Complexity of the 90 day grace period for paying exchange plan premiums

Posted by on Friday, Oct 17, 2014

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 Ninety-Day Grace Period

Health Affairs, Health Policy Briefs, October 16, 2014

To help enrollees new to the system keep their insurance, the ACA provides a ninety-day grace period before an insurer can discontinue someone’s coverage for failure to pay a monthly premium. This applies only to those who have received an advance premium tax credit to purchase health insurance through the Marketplaces and have previously paid at least one month’s full premium in that benefit year.

The grace period allows for continuity of care for patients by preventing people from shifting or “churning” in and out of coverage when they fail to make a monthly premium payment.

In final regulations, CMS said issuers must pay all appropriate claims for medical services rendered to the enrollee during the first month of the grace period, and the insurer may put on hold claims for services rendered to the enrollee in the second and third months. Issuers must also notify HHS of such nonpayment and notify providers of the possibility for denied claims when an enrollee is in the second and third months of the grace period.

During these second and third months of the grace period, because the patient is still insured, he or she cannot be billed by the provider for any remainder that is owed for medical services that the enrollee received. But if an enrollee fails to pay his or her premiums and the entire grace period elapses, providers are allowed to seek payment for the medical services they gave to that patient and for which the insurance company did not reimburse claims.

Patient assistance programs: Some providers have expressed interest in providing premium and cost-sharing assistance for their patients enrolled in coverage through the Marketplaces. By helping their patients maintain coverage and avoid the grace period in the first place, providers hope to reduce the risk that medical claims for care they provide will go unpaid.

However, questions continue to swirl about the legality of such an approach. Although federal anti-kickback regulations might seem to prohibit this type of practice, HHS has stated that such regulations do not apply to the Marketplaces, their plans, and premium tax credits because they are not considered “federal health care programs.”

The ACA’s uniform grace period could prove to play an important role in keeping people enrolled in their plans. But big questions remain unanswered about the financial risks to which physician practices or hospitals could be exposed, as well as how much risk insurers face for claims in the grace period and how that might affect premium growth for all enrollees over time.

The Affordable Care Act provides a 90 day grace period during which health care coverage through exchange plans is continued before insurers can cancel the plans for non-payment of premiums. However, the insurers must pay claims for only the first 30 days, whereas providers are not allow to collect from the patient during the remaining 60 days. After 90 days of nonpayment of premiums, the patient can be retroactively billed, though collection can be difficult since most of these patients do not have enough funds to pay their premiums, much less their health care bills.If you read the full Health Policy Brief, you will see that the issues are even more complex. The 90 day rule is yet one more unnecessary administrative burden that ACA added to our already highly complex system of financing health care. Under a single payer system there would be no such thing as a 90 day grace period. Financing of the health care system would be as automatic as it is now with Medicare.

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Will malpractice reform prevent “defensive medicine”?

Posted by on Thursday, Oct 16, 2014

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 Effect of Malpractice Reform on Emergency Department Care

By Daniel A. Waxman, M.D., Ph.D., Michael D. Greenberg, J.D., Ph.D., M. Susan Ridgely, J.D., Arthur L. Kellermann, M.D., M.P.H., and Paul Heaton, Ph.D.
The New England Journal of Medicine, October 16, 2014

Emergency department care has been a particular focus of a new generation of malpractice reform laws. Approximately a decade ago, the states of Texas (in 2003), Georgia (in 2005), and South Carolina (in 2005) changed their malpractice standard for emergency care to “willful and wanton negligence” (in Texas) and “gross negligence” (in Georgia and South Carolina). From a legal standpoint, these two standards are considered to be synonymous and are widely considered to be a very high bar for plaintiffs. Under typical interpretations of this standard, a plaintiff must show that a physician had “actual, subjective awareness” of “the likelihood of serious injury” but nevertheless proceeded with “conscious indifference.”

The Texas, Georgia, and South Carolina laws are intended to protect physicians who are practicing with incomplete information in high-intensity care settings. The enactment of these laws offers an unusual circumstantial experiment with which to evaluate a type of reform that is qualitatively different from what has been studied previously.

Study Design

We used a quasi-experimental analytic approach that was designed to evaluate the effect of legal reform on the treatment of Medicare patients in the emergency department; we attempted to isolate the effect of the law from temporal trends and from characteristics of patients and hospitals (i.e., to evaluate changes that could be attributable to the new policy).


Malpractice reform was not associated with a significant decrease in CT or MRI utilization in any of the three states. There was no significant reduction in per-visit emergency department charges in Texas or South Carolina. In Georgia, reform was associated with a 3.6% reduction (95% confidence interval [CI], 0.9 to 6.2; P=0.01) in charges. There was no reduction in the rate of hospital admissions in any of the three states.


Malpractice reforms in Texas, Georgia, and South Carolina, which changed the liability standard for emergency care from ordinary negligence to gross negligence, provide unusually broad protection for emergency physicians. We did not find evidence that these reforms decreased practice intensity, as measured by the rate of the use of advanced imaging, by the rate of hospital admission, or in two of three cases, by average charges. Although there was a small reduction in charges in one of the three states (Georgia), our results in aggregate suggest that these strongly protective laws caused little (if any) change in practice intensity among physicians caring for Medicare patients in emergency departments.

In the context of the existing literature, our findings suggest that physicians are less motivated by legal risk than they believe themselves to be. Although a practice culture of abundant caution clearly exists, it seems likely that an aversion to legal risk exists in parallel with a more general risk aversion and with other behavioral, cultural, and economic motivations that might affect decision making. When legal risk decreases, the “path of least resistance” may still favor resource-intensive care. Our results suggest that malpractice reform may have less effect on costs than has been projected.

