Will we allow our police and firefighters to lose their retiree health benefits?

Posted by on Friday, May 8, 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.

San Bernardino to slash retiree health care in bankruptcy plan

By Tim Reid
Reuters, May 7, 2015

The southern California city of San Bernardino has proposed virtually eliminating retiree health insurance costs under a bankruptcy exit plan it must produce by May 31, according to an attorney involved in negotiations with city officials.

Steven Katzman, who represents a committee of retirees in talks with the bankrupt city, says a tentative deal has been struck under which retirees would sacrifice the city subsidies they currently receive for health care coverage in exchange for a guarantee that San Bernardino continues to fund and not cut current pension benefits.

The deal would follow an approach taken in the recent bankruptcies of Detroit, Michigan and Stockton, California, where retiree health care was slashed or eliminated, while pensions emerged relatively unscathed.

Retirees, including former police, firefighters and other city workers, can choose to stay with the city health plan, while paying all costs, or they can quit the city health plan and look for coverage in a health exchange, or if eligible, apply for Medicare, the government-funded healthcare program for the elderly.


In designing the Affordable Care Act, one of the highest priorities was to protect employer-sponsored health plans since they were source of health care coverage for the majority of us. Certainly amongst the most reliable coverage are the plans provided for our police officers and firefighters. No.

As these and other public employees in San Bernardino and other bankrupt cities discovered, their coverage is vulnerable. These workers were forced into a deal wherein they had to give up the ironclad guarantee of retiree health benefits in exchange for protecting their pensions.

At least Medicare would be there for them once they became eligible, though they might face significant financial hardships in the interim. In fact, if we had an improved Medicare that covered everyone, it would always be there, not just for them but for all of us, and we would not have to rely on our employment as a source of health care coverage.

So the best – employer-sponsored health plans – do not provide the stability in health care coverage that we need, and these plans do not even cover over forty percent of us. Besides, the federal government is not subject to bankruptcy. With a single payer national health program, the government would always be there for us.

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What does NDP’s landslide victory in Alberta say about single payer?

Posted by on Thursday, May 7, 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.

Alberta’s health care system needs new prescription, NDP leader Rachel Notley tells Calgary crowd

By Dave Dormer
Calgary Sun, April 29, 2015

Restoring a $1 billion cut to funding and eliminating personal levies is the prescription to fixing an ailing health care system, NDP leader Rachel Notley said Wednesday.

“That is a private clinic behind me and that is what Jim Prentice has in mind for you and your family,” she said while campaigning in southwest Calgary.

“That is what a billion-dollar health care cutback leads to and I have a fundamental problem with private clinic health care.

“Private clinic health care is about building a two-tier system where the wealthy, the people who Jim Prentice and his friends represent, can pay to jump to the head of the line instead of treating people on the basis of need.”

Notley said private clinics draw resources away from the public health care system, ultimately undermining it.

“Instead of more of these clinics, I’m proposing we reverse the billion-dollar cutback to health care Mr. Prentice is asking you to vote for in this election and I’m also proposing that we get rid of the regressive health levy,” she said.

“And I’m proposing that we improve our public system with better diagnostics, better long-term care, better mental health care and just plain better health care overall, including better cancer care here in Calgary.

“On this issue, there’s a stark contrast between the vision I’m putting forward and what Mr. Prentice has to offer.”



Alberta election 2015 results: NDP wave sweeps across province in historic win

CBC News, May 6, 2015

It’s a massive shock that turns Canadian politics on its head: the NDP has won a majority government in Alberta.

“I think we might have made a little bit of history tonight,” (NDP) leader Rachel Notley told her supporters Tuesday night. “Friends, I believe, that change has finally come to Alberta. New people, new ideas and a fresh start for our great province.”

The long-governing PC Party dropped to third place. The outgoing premier Jim Prentice told his supporters late Tuesday that he had resigned as party leader and had resigned his seat.

The NDP won just over 41 per cent of the popular vote, the Wildrose got 24 per cent and the PCs were at about 28 per cent.

Prime Minister Stephen Harper congratulated Notley on her win.

