maybe they should seriously consider single payer.

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PolitiFact accurate but misleading on Sanders’s claim of U.S. spending twice as much

Posted by on Tuesday, Aug 18, 2015

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.

Bernie Sanders repeats flawed claim about U.S. health care spending compared to other countries

By Will Cabaniss
PolitiFact, August 16, 2015

Democratic presidential candidate Bernie Sanders is on a campaign for “Medicare for all” — or at least something like it.

Sanders, an independent senator from Vermont who identifies as a socialist, told NBC’s Meet the Press moderator Chuck Todd to look at how much the country spends compared to the rest of the world as a reason for a single-payer system.

“We spend almost twice as much per capita on health care as do the people of any other country,” Sanders said.

It’s a striking claim, and one we heard from Sanders six years ago.

We rated the claim False then, and it’s still wrong now.

We looked at data from the Organization for Economic Cooperation and Development (OECD), widely cited by experts as an authoritative source for this information.

In 2007, the United States led the world in health care spending at $7,167 per capita, according to the OECD. Norway and Switzerland followed at $4,579 and $4,568, respectively.

The United States maintained its spending lead in the years that followed. But Sanders puts the difference too strongly when he says U.S. spending is “almost twice” per capita of “any other country.”

According to the OECD’s most recent data, U.S. spending grew to $8,713 per capita in 2013. Switzerland and Norway came in second and third at $6,325 and $5,862 per capita, respectively.

Had Sanders fine-tuned his talking point by claiming that the United States spends twice as much per capita as the average developed country, his statement would been accurate. Average per capita spending is less than $3,500 across the 32 countries listed in the OECD database. That’s 40 percent of what the United States spends per person.

Our ruling

Sanders said that “we spend almost twice as much per capita on health care as do the people of any other country.”

The United States spends more on health care per capita than other countries, but not always twice as much. Sanders’ comment suggests the United States outpaces all other countries more than it actually does. European countries with extensive social service networks aren’t so far behind the United States.

We rate his statement False.…

OECD Health Statistics 2015:

Sen. Bernie Sanders told NBC’s Chuck Todd, “We spend almost twice as much per capita on health care as do the people of any other country.” You’ve probably heard, or thought you heard, similar statements from others, including some of the PNHP leadership. But this specific statement is technically incorrect.

Sanders did include the important specification that he was referring to “per capita” spending, but by specifying that our per capita spending was almost twice that of any other country, that would place the second highest spending country at slightly over half of our spending. That is not correct.

What he likely intended to say was, “We spend almost twice as much per capita on health care as the average of developed nations,” or, “… industrialized nations,” or, “… wealthy nations,” or, more specifically, “… as the average of all OECD nations.” PolitiFact indicates that such a statement would have been accurate.

Yet this statement still isn’t quite accurate. In 2013, the latest year for which we have full data, the United States spent $8713 per capita, whereas the OECD average was $3453 per capita. That is not “almost twice” the OECD average, but rather the United States is spending over TWO AND A HALF TIMES AS MUCH PER CAPITA as the average per capita spending of OECD nations (2.52 times as much).

PolitiFact rules, “Sanders’ comment suggests the United States outpaces all other countries (in spending) more than it actually does.” In fact, the United States outpaces the average per capita spending of other developed nations by even more than what Sanders intended to say.


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Health care injustice for California’s high-needs children

Posted by on Monday, Aug 17, 2015

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.

California’s Plan To Absorb Medically Fragile Children Into Managed Care Proves Controversial

By Barbara Feder Ostrov and Anna Gorman
Kaiser Health News, August 17, 2015

When Kausha King’s son Christian was born with cerebral palsy, along with a seizure disorder and lung disease, doctors told her he would not live past the age of three. Today, Christian is 18, and although he cannot walk or speak, he is happy and thriving, King says.

King credits much of her son’s progress to a little-known state program known as California Children’s Services (CCS), which pays for specialized medical care for children with severe illnesses or birth defects.

Beginning next year, state officials essentially want to fold the $2 billion program, which serves an estimated 180,000 children younger than 21, into its vast system of Medi-Cal managed care.