When the topic of controlling health care costs comes up, those opposed to single payer reform, and, for that matter, opposed to the Affordable Care Act, frequently cite the need for malpractice reform, often claiming that defensive medicine (ordering unnecessary tests and medical interventions merely to prevent lawsuits) is a major cause of excess health care spending. This article casts doubt that malpractice reform would reduce supposed defensive medicine.

The three states studied – Texas, Georgia and South Carolina – passed laws requiring a much more rigid standard of “gross negligence” for emergency department physicians to be found liable for malpractice. Data available from Texas demonstrates that their reforms did reduce malpractice claim filings by 60 percent, and reduced malpractice payments by 70 percent. Physicians were reassured that they were protected as long as they did not proceed with “conscious indifference” with care that had a “likelihood of serious injury.”

Now that there was no longer a need for CT and MRI scans and hospital admissions that  were done only to prevent lawsuits, the level of these presumed defensive medicine measures should have decreased. They did not.

This suggests that these measures were taken for reasons other than simply to prevent lawsuits. A low yield test or procedure is not necessarily a no yield intervention. These are done because there is a real chance, even if at low odds, that the intervention may benefit the patient.

This study leads us to conclude that the concept that there is excessive resource-intensive care provided strictly as defensive medicine should be abandoned and replaced with patient-centered outcomes research to better determine what is of value in health care (PCORI in ACA is such an attempt).

We should no longer allow ourselves to be distracted by false promises of health care savings through flawed concepts such as defensive medicine. We know what will greatly reduce wasteful spending, and that is a single payer national health program. We must not be distracted from trying to achieve that goal.

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States largely ignoring network inadequacies

Posted by on Wednesday, Oct 15, 2014

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.

Implementation of the Affordable Care Act: Cross-Cutting Issues: Six-State Case Study on Network Adequacy

By Sabrina Corlette, Kevin Lucia, and Sandy Ahn
Urban Institute, September 2014

During the transition to new health plans and new marketplaces under the Affordable Care Act (ACA), many insurers revamped their approach to network design, and many now offer narrower provider networks than they have in the past. In this study for the Robert Wood Johnson Foundation’s project to monitor ACA implementation, researchers assessed network changes and efforts at regulatory oversight in six states: Colorado, Maryland, New York, Oregon, Rhode Island, and Virginia. Researchers found that insurers made significant

changes to the provider networks of their individual market plans, both inside and outside the marketplaces, and that insurers took varying approaches to network design. Across all six states, insurers and state officials alike reported consumer and provider confusion about which plan networks included which providers, but most have received few consumer complaints about their ability to obtain in-network services. While three of the six states have taken action to improve provider directories, it appears unlikely that state legislatures, officials and regulators will dramatically change network adequacy standards, at least in the short-term.


Insurers have used—and are likely to continue to use— network design to curb costs and offer customers a more affordable premium. This was a clear trend in the individual market as insurers approached the 2014 plan year, and some of our informants believe it will soon extend to the group market as employers look for ways to reduce premiums. However, despite concerns among some regulators, consumer advocates, and providers that overly narrow networks could harm quality of care and place consumers at significant financial risk, most of our study states are not planning to significantly change their oversight of plan networks. Though consumers reported problems with inaccurate provider directories and a lack of consumer-friendly, comparable information about the scope of plan networks, only half of our study states report requiring insurers to improve the information made available to consumers. At the same time, state officials and insurers also reported that consumers were generally not complaining about difficulty obtaining needed care from providers. Consequently, most state legislatures, officials and regulators are unlikely to change network adequacy standards, at least in the short-term.…

Private insurers use narrow networks of physicians and hospitals so that they can negotiate more favorable provider rates which then supposedly allows them to keep their insurance premiums more competitive. The trade-off is that patients lose their choice of providers and increase the risk that they will suffer severe financial penalties because of unavoidable circumstances wherein care is obtained out of network, or worse, care is not received at all because of impaired access.

The use of narrow networks will cause harm to many patients. Yet, according to this report, for the present, “most state legislatures, officials and regulators are unlikely to change network adequacy standards.” Also, although provider directories are notoriously inaccurate, “only half of our study states report requiring insurers to improve the information made available to consumers.”

How much do the insurers really save by using narrow networks? The savings is not the difference between the prices specified by the providers and the amount contracted with the narrow network providers. Insurers already receive sharp discounts from the providers in their broad networks. So the savings is only the very modest additional amount squeezed out of those who contract for the more exclusive narrower networks. That savings is surely not worth the impaired access, loss of choice, and potential financial hardship brought by narrow networks.

With a single payer system, fair payments apply to all physicians and hospitals, therefore there is no need to establish separate networks. The one network is the entire health care delivery system (except for those who choose integrated delivery systems such as Kaiser Permanente). Government administered pricing is far more patient friendly than market-based manipulations, and isn’t the patient what it is all about?

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Status of higher payment for primary care under Medicaid

Posted by on Tuesday, Oct 14, 2014

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.

Medicaid in an Era of Health & Delivery System Reform: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2014 and 2015

By Vernon K. Smith, Kathleen Gifford, Eileen Ellis, Robin Rudowitz and Laura Snyder
Kaiser Family Foundation, October 14, 2014

Primary Care Payments

The ACA included a provision to increase Medicaid payment rates for primary care services to Medicare rates from January 1, 2013 through December 31, 2014. The federal government funded 100 percent of the difference between Medicaid rates that were in effect as of July 1, 2009 and the full Medicare rates for these two years. States were asked about their plans to extend this provision beyond December 31, 2014 (at regular FMAP rates). For states that have Medicaid rates for physician services that were already at or close to 100 percent of Medicare rates, this issue was not significant.