“I look forward to working with future Premier Notley on issues of importance for Albertans and all Canadians, including creating jobs, economic growth and long-term prosperity across the province and country,” Harper said in a statement issued Wednesday. He also offered thanks to Prentice, a former minister in his cabinet, and wished him well in his future endeavours.

2015 results – Number of seats won (Number of seats at prior dissolution in parentheses)

10 (70) – Progressive Conservatives
1 (5) – Liberal Party
53 (4) – New Democratic Party
21 (5) – Wildrose Alliance Party
1 (0) – Alberta Party
1 – Undecided


The landslide victory for the New Democratic Party (NDP) in Alberta appears to represent not only a shift to supporting progressive values and away from Prime Minister Stephen Harper’s conservative politics, but it also appears to be an endorsement of NDP’s strong support of Alberta’s single payer health program, with a rejection of recent trends in privatization of their system.

Lest the victors not become too smug and complacent, it should be pointed out that the progressives (New Democratic Party) received 41 percent of the popular vote, whereas the conservatives (Progressive Conservatives and Wildrose Alliance Party) received a combined 52 percent of the vote. (This may represent an oversimplification since some would label Harper’s PC party as “neoliberal.”)

Nevertheless it is reassuring to see a vote in one of Canada’s most conservative provinces that seems to support their single payer public health system, while rejecting privatized two-tier health care.

What lessons might there be here for the United States?

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Gilead and the hedge fund managers

Posted by on Wednesday, May 6, 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.

Activists Target Hedge Fund Managers Cashing In on Predatory Drug Pricing Schemes from Gilead Sciences

Vocal New York, May 5, 2015

On the eve of Gilead Science’s annual shareholder meeting, activists criticized the pharmaceutical giant’s decision to price its Hepatitis C Virus (HCV) cure out of reach for millions of sick people by targeting three major hedge fund investors in the company. The groups released a new report charging Julian Robertson of Tiger Management, Steve Cohen of Point72 Asset Management, and other hedge fund managers of profiting from extortionate drug prices on the backs of 3.5 million Americans and 175 million people worldwide who are living with the virus.

Gilead charges as much as $1,125 per pill and $94,500 for a course of its lifesaving treatments, forcing health care systems to limit access, robbing patients of a decent quality of life, and forcing many into serious health problems and complications.

Hedge fund managers are laughing all the way to the bank. A pack of hedge fund managers bet big on Gilead price-gouging schemes in 2014, increasing the number of shares they held by a factor of 12. The bet turned out well for the hedge fund managers – Gilead’s stock rose 84%. But things haven’t worked so well for HCV patients who still can’t get access to Gilead’s overpriced drugs.

“The hedge fund industry directly supports Gilead’s decision to put astronomical profits over people’s lives,” said Fred Wright of the grassroots political group VOCAL New York. “Hedge fund managers, including those we’re protesting today, have unapologetically attacked any effort to control drug costs for the good of the public. They’re parasites feeding off of people’s desperation.”

“While Gilead reports, once again, exorbitant profits from their HCV cures, the majority of the people with chronic HCV infection cannot afford them and are not being cured,” said Luis Santiago of ACT UP New York.  “Millions of people will see their HCV disease progress, with horrendous yet avoidable health results. Gilead’s profiteering is letting people get sicker, knowing there is a cure. Gilead must substantially lower these outrageous prices so the rationing is lifted and we can cure everyone with HCV.”



Hedgepapers No. 13 – Hepatitis C and Hedge Fund Profiteers

Hedge Clippers, May 4, 2015

A pack of hedge fund managers bet big on Gilead price-gouging schemes in 2014:

Julian Robertson of Tiger Management: “I love Gilead right now. I think it’s fabulous…They’re going to get inundated with cash from the profits on the Hepatitis C drug”

Steve Cohen, Chairman and CEO of Point72 Asset Management, whose firm’s schemes to game drug trials resulted in extensive insider trading investigations and almost landed him in prison

Cliff Asness of AQR Capital Management, who has published extensive rants against Obamacare, and who sits on the board of the Manhattan Institute, which opposes Medicare drug price negotiations

Robert Mercer of Renaissance Technologies, a major backer of key players in the fight against Obamacare, including the Heartland Institute and presidential candidate Ted Cruz

Joel Greenblatt of Gotham Asset Management and Glenn Dubin of Highbridge Capital, also significantly increased their stakes in Gilead Sciences over the course of 2014

These six hedge fund managers increased their shares of Gilead by twelve times during this period. The stock price rose 84% over this period, and the value of their collective holdings in Gilead went from $45 million to $844 million.