But families like King’s, along with children’s advocates and pediatric medical centers, are strenuously opposed. They say Medi-Cal managed care hasn’t worked well for vulnerable populations and is particularly risky for fragile kids whose lives depend on access to highly specialized care.

“It feels like our children are going to be dumped in to this system that doesn’t even seem to be working for healthier children,” said King, who lives in Concord, Calif. and works as a liaison for families of children with special needs. “Children like Christian require a different level of support than your average child.”

At issue are two separate programs whose beneficiaries overlap. About 90 percent of children served by CCS also qualify for Medi-Cal, the public insurance program for low-income Californians. Medi-Cal covers their general medical care, while CCS covers services related to specific conditions such as spina bifida, cancer, cystic fibrosis and sickle cell disease.

CCS pays a fee for each service provided, whereas Medi-Cal increasingly is switching to a managed care approach, in which medical services are coordinated and covered under a single health plan for a fixed monthly payment.

Many parents and consumer advocates are skeptical. Similar transitions of elderly, disabled and child populations from traditional fee-for-service Medi-Cal into managed care programs have proved controversial.

These critics point to a scathing report from the California State Auditor in June, which found that the state could not assure that its Medi-Cal managed care networks were adequate and that thousands of calls to an ombudsman’s office went unanswered every month. They also refer to a lawsuit pending in Los Angeles, alleging disabled people were denied crucial medications, tests and treatment by Medi-Cal managed care plans.

(Ann-Louise Kuhns, president and CEO of the California Children’s Hospital Association) said the state’s proposal threatens children’s access to the pediatric specialists who are most familiar with them and their rare diseases.

“These (managed care) plans typically don’t have these specialty providers in their networks,” she said.…

The origins of California Children’s Services (CCS) (formerly Crippled Children’s Services) date back almost a century (1927). It has been a phenomenal program ensuring care for these children with special needs. Now the state wants to transfer these children into Medi-Cal managed care programs (Medicaid). Ouch!

CCS is part of the traditional culture of California health care. Children’s hospitals, academic institutions, specialists and sub-specialists are readily available to meet the needs of these unfortunate children, simply because it’s always been that way. Well, really more than that, because that is what they do. But no thought is ever given to turning these children away.

In contrast, Medi-Cal has been chronically underfunded and has one of the lowest payment rates in the nation. Many providers refuse to accept Medi-Cal patients (and they are “providers” when they let money issues trump their professional obligation to care for the infirm). Now it is even worse in that the Medi-Cal managed care organizations limit patient access to their own contracted networks. Experience to date suggests that these networks are inadequate for basic, primary care services, and access to more specialized services is much worse.

California Department of Health Care Services director Jennifer Kent said that this is not about saving money, but rather that children can benefit by being managed in a system where the whole child is treated by one plan. But when the decision was made to transfer Medi-Cal patients to managed care programs it was about saving money, according to state announcements at that time.

CCS was all about getting the care that these children needed when they needed it. Medi-Cal managed care is about keeping patients away from “excessive” specialized care by coordinating their care through overworked primary care professionals who do not have the time nor expertise to meet many of the needs of these children with their complex disorders.

This should not to be construed as a statement condemning integrated health care. Just the opposite. Under a single payer system, our entire health care delivery system can be considered to be a single integrated system. Primary care provides an entry into a system in which the most appropriate care can be arranged – the best of integrated health care.

It was a wise move when the precursor of CCS was established early in the last century. It was a wise moved when they abandoned the label, “crippled.” It was a wise move when they perpetuated the program instead of folding it into California’s overworked and underfunded Medi-Cal program. But is was a terrible move when, for cost-saving reasons, they transferred Medi-Cal patients into managed care plans. Moving CCS patients into the same program is nothing short of tragic.

We need a single payer system so that we can get the bureaucrats and their private third party payers out of our way as we medically manage health care based on patient needs, rather than us managing health care dollars. Yes, we need public administrators to manage distribution of the funds, but we need to be free to advocate for our patients in a system designed to ensure access, not to prevent it.

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Do Amy Finkelstein and colleagues show that Medicaid has little value?