  • Twenty-two states indicated that they would not be continuing the primary care rate increase.
  • Fifteen states (Alaska, Alabama, Colorado, Connecticut, Delaware, Hawaii, Iowa, Maryland, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, and South Carolina) indicated that they will continue the higher rates at least partially if not fully. For example one state will provide a proportionate increase for all primary care physicians (half of the ACA rate increase); others plan to continue temporarily or target it to certain types of primary care.
  • Fourteen states indicated they had not yet made a decision on this policy and were still evaluating whether the enhanced rates had any impact on provider participation. Given the delayed implementation of the rate enhancement and the difficulty of attributing changes in provider enrollment and access to the enhanced payments, the impact of the increased rates is difficult to determine.…


Primary Care Services under Managed Care Delivery Systems

Qs &As on the Increased Medicaid Payment for Primary Care CMS 2370-F – MANAGED CARE

The requirements under 42 CFR 438.804 specify that the states submit two methodologies to the Centers for Medicare & Medicaid Services (CMS) for review and approval to implement this rule. How does approval of these methodologies impact the approval process for managed care contracts and rate packages for 2013?

Implementing regulations at 42 CFR 438.804 require states to submit to CMS a methodology for calculating the July 1, 2009, baseline rate for eligible primary care services and a methodology for calculating the rate differential eligible for 100 percent of Federal Financial Participation (FFP) by March 31, 2013. Further, 42 CFR 438.6 (c)(5)(vi) establishes Managed Care Organization (MCO), Prepaid Inpatient Health Plan (PHIP) or Prepaid Ambulatory Health Plan (PAHP) contract requirements to comply with this provision. It is CMS’s expectation that as soon as practicable after the State submits the required methodologies in 42 CFR 438.804 and receives CMS approval, the State will:

  1. submit revised actuarial certification documents reflecting the Medicare rate for eligible primary care services in their MCO, PIHP or PAHP capitation rates; and
  2. submit amendment(s) to this contract to ensure compliance with 42 CFR 438.6 (c)(5)(vi).

After CMS approval of the revised contract and rates, the MCO, PIHP or PAHP must direct the full amount of the enhanced payment to the eligible provider to reflect the enhanced payment effective January 1, 2013. Federal financial participation (FFP) is available at a rate of 100 percent for the portion of capitation rates attributable to these enhanced payments; however, receipt of the enhanced FFP is contingent upon the state’s successful completion of this process.…


The final rule specified that states will need to recoup the enhanced payments made to non- eligible providers identified through the annual statistically valid sample. Must health plans follow the same procedure for non-eligible providers?

States must require health plans to recoup erroneous payments found through the sampled pools of providers, and in a number of states, this sample will include both FFS and managed care providers.

Are MCOs permitted to include amounts sufficient to account for the payment differential on expected utilization while still holding the sub-capitated primary care physicians at risk for some level of increase in utilization due to the higher rates? Or must MCOs remove the risk to primary care physicians for utilization to ensure that these physicians receive the increased amount for actual experience?

The purpose of section 1202 of the Affordable Care Act and the final rule is to ensure access to and utilization of beneficial primary care services. Towards that goal, eligible primary care physicians must receive the full benefit of the enhanced payment at the Medicare rate for eligible services rendered. If a Medicaid managed care health plan retains sub-capitation arrangements, the health plan would be obligated to provide additional payments to providers to ensure that every unit of primary care services provided is reimbursed at the Medicare rate.…

As the Affordable Care Act (ACA) was being crafted, it was recognized that the expansion of coverage under Medicaid could result in greater access problems because of the low Medicaid payment rates and the lack of willing providers. In order to improve access, at least to primary care, it was decided to increase Medicaid primary care payment rates to the same level as Medicare for the years 2013 and 2014. As with so many of the ACA provisions, this seemingly simple solution has proven to be more complex.

Before and during this transition most states were moving many or all of their Medicaid patients into managed care programs. So the government had to issue guidelines on how to move enhanced Medicaid primary care payments into managed care organizations receiving capitation payments, and to be sure that these enhanced payments were directed to the eligible primary care providers (more administrative excesses). Although we are near the end of the two year period in which primary care payments are enhanced, news reports suggest that confusion and delays have not been entirely resolved.

Although these enhanced payments were considered to be crucial in ensuring adequate participation of primary care providers, twenty-two states have indicated that they would not be continuing the primary care rate increases. Fifteen states have decided to continue, though many at lower rates and perhaps only temporarily. Fourteen states are undecided. “Given the delayed implementation of the rate enhancement and the difficulty of attributing changes in provider enrollment and access to the enhanced payments, the impact of the increased rates is difficult to determine.”

Medicaid is a welfare program, and, as such, will continue to be chronically underfunded. Medicaid patients frequently have difficulties accessing primary care services, and the continued underfunding will perpetuate that problem. Access to specialized services is even more limited because of the very low participation rates of specialists.

Single payer would eliminate these injustices since we would all have the same high-quality program – an improved Medicare for all.

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Private health plans no longer assure adequate protection

Posted by on Monday, Oct 13, 2014

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.