That’s a lot of interest in curing Hepatitis C victims – or rather, in squeezing them for profit.



Pharmaceutical firms contribute to wealth inequity

Quote of the Day, April 27, 2015

Pharmaceutical firms are buying the rights to the products of other firms, often buying the firms themselves, paying very high prices for these rights. …an even more egregious example is the action of Gilead Sciences in buying up the rights to the newer, more effective Hepatitis C drugs, again paying outrageous prices for those rights. They are recovering this capital cost by charging $1,000 or more for each pill sold, when a course of treatment may be 84 pills.

A massive amount of capital is paid out, requiring the purchasing firm to charge much higher prices for those drugs to recover the funds paid to acquire the drug rights. Who receives the capital paid out? The wealthiest tier – the tier that holds by far the largest percentage of shares in public and private corporations.


Last week in a Quote of the Day it was described how pharmaceutical firms such as Gilead were paying outrageous amounts for drug rights and then passing these extra costs onto patients through much, much higher drug prices, while tacking on exorbitant profits.

Today’s report shows where much of these profits are going: to the hedge funds! The pharmaceutical industry has become a tool of Wall Street in extracting funds from patients and passing them on up to the very wealthiest, including the fund managers themselves – compounding our problem with wealth inequity.

This screams out for government intervention. With this and all of the other abuses, how could we not support moving control of health care financing to our own public program – a single payer improved Medicare for all?

(For those who plead that hedge funds serve not only the wealthiest individual investors, but they also serve institutional investors such as university foundations and union retirement funds, then you should ask yourself if it is proper for these institutions to expand their assets with tainted money. An important role of government should be to ensure that their money is clean.)

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HHS moving forward with Pioneer ACO model

Posted by on Tuesday, May 5, 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.

Affordable Care Act payment model saves more than $384 million in two years, meets criteria for first-ever expansion

HHS.gov, May 4, 2015

Today, an independent evaluation report released by the Department of Health and Human Services showed that an innovative payment model created as a pilot project by the Affordable Care Act generated substantial savings to Medicare in just two years. Additionally, the independent Office of the Actuary in the Centers for Medicare & Medicaid Services (CMS) has certified that this patient care model is the first to meet the stringent criteria for expansion to a larger population of Medicare beneficiaries.

The independent evaluation report for CMS found that the Pioneer Accountable Care Organization (ACO) Model generated over $384 million in savings to Medicare over its first two years – an average of approximately $300 per participating beneficiary per year – while continuing to deliver high-quality patient care. The Actuary’s certification that expansion of Pioneer ACOs would reduce net Medicare spending, coupled with Secretary Sylvia Mathews Burwell’s determination that expansion would maintain or improve patient care without limiting coverage or benefits, means that HHS will consider ways to scale the Pioneer ACO Model into other Medicare programs.

“This is a crucial milestone in our efforts to build a health care system that delivers better care, spends our health care dollars more wisely, and results in healthier people,” said HHS Secretary Sylvia M. Burwell. “The Affordable Care Act gave us powerful new tools to test better ways to improve patient care and keep communities healthier. The Pioneer ACO Model has demonstrated that patients can get high quality and coordinated care at the right time, and we can generate savings for Medicare and the health care system at large.”

Pioneer ACOs are part of the innovative framework established by the Affordable Care Act to move our health care system toward one that rewards doctors based on the quality, not quantity, of care they give patients. HHS earlier this year announced the ambitious goal of tying 30 percent of Medicare payments to quality and value through alternative payment models by 2016 and 50 percent of payments by 2018.