Posted by on Friday, Aug 14, 2015

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 Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment

By Amy Finkelstein, Nathaniel Hendren & Erzo F.P. Luttmer
National Bureau of Economic Research, Working Paper 21308, June 2015


We develop a set of frameworks for valuing Medicaid and apply them to welfare analysis of the Oregon Health Insurance Experiment, a Medicaid expansion for low-income, uninsured adults that occurred via random assignment. Our baseline estimates of Medicaid’s welfare benefit to recipients per dollar of government spending range from about $0.2 to $0.4, depending on the framework, with at least two-fifths – and as much as four-fifths – of the value of Medicaid coming from a transfer component, as opposed to its ability to move resources across states of the world. In addition, we estimate that Medicaid generates a substantial transfer, of about $0.6 per dollar of government spending, to the providers of implicit insurance for the low-income uninsured. The economic incidence of these transfers is critical for assessing the social value of providing Medicaid to low-income adults relative to alternative redistributive policies.


Valuing Medicaid

By Harold Pollack, Bill Gardner & Timothy Jost
The American Prospect, July 26, 2015

How Valuable Is Medicaid?

An important recent paper by Amy Finkelstein, Nathaniel Hendren, and Erzo Luttmer, “The Value of Medicaid,” tries to determine how much it is worth, but in a narrow way whose baseline assumptions understate the value of the program. The authors use data from the Oregon Health Insurance Experiment. The experiment worked like this: Oregon had more poor and uninsured people than they could insure under Medicaid. So they held a lottery for who could apply for Medicaid coverage. Finkelstein and her colleagues realized that this lottery was in effect an experiment that would allow them to study the impact of Medicaid coverage on the previously uninsured.  Following a reasonable — but contestable — economic methodology, Finkelstein and colleagues estimated an equivalent dollar-value to the improved health observed among lottery winners. The authors then explored what happened to a dollar that was spent on providing Medicaid: Who actually benefited and by how much? And would recipients have been willing to pay for their Medicaid benefits if they had to?

The study’s major findings, widely reported in The Wall Street Journal, Vox, Forbes, and many other media outlets, can be summarized as follows:

  1. Uninsured people who get Medicaid only gained from 20 to 40 cents in value from each dollar spent by the government.
  2. A principal reason why the benefit of getting insured was so small is that when uninsured people received care, they typically paid only 20 cents on the dollar for those services. Safety-net providers, state or local government, friends, relatives, or someone else absorbed the remaining costs. When a recipient became insured, Medicaid paid some of these costs at the rate of about 60 cents per dollar.
  3. Because a large fraction of Medicaid expenditures financed care that recipients would have received anyway (for example, by leaving bad debt at hospitals), it is unclear whether recipients themselves would have been willing to pay the full costs of Medicaid.

While the Oregon Health Insurance Experiment was a well-designed study, too few of the study participants experienced serious medical conditions to investigate how Medicaid affected their health or quality of life. In addition, the experiment — and thus Finkelstein, Hendren, and Luttmer’s study — did not examine how Medicaid affected recipients’ families or the health-care institutions that care for low-income uninsured patients. Medicaid’s long-term benefits as an investment in infants and children were also beyond the scope of the Oregon experiment.

But perhaps the most important limitation of the study stems from an assumption that many readers would be unlikely to notice. Finkelstein and her colleagues placed a very low value — $25,000 — on a year of additional life for Medicaid beneficiaries. The typical threshold used in health services research is much larger, in recent studies far above $100,000 per additional year of (healthy) life. Yet because the median income of the Oregon study participants was about one-fourth of the median income in the United States, the researchers chose to value an additional life-year at about one-fourth of the usual threshold. This assumption powerfully frames everything that follows in this analysis. After all, if you start out by assuming that Medicaid beneficiaries’ lives are worth very little, you will find that it is not worth spending much money to prolong them.

Although Finkelstein, Hendren, and Luttmer’s baseline assumptions are methodologically defensible, they have radical implications that are rarely so bluntly applied in other domains of health-policy research. Choices about how to financially value the health of poor people relative to the health of others are inevitably both politically and morally freighted. It strains credulity, for example, to imagine American policymakers using this low a value for life when analyzing mammography, prostate cancer treatment, or implantable cardiac defibrillators for seniors.