Privately Insured in America: Opinions on Health Care Costs and Coverage

The Associated Press-NORC Center for Public Affairs Research, October 2014

A significant minority of those with private health insurance, including those covered by high-deductible health plans (HDHPs), are greatly impacted by the out-of-pocket cost of health care—they are concerned with the uncertainty of major expenses, skip necessary medical treatment, and experience real financial burden when obtaining health care. All told, about 1 in 8 privately insured Americans—or more than 16 million people—face major financial hardships like going without food or using up all of their savings as a result of medical bills.

When asked about nine specific behaviors to reduce personal health care expenses, about half of privately insured adults age 18-64 experienced at least one of them.

  • As a result of health care costs, significant minorities of privately insured individuals don’t go to the doctor when they are sick (19 percent), go without preventive and recommended care (18 percent), use up all or most of their savings (18 percent), and go without basic needs (13 percent).
  • A quarter of privately insured adults age 18-64 lack confidence in their ability to pay for a major unexpected medical expense.
  • The privately insured who report having a HDHP are more likely than those who do not to decrease their contributions to savings (41 percent vs. 26 percent) and retirement plans (28 percent vs. 15 percent) as a result of health care costs.
  • Nearly 1 in 4 adults age 18-64 covered by a HDHP reports that paying for health care expenses caused them to use up their savings.
  • Thirty-five percent of those surveyed indicate that when enrolling in a health insurance plan, their current plan was the only option available.
  • With out-of-pocket costs emerging as a major source of uncertainty among the privately insured, more privately insured Americans choose a health care plan with a relatively high monthly premium but lower out-of-pocket costs (52 percent) over a plan with relatively low premiums and higher out-of-pocket costs (40 percent), when presented with the tradeoff.
  • But, there isn’t overwhelming support for plans with select networks5 designed to keep out-of-pocket costs low. Twenty percent say they are extremely or very willing to participate in this type of plan, 38 percent are somewhat willing, and 40 percent are not too or not at all willing.

Of those who indicate they have used health care services since enrolling in their current health insurance plan, 39 percent say the out-of-pocket costs being higher than expected has been a major (14 percent) or a minor (24 percent) problem.

As the health care marketplace is evolving with the advent of new exchanges, those who purchase their health insurance plans directly or through exchanges are more likely to express difficulty finding health care providers covered under their plans.

Those who have changed health insurance plans and say they have HDHPs are especially likely to cite increased costs without a corresponding increase in quality.

This new survey conducted by the Associated Press-NORC Center for Public Affairs Research confirms, once again, that private health insurance in the United States often is not providing adequate financial protection for those with health care needs. More than 16 million people who have private insurance “face major financial hardships like going without food or using up all of their savings as a result of medical bills.” The one-half of Americans who use hardly any health care at all likely do not realize that they are one major illness away from similar financial hardship.

When something is not working, we should fix it. The inadequacies of private plans cannot be repaired without intolerable increases in health insurance premiums. Yet a well designed single payer national health program could remove the financial barriers to care – for everyone – without any increase in our current national health expenditures. Without action, 30 million will remain without any insurance at all, and many of the rest of us could remain vulnerable to high out-of-pocket medical costs in spite of our private insurance coverage.

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“Reference pricing” is yet another intrusive diversion from real reform

Posted by on Friday, Oct 10, 2014

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.

Reference Pricing: A Small Piece of the Health Care Price and Quality Puzzle

By Chapin White, Megan Eguchi
National Institute for Health Care Reform, NIHCR Research Brief No. 18, October 2014

As purchasers seek strategies to reduce high health care provider prices, interest in reference pricing—or capping payment for a particular medical service—has grown significantly. However, potential savings to health plans and purchasers from reference pricing for medical services are modest, according to a new analysis by researchers at the former Center for Studying Health System Change (HSC) using 2011 private insurance claims data for about 528,000 active and retired nonelderly autoworkers and their dependents. In 2011, the California Public Employees’ Retirement System (CalPERS) adopted reference pricing for inpatient knee and hip replacements. Using quality and price information, CalPERS set an upper limit of $30,000—the reference price—for hospital facility services for a knee or hip replacement. CalPERS designated certain in-network hospitals as meeting the reference price, and patients using designated hospitals are responsible only for the health plan’s usual cost-sharing amounts. However, if patients use a non-designated hospital, they are responsible for both usual cost sharing and any amount beyond the $30,000 reference price. While reference pricing for inpatient services has some potential to steer patients to hospitals with better quality metrics, only limited savings—a few tenths of a percent of total spending—are possible from applying a similarly narrow reference pricing to other privately insured populations. The potential savings from reference pricing are modest for two reasons: Shoppable services only account for about a third of total spending, and reference pricing only directly affects prices at the high end of the price distribution. When considering reference pricing, employers and health plans need to weigh potential savings against increased plan complexity and financial risk to enrollees, along with the analytical and financial resources needed to create and manage the program.

From the Implications

The CalPERS reference pricing experience tells two different but equally true stories—a dramatic percentage decline in prices and spending on knee and hip replacements and an extremely small percentage decline in total spending. To significantly impact spending among the privately insured, reference pricing would have to be applied quite broadly. And, even using a very inclusive list of shoppable services, the potential savings are relatively modest.

Both conventional network-based plans—preferred provider organizations and health maintenance organizations—and reference pricing suffer some of the same limitations. Both types of plans rely on patient cost-sharing differentials to steer patients to certain providers, but the higher cost sharing cannot reasonably be applied in emergencies when patients can’t choose their provider. Also, both types of plans are vulnerable to the demands of dominant “must-have” providers, either to be in network or to be both in network and designated.