Association of Pioneer Accountable Care Organizations vs Traditional Medicare Fee for Service With Spending, Utilization, and Patient Experience

By David J. Nyweide, PhD; Woolton Lee, PhD; Timothy T. Cuerdon, PhD; Hoangmai H. Pham, MD, MPH; Megan Cox, MHA; Rahul Rajkumar, MD, JD; Patrick H. Conway, MD, MSc
JAMA, May 4, 2015

During Pioneer ACOs’ first 2 performance years, total spending for 1 481 970 aligned beneficiaries increased approximately $385 million ($280 million in year 1; $105 million in year 2) less than spending of similar FFS beneficiaries. A large portion of the smaller increase in spending was from decreases in inpatient utilization among ACO-aligned beneficiaries, although greater decreases in primary care evaluation and management office visits, and smaller increases in the use of tests, procedures, and imaging services, also were related to the observed differential changes in spending. There was no difference in all-cause readmissions within 30 days of discharge, but follow-up visits after hospital discharge increased more for ACO-aligned beneficiaries. Beneficiary reports of care experiences were similar to both the general FFS and Medicare Advantage populations in the first performance year and may have been better in terms of timely care and clinician communication.

Although such success may be replicable in regions with varying market characteristics, not all ACOs did well fiscally—one-third of Pioneer ACOs did not generate lower expenditure growth relative to their comparison populations in their first 2 years, and 2 generated significantly higher expenditure growth their second year. Multiple factors may contribute to these findings. It may take more time for some ACOs to redesign care delivery and learn how to effectively manage the care of a population of FFS Medicare beneficiaries to realize smaller increases in spending. CMS may also need to reexamine specific design elements to facilitate better performance, such as expenditure benchmarking methodologies that are more predictable to the ACO or enhanced benefits and other tools to engage beneficiaries. Reducing Medicare spending through the Pioneer ACO model, then, likely depends on an array of market, organizational, programmatic, and physician-related factors that should be better understood in future implementation and research.

For individual Pioneer ACOs, the results of this difference-in-differences analysis differ from the results that determine whether they share in savings with CMS. The latter results were derived from reconciling the ACO’s projected and actual spending levels as part of their financial incentive to participate in the model, whereas the primary goal of this analysis was to assess the performance of Pioneer ACOs on a set of key spending and utilization outcomes compared with such outcomes in the absence of the intervention. This study does not address other important concerns such as the degree to which the Pioneer ACO model can sustain small increases in spending and high quality performance over longer periods or whether Pioneer ACOs can achieve a meaningful return on investment for the resources they devote to improving care. These results are also limited to Pioneer ACOs and do not include other types of Medicare ACOs.



Accountable Care Organizations and Evidence-Based Payment Reform

By Mark McClellan, MD, PhD
JAMA, May 4, 2015

The study by Nyweide et al in this issue of JAMA is the most comprehensive to date on the association of Medicare’s Pioneer ACO program with spending and beneficiary experience with care. Because beneficiaries cannot be randomized to a Pioneer ACO, the authors compared annual changes among beneficiaries assigned to the ACOs with changes among beneficiaries in the same region who were not in an ACO or a Medicare Advantage plan.

In the first year, the spending difference was largely attributable to fewer physician encounters and hospital admissions; in the second year, reductions in “preventable” hospitalizations for complications that may be affected by ambulatory care were more important.

These early results may be viewed as modest. The smaller increase in spending amounted to 4% in year 1 and less than 1.5% in year 2 (though the 2 estimates do not appear statistically different). The estimates do not account for the shared-savings payments to the ACOs, which totaled $77 million in 2012. Nor do they account for the investments of time and money made by the health care organizations.



Pioneer ACO Evaluation Findings from Performance Years One and Two

L&M Policy Research, March 19, 2015

From “Results at a Glance”