The authors are careful not to make any normative statements based on these findings, but others such as Michael Cannon, Tyler Cowen, and John Graham have done so. They make two arguments: First, Medicaid is an inefficient way to benefit the poor. If a Medicaid dollar results in only 20 cents in benefit to a previously uninsured person, wouldn’t it be more efficient to simply give that person a dollar? And, second, Medicaid is actually a subsidy for people other than those it ostensibly helps.

We see matters rather differently. Economists have long understood that poor people would prefer cash to subsidized health insurance (especially if they can still get health care for free). So why does every developed country, including the United States, subsidize health insurance for the poor? Part of the reason is that those countries have broader moral and public-health criteria for thinking about health insurance and poor people’s lives. Universal health care expresses a commitment to the well-being of fellow citizens. Everyone should have access to a decent minimum of care; caring for others in distress is a primary expression of human solidarity.


Quotes from conservatives cited above:

Michael Cannon: “The (Finkelstein et al) trio found that Medicaid enrollees receive very little benefit from each dollar spent on Medicaid.”

Tyler Cowan:  “An implication of this is that the poor would be better off getting direct cash transfers.”

John Graham:  “Only 20 to 40 cents of Medicaid spending actually goes towards patients’ welfare.”

This NBER study by Amy Finkelstein and her colleagues on the value of Medicaid is important in that it is being used by conservatives to discredit Medicaid, giving fodder to opponents of this program. For that reason, it is important to understand the limitations of the narrow assumptions used in the study, and that is why the article by Harold Pollack and his colleagues is so important.

The Finkelstein article is challenging for the non-economist, but one assumption stands out as a basis for countering the claims of the conservatives who would use this to diminish support for Medicaid. That assumption in this study is that a year of life is worth about $25,000 for Medicaid beneficiaries when most studies assign a value closer to $125,000 per quality-adjusted life year ($100,000 to $150,000). When private insurance extends life by a year it is worth about five times what that same year of life would be worth for a low-income Medicaid beneficiary, so this study seems to assume. According to Pollack, et al., “… if you start out by assuming that Medicaid beneficiaries’ lives are worth very little, you will find that it is not worth spending much money to prolong them.”

Another bizarre line of reasoning is that much of the Medicaid money does not benefit the patient because it goes to physicians, hospitals, and Medicaid managed care organizations. The assumption seems to be that if the patient was not covered by Medicaid, the care would be provided anyway on a charity basis. Thus the patient does not receive any benefit from Medicaid because charity care and care under Medicaid are supposedly the same (not true), whereas the physicians and hospitals would benefit by receiving Medicaid income for what would otherwise be charity care. Would these conservatives seriously contend that private insurance provides little value for patients since the money goes to the physicians, hospitals and insurers and not to the patient? Of course not. Private insurance funds are used to purchase health care, providing considerable value for the patient. So how can they say that Medicaid funds are simply diverted to the health care delivery system, providing little value for the patient?

This is yet one more study to come out of the Oregon Health Insurance Experiment. The raw data in these studies are valid but the assumptions made and the interpretations extrapolated from them are being used to make claims such as, “Medicaid enrollees receive very little benefit from each dollar spent on Medicaid.” Medicaid saves lives, reduces suffering, and prevents financial hardship. That has real value.

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Is patching ACA the best approach for now?

Posted by on Thursday, Aug 13, 2015

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.

Next Steps for the Affordable Care Act

By Linda J. Blumberg, John Holahan
Urban Institute, August 12, 2015

While the ACA has already had some very important successes, simply put, there has never been enough funding, given how ambitious the goals of the law were—for example, substantially reducing the number of uninsured, ending discrimination against those with health conditions, and controlling health care costs.

Every effort was made to keep the costs of the law under a trillion dollars over 10 years, which amounted to about 0.7 percent of GDP. This amount was simply not adequate, given the problems the nation faced in the health care sector. In order to allow the ACA to meet and exceed its long-term objectives, additional investments should be made to improve affordable access to care and bolster administrative capacity.

Affordability concerns

Under the ACA, significant strides have been made in increasing the affordability of coverage and reducing the number of uninsured by 15 million people. This was done in an environment with surprisingly moderate premiums in the private nongroup insurance market and prohibitions on discrimination against those with health problems. However, despite these achievements, affordability remains the most often stated reason for remaining uninsured.