Compared to a limited-network plan, reference pricing faces at least three additional logistical hurdles. First, the health plan must have reliable price data for specific providers for specific services so that it can set the reference price and designate providers. Even very large plans will lack the historical data to accurately measure the prices they typically pay to smaller hospitals. Second, the plan would ideally have provider-specific quality metrics on hand that can be used to assure patients that they are not being steered to low-quality providers. Although hospital quality metrics and rankings abound, the methodologies behind those rankings are still under development. Third, reference pricing requires new customer-service tools to support shopping by patients and to deal with inevitable member complaints. Implementation would require commitment of significant resources by the plan, potentially offsetting some or all of the savings from reductions in payments to high-price providers.

The main disadvantage of reference pricing is that it adds a new layer of complexity for plan administrators and enrollees. Rather than facilities simply either being in or out of the network, there are now three types of facilities: in-network designated, in-network non-designated and out of network. Even more confusingly, a single facility might be designated for one type of service—for example, an inpatient hospital providing a knee replacement—but not designated for another—that same hospital providing a colonoscopy in an outpatient department. Additional complexity raises significant concerns, given that the basic elements of conventional benefit design are already beyond the grasp of many consumers.

One question is whether a reference pricing program can steer patients to lower-price, adequate-quality providers. The answer, based on the CalPERS experience, appears to be yes. But, that may not be the right question. A better question may be why private health plans would ever pay negotiated prices over $30,000 for inpatient knee and hip replacements. The CalPERS reference pricing program seemingly took a hard line against hospitals charging unreasonably high prices—$30,000 or more—for knee and hip replacements. But, is $30,000 really a reasonable price for an inpatient knee or hip replacement? To put that amount in perspective, the Medicare program on average paid $14,324 for inpatient knee and hip replacements in 2011.

Our policy wonks continue to look for methods of controlling health care costs that will protect the role of private insurers, and, above all, prevent us from drawing the inevitable conclusion that we desperately need a single payer national health program. Reference pricing is one more supposed cost-saving tool that has garnered much interest. What is it and will it work?

Reference pricing is a process in which a maximum price is set for a given medical service. The patient then either goes to a designated provider who has agreed to accept that amount, along with contracted patient cost sharing, as payment in full, or, if the patient chooses a provider with higher prices, the patient must pay the full difference.

California Public Employees’ Retirement System (CalPERS) experimented with reference pricing by establishing $30,000 as a reference price for the hospital services for a knee or hip replacement. The experiment was considered to be a success based on the fact that 15 to 30 percent of patients who would have gone to a non-designated hospital switched and went to a designated hospital instead. But how do you define success?

The package fee that the private market was able to negotiate was $30,000. Medicare on average paid $14,324 for the same services. Is it a success when private insurers are paying double the fees set by a public insurer?

Some might consider it to be a success when the patient did not have to pay the difference between the reference price and the price that would have been charged in a non-designated hospital, though what is the patient giving up?

Consider how a decision is usually made to have a joint replacement. The patient typically goes to his or her primary care professional where initial evaluation indicates that a joint replacement may be indicated. A referral is made to a specialist qualified to do joint replacements. If the decision is made to go ahead with the procedure, arrangements are made with the hospital the specialist is associated with. But then the insurer intervenes and threatens the patient with severe financial penalties (all costs above the reference price) unless the patient agrees to give up the specialist and hospital that is part of the team of her primary care professional, either as a formal integrated health system or as an informal team of community professionals working together. To escape the financial penalty, the patient pays the penalty of disruption in care.

So what did this successful experiment that everyone wants to emulate actually accomplish? Care of 15 to 30 percent of patients was disrupted in exchange for establishing a cap on payment that was twice what Medicare pays, and yet netting only “an extremely small percentage decline in total spending.”

Another important consideration discussed in this report is that reference pricing significantly increases administrative complexity – just what we need in a system that is unique in the world for all of its profound administrative waste. But very telling is the comment in this report that some of this administrative increase will be in the form of new customer-service tools “to deal with inevitable member complaints.”

Great – a disruptive program that doesn’t work very well but ticks everyone off! We’ll say it again – single payer.

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Do opinions of Medicaid patients matter?

Posted by on Thursday, Oct 9, 2014

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.

Low-Income Residents In Three States View Medicaid As Equal To Or Better Than Private Coverage, Support Expansion

By Arnold M. Epstein, Benjamin D. Sommers, Yelena Kuznetsov and Robert J. Blendon
Health Affairs, October 8, 2014 (online)


Expansion of Medicaid under the Affordable Care Act to millions of low-income adults has been controversial, yet little is known about what these Americans themselves think about Medicaid. We conducted a telephone survey in late 2013 of nearly 3,000 low-income adults in three Southern states—Arkansas, Kentucky, and Texas—that have adopted different approaches to the options for expansion. Nearly 80 percent of our sample in all three states favored Medicaid expansion, and approximately two-thirds of uninsured respondents said that they planned to apply for either Medicaid or subsidized private coverage in 2014. Yet awareness of their state’s actual expansion plans was low. Most viewed having Medicaid as better than being uninsured and at least as good as private insurance in overall quality and affordability. While the debate over Medicaid expansion continues, support for expansion is strong among low-income adults, and the perceived quality of Medicaid coverage is high.

From the Discussion

In our survey of nearly 3,000 low-income adults in three states, we found strong and consistent enthusiasm—among nearly 80 percent of respondents—for expanding Medicaid under the ACA and a more nuanced picture of whether it would be preferable to gain coverage via traditional Medicaid or subsidized private insurance.