  • Pioneer ACOs saved a total of $384 million over the first two performance years; most of these savings accrued in the first performance year ($279.7 million in the first performance year [2012]; $104.5 million in the second performance year [2013]).
  • Total spending relative to local markets varied for the 32 individual Pioneer ACOs:
    •   Ten Pioneers had statistically significant savings in both performance years.
    •   Ten Pioneers had statistically significant savings in only one of the two performance years; two of these Pioneers had significant losses the other year.
    •   Twelve Pioneers had no statistically distinguishable savings or losses.
  • Pioneer ACO features explored to date—including hospital relationships, ability to follow beneficiaries across the care continuum, and ACO leadership—do not appear to explain the differences in Pioneer ACOs’ spending performance in the first two years of the model. Provider engagement activities suggest some relationship with Pioneer ACOs’ performance. These findings may be attributable, in part, to the somewhat limited variation in observed structural characteristics that can be measured consistently from available qualitative data across all Pioneer ACOs.
  • Overall spending performance was mainly accompanied by utilization reductions in acute inpatient settings. As a group, Pioneer ACO results showed lower-than-expected utilization in acute inpatient stays and physician services in the first and second performance years compared to local markets. The 10 Pioneers with savings in both performance years had particularly steep reductions in acute inpatient stays.
  • Pioneer ACOs collectively had per-beneficiary-per-month savings in 2012 relative to near markets on physician services, inpatient hospital, hospital outpatient, skilled nursing facility, home health, hospice, and durable medical equipment services. However, the magnitude of savings in these settings was lower in 2013.
  • Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys of aligned Pioneer beneficiaries found that Pioneer ACOs exhibited few changes in patient experience between the first and second performance year. In addition, most ACOs have similar levels of performance to one another in the domains we examined. There appears to be little relationship between savings and high or low CAHPS scores.
  • Pioneer ACOs continue to rely largely on internal sources of learning. Although ACO leadership report gaining insights from consultants, commercial payers, and self-insured employers, they find that as innovators, they have more experience within their organizations that they can draw on than from external sources. Pioneers ACOs had the greatest participation in learning system topics related to cost savings, financial data analysis, and quality results/quality reporting/quality improvement.

From “Conclusions”

Descriptive examination of key ACO features did not reveal measured characteristics that appear to be related to ACOs’ two-year spending results. This finding may be attributable, in part, to the somewhat limited variation in observed structural characteristics that can be measured consistently from available qualitative data across all Pioneer ACOs. For those features where we do observe variation, such as relationship with a hospital or whether ACO providers use a single EHR, it appears that they do not explain Pioneer ACOs’ two-year spending results. One suggestive finding is around provider engagement, where ACOs that place more emphasis on engaging providers through incentives and referral management activities may be better positioned to achieve savings. Ongoing collection and analysis of qualitative data may provide additional insights into key operational features or may reveal that other factors, such as market characteristics, are bigger drivers of spending.


Although most reports about the initial experiences with the Pioneer ACO model have been relatively disappointing, nevertheless HHS Secretary Sylvia Burwell in a press release states, “The Pioneer ACO Model has demonstrated that patients can get high quality and coordinated care at the right time, and we can generate savings for Medicare and the health care system at large.”

The release further states, “this patient care model is the first to meet the stringent criteria for expansion to a larger population of Medicare beneficiaries.” HHS intends that, by 2018, 50 percent of Medicare payments will be tied to quality and value through such “alternative payment models.”

This study was done with highly select “Pioneer” organizations that were already geared up to put into place policies intended to accomplish the goal of lower costs without impairing quality. The first year reductions in spending were quite modest and not achieved by many of the ACOs, and the second year savings were only one-third of the first year, questioning whether savings could be sustained. Also a portion of the savings was returned as shared savings rewards, plus the calculated savings did not include the offset of investment of time and money by the health care organizations. A savings for Medicare does not necessarily equate with a savings in health care spending.

The mechanisms of the savings are not clear. With the successful Pioneer ACOs there were fewer hospitalizations and fewer physician visits, but this could represent the fact that the Pioneer organizations were caring for healthier patients. Also it is not clear if the ACOs were truly effective in reducing unnecessary physician visits and hospitalizations, or if they were denying beneficial health care services because of incentives provided for reducing spending.

The JAMA authors write, “Reducing Medicare spending through the Pioneer ACO model, then, likely depends on an array of market, organizational, programmatic, and physician-related factors that should be better understood in future implementation and research.” So we do not know what we are doing, yet HHS is going to shove us into an ill-defined and unproven program which will determine 50 percent of Medicare payments in less than three years from now. And doctors thought SGR was bad!

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Role of managed care in the Medicaid program: Implications for health care access, use, and expenditures for nonelderly adults

By Kyle J. Caswell and Sharon K. Long
Inquiry 2015 Apr 16;52.