  • As it now stands, premium and cost-sharing subsidies are not generous enough to make coverage affordable for large numbers of low-income Americans.
  • Low-income families are often unable to obtain subsidized coverage if one worker in the family receives an offer of affordable single coverage through an employer.
  • Following the Supreme Court decision in 2012, which essentially left Medicaid expansion up to individual states, 21 states still have not expanded eligibility for that program. That leaves a significant gap between those Medicaid eligible prior to the ACA and those eligible for federal subsidies through the marketplaces.

Administrative concerns

In addition to these affordability issues, the significant reforms in the ACA require serious attention to administration. Much of the need for administrative effort is a consequence of building a system around competing private insurers. This requires a complex and flexible IT apparatus, continuing strategies and structures for broad-based education, outreach and enrollment assistance, and effective approaches for oversight and enforcement of insurance regulation.

  • Experience with IT systems has been decidedly mixed, with some state marketplaces working effectively, some moving to the federal system, and some moving to well-functioning systems developed for other states. But the most promising systems, including, require more funding than they have thus far received.
  • Education, outreach, and enrollment assistance needs are not diminishing, although the current funding approach appears to treat it that way.
  • Regulatory oversight and enforcement resources have yet to be allocated sufficiently.

Our solutions

All of these issues can only be addressed with additional funding, and the amount that is needed is trivial as a share of the economy. We propose the following:

  • Make reductions in the premiums and cost-sharing (deductibles, co-payments, coinsurance) that low-income people pay to purchase coverage through the nongroup marketplaces.
  • Make it possible for families to receive financial assistance for the purchase of marketplace coverage even if a family member has an affordable offer of single coverage through an employer.
  • Make it an option for states to expand Medicaid to those at or below only 100 percent of the federal poverty level to induce more states to step forward.
  • Make permanent a significant federal contribution to administrative costs. This includes IT systems, but also the human support that is needed, like call centers and a permanent cadre of personnel to help individuals get enrolled both during open enrollment and during special enrollment periods. Plus, make a federal investment in ensuring appropriate oversight and enforcement of insurance regulations.

How much these solutions cost

We estimate that our proposed reforms could be done for about 0.2-0.24 percent of GDP. There are many ways to pay for this, including applying rebates used in the Medicaid program to certain Medicare enrollees as well, increasing cigarette and alcohol taxes, and replacing the “Cadillac tax” with a cap on the exclusion of employer contributions to health insurance.

The changes that we propose are not trivial. We recognize that they are not politically feasible in the near term, but we also believe that what is politically feasible at this moment will not do the job that is necessary to make the ACA solve all the problems it is intended to address.

The ACA marks a large step forward for the US health care system, but no country solves its health care problems with one piece of legislation. There is more to do, and doing it is achievable with additional investments that are extremely small relative to our economy and our total level of health care spending.

Full report (60 pages):…

This report is ideal for those who say that we should forget single payer and instead move forward with fixing what we have – the Affordable Care Act. The authors list some of the more obvious problems and provide suggested solutions. Although their contribution to the reform dialogue is commendable, there are two major problems with their approach.

The most important concern is that their recommendations are limited to deficiencies in ACA, but ACA was merely a series of patches to our highly dysfunctional, inequitable, inadequate, overpriced system uniquely characterized by profound administrative inefficiencies. The fundamentally flawed system would remain intact. Though the ACA patches were beneficial, they did not begin to address the profusion of other problems in our system.

The authors are merely proposing patches to the patches. We will still be left with millions without insurance, millions who are underinsured, profound administrative waste, and little means to control our high health care costs. In fact, the authors recommend increasing our spending on health care – additional spending that is appropriate only if you accept the fact that we reject the comprehensive reform that we really need.

The other problem is political. They acknowledge that their proposals “are not politically feasible in the near term.” But isn’t that what people say about single payer? Is single payer really that much less feasible than patches to the patches? Look at the current political campaigns. One of the most outspoken advocates of single payer Medicare for all is filling stadiums with passionate supporters of his messages. Yet other candidates who advocate for repeal of Obamacare and reducing our spending on Medicare and Medicaid are drawing ridicule from those outside of their narrow camp.