Support for expansion by the population who would most likely be eligible for it may provide further impetus for expansion, although low-income adults and the uninsured may lack the clout to bring about this policy change in many states where the ACA remains unpopular among the political leadership.

Quality and affordability of care were generally rated as better with Medicaid coverage, while private coverage was seen as offering better access to and more respect from providers. These views represent a nuanced but reasonable comparison of Medicaid versus private health insurance and are consistent with some of the empirical evidence in this area. Recent studies indicate that Medicaid provides low-income adults with better financial protection than does private coverage, while lower reimbursement rates in Medicaid have been linked to lower physician participation rates in that program compared to private coverage. Favorable views toward Medicaid were most common among racial and ethnic minorities, people with lower education and income, and those in worse health.


Medicaid, Often Criticized, Is Quite Popular With Its Customers

By Margot Sanger-Katz
The New York Times, October 9, 2014

A study published in the journal Health Affairs found that poor residents of Arkansas, Kentucky and Texas, when asked to compare Medicaid with private coverage, said that Medicaid offered better “quality of health care” and made them better able to “afford the health care” they needed.

Medicaid, the federal-state program for poor and disabled Americans, is a frequent political target, often described as substandard because of its restricted list of doctors and the red tape — sometimes even worse than no insurance at all.

But repeated surveys show that the program is quite popular among the people who use it.

When asked to consider it alongside other big, popular government programs, Medicaid compares favorably, said Robert Blendon, a public health professor at Harvard who studies public opinion on health care issues and was a co-author on the recent study. “It’s only when you compare it to Medicare, which is so much more popular than 96 percent of what the federal government does, that it looks unimpressive,” Mr. Blendon said.

The people surveyed by the Harvard researchers didn’t prefer Medicaid to private insurance in every respect. They gave private coverage the edge when it came to seeing “doctors you want, without having to wait too long” and “to have doctors treat you with care and respect.” But Medicaid came out ahead on the question of whether it enabled them to “be able to afford the health care you need,” and on the overall question of “quality of health care.”…

Low-income patients strongly support the Medicaid program. It provides better financial protection than does private insurance, and they perceive the care to be of high quality. Their primary concern is that “private coverage was seen as offering better access to and more respect from providers” than does Medicaid.

When asked whether it was better to have Medicaid or to be uninsured, there was strong agreement that Medicaid patients have higher quality of care, have greater access to doctors, are treated with better respect, and, especially, are better able to afford the health care that they need, than are the uninsured.

In fact, according to Harvard’s Robert Blendon, Medicaid compares quite favorably to other popular government programs, though the support is “unimpressive” when compared to the support for Medicare.

Unfortunately, the politicians in many states do not seem to care. Even though the federal government would provide most of the funds, they would rather leave these people uninsured. Obviously, they could care less about the opinions of this low-income population that lacks political clout.

Why would Medicare be more popular than Medicaid? Medicare that is supplemented with Medigap, retiree plans, or Part C plans removes financial barriers to care, thus providing a similar level of financial protection as Medicaid – with the exception that Medicaid covers long term care as well. Medicaid does have the stigma of a welfare program whereas Medicare is considered to be an earned right available to all qualified by age or disability. The greatest reason that Medicare is preferred is that the patients have free choice of their physicians, including specialists.

Under what system would a low-income patient fare best? One in which the welfare stigma is removed, and everyone is treated equal. One in which financial barriers such as large deductibles and coinsurance are removed. One in which patients have free choice of their health care professionals and hospitals. One in which a high standard of quality is the norm for all. In other words, low-income patients would fare best is a system that would work well for all of us – a single-payer, improved Medicare for all.

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Conservatives say health costs drive income inequality

Posted by on Tuesday, Oct 7, 2014

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

Income Inequality and Rising Health-Care Costs

By Mark J. Warshawsky and Andrew G. Biggs
The Wall Street Journal, October 6, 2014

A new Kaiser Family Foundation survey reports that health-insurance premiums rose by a “modest” 3% in 2013. Even more modest, however, was the 2.3% growth of workers’ earnings last year. These figures merely illustrate a long-term trend of rising health costs eating away at wages. The real story is even more dramatic: Government data show that health costs are the biggest driver of income inequality in America today.

Most employers pay workers a combination of wages and benefits, the most important of which is health coverage. Economic theory says that when employers’ costs for benefits like health coverage rise, they will hold back on salary increases to keep total compensation costs in check. That’s exactly what seems to have happened: Bureau of Labor Statistics data show that from June 2004 to June 2014 compensation increased by 28% while employer health-insurance costs rose by 51%. Consequently, average wages grew by just 24%.

But here’s what the news headlines miss: Rising health costs don’t affect every employee the same. An average family health policy today costs employers nearly $12,000 per year, up from only $4,200 in 1999. Had employer premiums not risen, average salaries today would be around $7,800 higher. For a lower-income worker who today makes $30,000, that could have meant a 26% salary increase. By contrast, a “one percenter” making $250,000 today would have seen his earnings rise only by 3.1%. Health costs are a bigger share of total compensation for lower-wage workers, and so rising health costs hit their salaries the most. The result is higher income inequality.

These data give us a different perspective on the inequality debate. Most people think of income inequality as money “redistributed” from the poor to the rich. In reality, much of what we’re seeing is more of low-income workers’ compensation going toward their health benefits and less ending up in their pockets. That’s a different problem and points toward different solutions.…

This WSJ opinion article is from the conservative American Enterprise Institute (AEI). When they say that “health costs are the biggest driver of income inequality in America today,” this should provide us with common ground to simultaneously address both income inequality and the health care crisis.