Existing research finds little evidence that managed care substantially reduces health care expenditures, if at all, among nonelderly overall, or among nonelderly adults with disabilities. [p. 1]

This study finds that increased MMC [Medicaid managed care] penetration in a county is associated with an increase in the probability of an ED visit, and reported difficulty seeing a specialist and unmet need for prescription drugs among nonelderly non-SSI Medicaid adults. Furthermore, we find no evidence of reduced expenditures associated with increased MMC penetration for the non-SSI [Supplemental Security Income] population. For nonelderly SSI Medicaid adults, we observe no consistent evidence that MMC penetration influences medical care access, use, or expenditures. [p. 8]

Overall these results, especially among non-SSI Medicaid enrollees, seemingly contradict conventional theories on the expenditures and benefits of managed care. [p. 9]

Our findings … will help to inform the trend toward medical homes and accountable care organizations (ACOs). That is, to the extent that medical homes and ACOs in Medicaid are based on the MMC model, the benefits generated from these alternatives may also be limited.



Care coordination program for Washington state Medicaid enrollees reduced inpatient hospital costs

By Jingping Xing et al.
Health Affairs,  2015, 34:653-661

[E]mpirical evidence to support the effectiveness of care coordination has been lacking. [p. 653]

The objective of this study was to evaluate the impact of a care coordination intervention for Medicaid beneficiaries in Washington state. … Program eligibility was … limited to beneficiaries with prospective cost-based risk scores in approximately the top 20 percent of the risk distribution of Medicaid beneficiaries with disabilities. [p. 654]

The estimated reduction in overall medical costs of $248 per member per month exceeded the cost of the intervention but did not reach statistical significance. [p. 659]


The early peer-reviewed research on managed care’s latest and hottest fads, the ACO and “medical home,” is demonstrating that they do not save money. A common response by managed care proponents is that ACOs and “homes” might save money if they were to “target”  the very sick rather than the general population (see here and last bullet point here for examples).

The papers by Caswell and Long and by Xing et al., quoted above, both published in April, demonstrate how difficult it is going to be for managed care in any form to save money unless the “targeted” populations are quite sick and very carefully selected and, therefore, very small.

Caswell and Long report that states that turn their entire Medicaid population over to “managed care” get a bad bargain – quality of care goes down and expenditures do not fall. They report this is true even for those eligible for Supplemental Security Income who are, as the authors put it, “by definition, severely disabled.”

Caswell and Long’s definition of Medicaid spending did not include the much higher administrative costs Medicaid pays when states switch from paying providers directly to funneling tax dollars through managed care plans. We may conclude that Caswell and Long have demonstrated, in effect, that making Medicaid recipients enroll in managed care plans raises Medicaid’s costs.

Caswell and Long’s results are unusually reliable because they controlled for numerous confounding variables.[1]

Xing et al. reported on the cost of implementing the intervention they analyzed, in this case Washington State’s Medicaid Chronic Care Management program. They found that the program did not save money even before they took the intervention’s cost into account and even though the program was directed at a small and quite costly slice of the population – the sickest 20 percent of the 15 percent of the state’s Medicaid recipients who are disabled.

Their description of Washington’s program sounds like the usual description of what ACOs and “homes” are supposed to do. Here is an excerpt from Xing et al.’s paper:

The program’s nurse care managers provided care for each patient in collaboration with his or her primary care physicians and other providers. When a patient enrolled in the program, an initial comprehensive assessment was conducted. … An individualized health action plan was developed for each patient. … The nurse care manager met face-to-face with the patient and his or her primary care physician to refine the health action plan. … Patients had face-to-face contact with a nurse care manager at least monthly. … Examples of coordinating health care and social supportive services include consulting with pharmacists … , assessing fall risks and developing a full prevention plan … , promoting access to appropriate health care services, working with the patient and caregivers to better manage chronic medical conditions such as diabetes. [pp. 654-655]

Nurse care managers were each responsible for just 45 patients. That is a very small number compared to the typical patient load of 2,300 patients per primary care doctor.