If we are going to work on changing political feasibility, wouldn’t it be far better to join the rising tide in support of replacing bad policy with good policy through single payer, instead of merely trying to patch the bad policies of our highly dysfunctional post-ACA non-system?

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NHIS shows ACA is working, but how well?

Posted by on Wednesday, Aug 12, 2015

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

Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–March 2015

By Robin A. Cohen, Ph.D. and Michael E. Martinez, M.P.H., M.H.S.A.
National Center for Health Statistics, August, 2015


  • The number of uninsured persons continued to decline from 2013. In the first 3 months of 2015, 29 million persons of all ages (9.2%) were uninsured at the time of interview, 7 million fewer persons than in 2014.
  • Among adults aged 18-64, the percentage uninsured decreased from 16.3% in 2014 to 13.0% in the first three months of 2015. There was a corresponding increase in private coverage, from 67.3% to 70.4%.
  • Among children under age 18 years, the percentage with private coverage increased from 52.6% in 2013 to 56.3% in the first 3 months of 2015, reversing a 14-year trend of declining rates of private coverage.
  • Among those under age 65, the percentage with private coverage through the Health Insurance Marketplace or state-based exchanges increased from 2.5% (6.7 million) in the last three months of 2014 to 3.6% (9.7 million) in the first 3 months of 2015.

Estimates of enrollment in HDHPs and CDHPs

In the first 3 months of 2015, 36.0% of persons under age 65 with private health insurance were enrolled in an HDHP, including 13.3% who were enrolled in a CDHP [an HDHP with a health savings account (HSA)] and 22.7% who were enrolled in an HDHP without an HSA. Among those with private insurance, enrollment in an HDHP generally increased since 2010. However, the percentage who were enrolled in an HDHP did not significantly change between 2014 (36.9%) and the first 3 months of 2015 (36.0%).

The National Health Interview Survey (NHIS) shows the success of implementation of the Affordable Care Act (ACA) in reducing the number of uninsured in the United States – down to 29.0 million, from a 2014 level of 36.0 million. Although it is great news to know that so many gained coverage, it is disappointing that 29 million will still remain uninsured.

There is a bit of news in this report that could be significant. The rise in enrollment in high-deductible health plans (HDHPs) has been of concern because they create financial barriers to care and result in personal financial hardships. This year the enrollment stayed flat – at 36.0% compared to 36.9% in 2014 – a statistically insignificant decline in the percentage. Although health savings accounts (HSAs) have been heavily promoted to help cover higher out-of-pocket expenses associated with HDHPs, 63% of those with private HDHPs did not have an HSA to help with those expenses. It is the deductible, not the savings account, that is the primary operative.

One of the more serious flaws of ACA is the increased use of HDHPs as a trade-off to keep insurance premiums more affordable. These HDHPs have been unpopular because of the medical bills patients are facing, but they have been selected anyway because of the lower premiums.

It will take more time to see if this flattening of the growth in HDHPs actually represents an increasing resistance to these plans or if it is just a random variation. Even if it does represent the early onset of a rebellion, individuals will still be faced with trying to balance premiums with out-of-pocket expenses – a dilemma inherent in the lower actuarial values of today’s typical private plans. A single payer system would eliminate this problem, not to mention that it would bring the percentage of uninsured down to zero.

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IG report on problems with eligibility determinations in exchange plans

Posted by on Tuesday, Aug 11, 2015

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.

Not All of the Federally Facilitated Marketplace’s Internal Controls Were Effective in Ensuring That Individuals Were Properly Determined Eligible for Qualified Health Plans and Insurance Affordability Programs

Department of Health and Human Services, Office of the Inspector General, August 2015

Our objective was to determine whether the Federal marketplace’s internal controls were effective in ensuring that individuals were determined eligible for enrollment in QHPs (qualified health plans) and eligible for insurance affordability programs according to Federal requirements.