Unfortunately, in this article the authors further define the problem as over-insurance and a need for high-deductible health plans. Reducing benefits and increasing cost sharing would make the problems even worse for low- and moderate-income individuals and families.

Nevertheless we can agree that the current inequities in health care financing – which were inadequately addressed through the Affordable Care Act – are a significant contributor to income inequality. The most effective solution to address both would be to enact a progressively-financed single payer national health program (though further public policies would be required to temper the extremes of income and wealth inequality).

There is a glimmer of hope when the opponents of single payer recognize the problems, but that hope is dashed when they revert to ideological approaches that place an even greater burden on those more vulnerable.

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George Halvorson criticizes deductibles

Posted by on Monday, Oct 6, 2014

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.

An Interview With George Halvorson: The Kaiser Permanente Renaissance, And Health Reform’s Unfinished Business

By Jeff Goldsmith
Health Affairs Blog, September 30, 2014

Kaiser (Permanente) surprised the health plan community by announcing in March 2002 the selection of a non-physician, George Halvorson, as its new CEO.

During his twelve year tenure as CEO, Halvorson not only guided the plan to solid profitability, but added a million members in California, its largest market, despite a devastating recession and a national retreat of commercial HMO membership.

The Growth Of High-Deductible Health Plans

Jeff Goldsmith: If you look at the Kaiser/HRET survey, which focuses on the employer segment, the HMO wedge shrinks while the high deductible health plan wedge seem to grow in proportion. In 2013, High Deductible Health Plans (HDHPs) represented around 30 million lives.  Are HDHPs “managed care” in your view?

George Halvorson: Yes. I think they are a form of managed care.  HDHPs get involved to some degree in delivery of care.  They require care/data reporting.  They have some care protocols or some care-related elements they don’t allow. So I would classify all those plans and products under the broad category of managed care. If employers buy a $500 dollar deductible plan from Kaiser Permanente — and about 10 percent of Kaiser members are now in plans that have deductibles that are high or higher — the employees still get their care at KP.  When they pay the fee for the office visit, they pay KP as opposed to paying it outside, so that the cash flow for KP is basically the same.  It just comes down two separate channels, copays and premiums, instead of coming down one prepaid premium channel.

Goldsmith: How hard was it for your colleagues, particularly the Permanente physicians, to accept the philosophical change that required?  In the legacy Kaiser model, there was no cost to the patient.

Halvorson: Everyone at KP, including myself, strongly preferred the model where there was no cost for the patient.  However if 10 percent of our employer customers want to buy a high deductible product and we don’t sell it to them, then they leave. Kaiser has hospitals, clinics, pharmacies, lots of care-related infrastructure that would not do as well if 10 percent of the patients were gone.  It is important to point out that we made a very conscious decision to not change care in any way for those patients. That was a critical issue. It is easier to maintain the old approach for all patients because 90 percent of the KP’s members are still in the older benefit model.

Goldsmith: Of the million people that were added to Kaiser in California during your time as CEO in California, how many of them came because of this change in your benefits strategy?

Halvorson: Now about 10 percent of Kaiser’s members are in plans with deductibles of some kind. I personally went to California’s managed care regulators and worked to persuade them to allow us to offer the product.  I had to give them assurances that we would not be changing the delivery of care for those members in any way. Those members would not be there if we had not offered a product with personal financial exposure in it.

Goldsmith: Did the high deductibles make your job as a care system easier or harder?

Halvorson: Harder.

Goldsmith: Why?

Halvorson: Because we had to bill the patient.

Goldsmith: What else besides the billing?

Halvorson: The billing was the major issue.

Goldsmith: It didn’t make it more difficult for you to get them to do things that were in their own health interest, even if it cost them money?

Halvorson: Because we are who we are and because we ask people to do what we ask them to do in a very consistent and reasonable way, members tend to follow. We didn’t see a lot of people refusing to get needed care based on the fact that they had deductibles. That was largely because we are so committed to a particular set of care concepts and protocols that the credibility of the individual caregiver for the patient triumphed over the financial exposure.…

Former Kaiser Permanente CEO George Halvorson said, “Everyone at KP, including myself, strongly preferred the model where there was no cost for the patient.” So why did they start selling plans with deductibles?

Simply stated, it was because many employers demanded deductibles and other forms of cost sharing. Deductibles have become a standard throughout the insurance industry, and most employers like them because the premiums paid are lower since up front costs of health care are being shifted to their employees’ pockets.

Yet Halvorson said that deductibles made their job as a health care system harder, mainly because of the administrative inefficiencies of having to bill each patient for these charges. Kaiser received the same total amount but they had to establish “two separate channels, copays and premiums, instead of coming down one prepaid premium channel.”

Either way, the employees were paying the costs – through forgone wage increases that paid the premiums, or through direct out-of-pocket payment of the deductibles. The only reason for making this change was the pigheadedness of the employers who insisted, based primarily on misguided ideology, that they wanted to join the high deductible, consumer-directed bandwagon.

It is well known that deductibles frequently cause individuals to forgo appropriate care which can then result in adverse health outcomes. Halvorson said that they “didn’t see a lot of people refusing to get needed care.” Without the data it is hard to know, but since most of Kaiser’s patients have decent jobs with employer-sponsored plans, these are patients from a relatively healthy sector of the population, mostly with reasonable incomes, so they may be less likely to forgo appropriate care. But even amongst Kaiser’s patient population, there will be some who will find deductibles to be significant barriers to care.

There is nothing good about Kaiser’s deductibles, but there are several things that are bad. And this is in the best of circumstances.