As you might surmise, Washington’s chronic care program was very expensive. The program paid participating clinics $180 per enrollee per month, far higher than the $5 paid by the average “home” program. (The $180 represented only the state’s additional costs. It did not include administrative costs incurred by participating clinics nor the cost of services provided by community agencies contacted by the nurse managers.)

The reduction in total medical spending was $280 per enrollee per month, a sum which did not reach statistical significance. When we subtract the cost of Washington’s program ($180) from the medical savings, we are left with $100, a much smaller number.

Xing et al. do not tell us what percent $100 is of total spending (they do not even report what total spending was). But we can be confident $100 is at best roughly half a percent of total spending.[2]

Xing et al. provide a few rays of hope for those who claim some form of managed care will eventually be shown to save money for the chronically ill. The $280 figure for total medical savings approached statistical significance. (The P value was .09). Given that the average Medicaid beneficiary stayed with the program for only 10 months, proponents of the program have grounds to argue that with a little more time the program might have cut total medical spending, and perhaps total medical spending plus the cost of hiring the nurses, by a statistically significant amount.

To sum up, the Caswell/Long and Xing et al. papers confirm what previous research has shown – that managed care applied to entire populations cannot save money when the administrative costs of managed care are taken into account, but pouring more money into health care professionals to “coordinate care” for a very tiny, very costly portion of the population might achieve modest savings. A few other studies confirm the possibility that when the focus of managed care is shifted from the general population to carefully selected portions of the very sick, small savings are possible. For examples, see here and here.

If research continues to confirm that managed care cannot save money when it is applied indiscriminately across an entire population, and can only do so when it is applied to a tiny fraction of patients, that will not bode well for managed care.  If managed care can save money only when it is applied to small fractions of the population, then the rationale for herding the nation’s entire population into HMOs, ACOs, “homes” and other flavor-of-the-month entities disappears. And if the rationale for herding entire populations into these entities disappears, so too does the rationale for herding the nation’s doctors and hospitals into those entities.

And if those rationales disappear, then the rationale for substituting capitation and other per-head payment methods for fee-for-service, that is, shifting insurance risk to providers, will be undermined. Bearing insurance risk is possible only for entities that can spread that risk over large populations. The pool of all patients with congestive heart failure, to take an example of a sub-type of patient where the return-on-investment in managed care might be positive, is too small to permit an ACO or insurance company to bear risk.

Proponents of ACOs and “medical homes” who suggest that those entities should “target” the very sick are on the right track. But they should be aware of the profound consequences of their recommendation. If by “target” they mean managed-care entities like ACOs and “homes” should focus exclusively on selected portions of the chronically ill and cease applying all forms of managed care to the rest of the population, they are in effect recommending the end of managed care as we know it.


1. By limiting their analysis to Medicaid, Xing et al. even controlled, in a rough fashion, for the possibility that insurance companies might have pushed payment rates to providers below those paid by un-privatized, traditional Medicaid. Because Medicaid rates have always been far below rates paid by the private sector, it is unlikely that insurance companies insuring Medicaid enrollees could squash those rates much further. That means any difference in cost between traditional Medicaid and privatized (managed-care) Medicaid that Xing et al. might have found could be attributed to the assortment of tools known as managed care (utilization review, shifting insurance risk onto doctors, pay-for-performance, etc.) and not to the use of market power to push reimbursement rates down.

2. Total annual Medicaid spending per disabled enrollee during 2011 (which is within the 2007-2012 time period of Xing et al.’s study) was $18,518 at the national level. Xing et al. selected the sickest 20 percent of these enrollees in Washington, which means average spending on this group was substantially higher than $18,518. The skewness of spending on Medicaid disabled patients is almost as severe as it is among the general population; the sickest fifth account for almost 90 percent total spending (see Table 4 here). If we assume, conservatively, that the most expensive 20 percent of Washington’s Medicaid disabled cost $20,000 annually, then the $1,200 annual savings ($100/month times 12 months) constituted six-tenths of 1 percent of total spending.

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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ACA exchanges and private insurance brokers struggle financially

Posted by on Monday, May 4, 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.

Almost half of Obamacare exchanges face financial struggles in the future

By Lena H. Sun and Niraj Chokshi
The Washington Post, May 1, 2015

Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers.