Social Security Numbers Were Not Always Validated Through the Social Security Administration

Citizenship Was Not Always Verified Properly

Annual Household Income Was Not Always Verified Properly

Family Size Was Not Always Determined Correctly


Inconsistencies Related to Certain Eligibility Requirements Were Not Always Resolved Properly

Inconsistencies Related to Certain Eligibility Requirements Were Not Always Expired Properly

Applicant Data and Documentation Related to Resolving Inconsistencies Were Not Always Maintained Properly

Considering the administrative complexities of the Federally Facilitated Marketplace (insurance exchanges) established by the Affordable Care Act, these deficiencies in determining eligibility for the exchange health plans and for the premium tax credits and cost-sharing reductions do not really demonstrate bureaucratic incompetence but rather would be expected based on the complex program design authorized by the legislation.

This was totally unnecessary. By design, in a single payer system everyone is eligible and automatically enrolled. There is no need for premium tax credits since there are no premiums. The program is funded through equitable taxes instead. There also is no need for cost-sharing reductions since there are no deductibles or coinsurance. It is a prepaid program.

Instead of reading the news reports and merely tisk-tisking the incompetence of the administration, we need to give more thought as to why the administrative boondoggles exist and redirect the blame to the fact that we are implementing a highly flawed model of health care financing. That should then lead us to advocating for a model that really does work well – a single payer national health program.

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Can we celebrate the decline in the numbers of uninsured?

Posted by on Monday, Aug 10, 2015

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.

In U.S., Uninsured Rates Continue to Drop in Most States

By Dan Witters
Gallup, August 10, 2015

The marketplace exchanges opened on Oct. 1, 2013, with new insurance plans purchased during the last quarter of that year typically starting on Jan. 1, 2014. Medicaid expansion among initially participating states also began with the onset of 2014. As such, 2013 serves as a benchmark year for uninsured rates as they existed prior to the enactment of the two major mechanisms of the healthcare law.

Nationwide, the uninsured rate fell from 17.3% in full-year 2013 to 11.7% in the first half of 2015.

Collectively, the uninsured rate in states that have chosen to expand Medicaid and set up their own state exchanges or partnerships in the health insurance marketplace has declined significantly more since 2013 than the rate in states that did not take these steps. The uninsured rate declined 7.1 points in the 22 states that implemented both of these measures by Dec. 31, 2014, compared with a 5.3-point drop across the 28 states that had implemented only one or neither of these actions.

Although the 22 states that implemented both mechanisms before Jan. 1, 2015, had a lower uninsured rate to begin with, the 7.1-point drop is larger than what is reported among the other 28 states, and represents a 44% decline since 2013 in the uninsured rate among adults residing there. The 5.3-point drop in the 28 states that have implemented one or neither of the mechanisms represents a 28% decline in uninsured rates. Still, the difference in the rate of decline in uninsured rates between the two groups of states has now leveled off, and is unchanged relative to the same 1.8-point gap in the rate of decline measured in midyear 2014.

Although supporters of the Affordable Care Act (ACA) celebrate the reductions in the numbers of uninsured into the second year of plan enrollment, those of us who believe that everyone should be covered certainly do not have cause to celebrate.

Nationally, the rate of uninsured fell from 17.3% before ACA expansions were implemented to 11.7% after the second annual enrollment period. That is a decline in the uninsured of only 32%. Two-thirds of the numbers previously uninsured still remain uninsured.

Even in those states that cooperated with ACA by both expanding Medicaid and by establishing exchanges themselves or partnering with the federal government to establish exchanges still saw reductions in the uninsured of only 44% – less than half (a decline from 16.0% to 8.9%). Thus even the optimal results are disappointing. States that failed to cooperate saw even less of a decline in the uninsured – 28% (from 18.7% to 13.4%).

With two seasons of ACA implementation, the low fruit has been picked. With increasing penalties for remaining uninsured, a few more enrollees should trickle into the exchanges. Also some states missing in action will likely reluctantly expand their Medicaid programs. But even with optimistic estimates of the increases in participation, it is quite clear that far too many will remain uninsured.

The defect is in the design of the Affordable Care Act – an administratively complex, fragmented system that could never result in truly universal coverage, not to mention all of the inequities that it perpetuates. In contrast, a single payer system automatically enrolls everyone, while reducing inequities. That’s the design that we need.

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