With a single payer system there would be no deductibles, just as there were not in Kaiser’s legacy system. Perhaps the most revealing comment Halvorson made is that before and after instituting deductibles, “the cash flow for KP is basically the same.” It didn’t make a difference; it just mucked things up!

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HHS authorizes higher hypothetical cost threshold for privatized Medicaid

Posted by on Friday, Oct 3, 2014

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.

Medicaid Demonstrations: HHS’s Approval Process for Arkansas’s Medicaid Expansion Waiver Raises Cost Concerns

GAO, Released September 8, 2014

What GAO Found

In approving Arkansas’s Medicaid Section 1115 demonstration, the Department of Health and Human Services (HHS) gave the state the authority to test whether providing premium assistance to purchase private coverage offered on the health insurance exchange will improve access to care for individuals newly eligible for Medicaid as a result of the Patient Protection and Affordable Care Act (PPACA).

In approving the demonstration, HHS did not ensure that the demonstration would be budget- neutral — that is, that the federal government would spend no more under the state’s demonstration than it would have spent without the demonstration. Specifically, HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs — significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program — without requesting any data from the state to support the state’s assumptions. GAO estimated that, by including these costs, the 3-year, nearly $4.0 billion spending limit that HHS approved for the state’s demonstration was approximately $778 million more than what the spending limit would have been if it was based on the state’s actual payment rates for services under the traditional Medicaid program. Furthermore, HHS gave Arkansas the flexibility to adjust the spending limit if actual costs under the demonstration proved higher than expected, and HHS officials told us that the Department granted the same flexibility to 11 other states implementing demonstrations that affect services for newly eligible beneficiaries. Finally, HHS, in effect, waived its cost-effectiveness requirement that providing premium assistance to purchase individual coverage prove comparable to the cost of providing direct coverage under the state’s Medicaid plan, further increasing the risk that the demonstration would not be budget-neutral.

As of June 2014, HHS has approved one additional state’s — Iowa’s — demonstration to use premium assistance to purchase exchange coverage. Iowa’s demonstration is more limited in scope in that it covers a portion of the expansion population, those with incomes of 101 percent to 133 percent of the federal poverty level. As with its approval of the Arkansas demonstration, HHS gave Iowa the flexibility to adjust its spending limit and waived the cost-effectiveness requirement. According to HHS officials, three other states as of June 2014 had indicated an interest in implementing a similar approach.

In commenting on a draft of this report, HHS disagreed with GAO’s findings that HHS’s approval process did not ensure that the Arkansas demonstration will be budget-neutral. GAO maintains the validity of these findings.

What GAO Recommends

GAO is not making recommendations in this report. GAO has had long-standing concerns with HHS’s policy, process, and criteria for reviewing and approving section 1115 demonstrations, including the lack of transparency in the basis for approved spending limits. GAO has previously reported that HHS’s budget neutrality policy and process did not provide assurances that demonstrations would be budget-neutral to the federal government. Among other concerns, GAO reported that HHS allows methods for establishing the spending limit that GAO believes are inappropriate, such as allowing states to include hypothetical costs — expenditures that the state could have made under its Medicaid program but did not — in establishing the baseline for the spending limits. As a result, GAO has made a number of recommendations in the past to improve the budget neutrality process for Medicaid demonstrations. In 2008, because HHS disagreed that changes to the budget neutrality policy and review process were needed, we suggested that Congress require the Secretary of HHS to improve the demonstration review process by, for example, better ensuring that valid methods are used to demonstrate budget neutrality.

From the full GAO report:

HHS’s approval of $778 million dollars of hypothetical costs in the Arkansas demonstration spending limit and the department’s waiver of its cost-effectiveness requirement is further evidence of our long-standing concerns that HHS is approving demonstrations that may not be budget-neutral. HHS’s approval of the Arkansas demonstration suggests that the Secretary may continue to approve section 1115 Medicaid demonstrations that raise federal costs, inconsistent with the Department’s policy of budget neutrality. Moreover, the additional flexibility granted to Arkansas and 11 other states to increase the spending limit if costs prove higher than expected sets another precedent, further eroding the integrity of HHS’s process. If, as it did with Arkansas, HHS allows states to use an approach to expanding Medicaid that is expected to cost more than expansion under the existing Medicaid program with fewer cost controls in place, there could be significant cost implications for the federal government. Efforts to ensure cost- effectiveness and budget neutrality in Medicaid expansion demonstrations have even greater fiscal implications given that states that choose to do so will receive enhanced federal funding for the newly eligible population.

Our two major public programs for health care financing – Medicare and Medicaid – continue down the path of privatization, with the complicity of the Department of Health and Human Services (HHS).

We’ve reported many times that the private Medicare Advantage plans that are displacing the traditional Medicare program have been deliberately funded well in excess of that allotted for traditional Medicare, both by acts of Congress and by administrative chicanery at HHS.

Now the GAO reveals that HHS has also used the section 1115 Medicaid waiver process to allow states to not only transfer their Medicaid patients to private health plans, but to also allow them to meet the higher costs of private plans, through innovative chicanery such as “allowing states to include hypothetical costs — expenditures that the state could have made under its Medicaid program but did not — in establishing the baseline for the spending limits.”

Although privatization of Medicare and Medicaid has long been a Republican goal, since the neo-liberals have dominated the Democratic leadership, they have aided and abetted this effort. We are supposed to be a democracy, yet no matter how we vote, we are electing politicians who spend more of our tax and premium dollars on the administrative waste and mediocre performance of the private insurers. Any suggestions?

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