Most exchanges are independent or quasi-independent entities. For most, the main source of income is fees imposed on insurers, which typically are passed on to consumers.



Insurance Brokers in Calif., Other States Struggling Under ACA

California Healthline, May 4, 2015

Insurance brokers in California and other states have struggled financially since the passage of the Affordable Care Act.

In California, more than 12,600 insurance agents are certified to sell health plans through Covered California. Agents assisted 43% of individuals and families who signed up for coverage during the exchange’s second open enrollment period.

Susie Fabrocini — an insurance broker and owner of Reseda-based Great Life Financials — said selling health insurance is becoming a less sustainable business under the ACA, in part because customers seek significantly more assistance.


The insurance exchanges established under the Affordable Care Act function much like an insurance broker, adding additional administrative costs beyond the administrative costs of the insurers and the costs of the administrative burden placed on the health care professionals and institutions. Private insurance brokers in many states also may sell exchange plans, and, of course, they have their own overhead expenses.

Experience is showing that these additional administrative costs are significant, and the exchanges and brokers are struggling with those costs. The costs are then passed on to the purchasers of the health plans in the form of higher premiums. When the the health care system of the United States was already an outlier with outrageous administrative costs, it seems disingenuous that the reform design selected would add to that administrative burden.

With a single payer, improved Medicare for all, state and federal insurance exchanges and private insurance brokers would not be involved at all. Just as with our current Medicare program, enrollment would be a simple, once-in-a-lifetime process, efficiently accomplished at negligible cost by a government bureaucrat.

For those opposed to government bureaucrats, how could you pass up that kind of a discount?

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The Florida House Speaker’s opposition to Medicaid

Posted by on Friday, May 1, 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.

Florida House Goes Home Early Over Medicaid Impasse

By Lynn Hatter, WFSU
Kaiser Health News, April 29, 2015

The Florida House – at odds with the state Senate over the expansion of Medicaid – abruptly ended its session three days early on Tuesday, leaving hundreds of bills unrelated to health care unfinished.

The Republican-led state House is firmly against Medicaid expansion, while the Republican-led state Senate, which is still in session, supports it.



Why I oppose the expansion of Medicaid

By Steve Crisafulli, Speaker of the Florida House of Representatives
Miami Herald, April 29, 2015

We oppose expanding Medicaid because it is a broken system with poor health outcomes, high inflation, unseverable federal strings and no incentive for personal responsibility for those who are able to provide for themselves.

The Florida Senate disagrees and, unfortunately, has partnered with the Obama administration to demand Medicaid expansion. They suggest existing safety-net funding (the Low Income Pool, or LIP) and our state budget are tied to federal healthcare policy goals.

If we lose the federal LIP funds, we can create a more limited, state-funded program or we can live without LIP by pursuing other policy options aimed at reducing costs and increasing access to quality healthcare.

Such options include ideas that the Florida House has championed for years. We support expanding the use of telemedicine and expanding the scope of practice for advance-practice nurses to treat patients. We support encouraging direct primary care, which restores the doctor/patient relationship so healthcare is available at dramatically lower costs. We support expanding medical malpractice reform to reduce frivolous lawsuits that increase healthcare costs and expanding choices for where patients get their healthcare by eliminating unnecessary government regulations. We support breaking geographic monopolies for hospitals. We support allowing consumers to buy health insurance across state lines.


Florida House Speaker Steve Crisafulli criticizes the Medicaid program, but for the wrong reasons, while failing to acknowledge that Medicaid does improve health care access and affordability for low-income individuals and families.

Where he really reveals his true character is in his support of the policy options he lists that he says would reduce costs and increase access to quality health care. Clearly, substituting these policy options for the Medicaid program constitutes an abandonment of any reasonable effort to meet the health care needs of this vulnerable population.

If he really cared, he would use the right reasons to criticize Medicaid and the other features of the Affordable Care Act, and then he would support reform that would make quality health care truly affordable and accessible for everyone – a single payer, improved Medicare for all. But obviously he doesn’t care.

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The BlueCross BlueShield Association is privatizing Medicare

Posted by on Thursday, Apr 30, 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.

Blue Cross and Blue Shield Companies to Launch Retiree Health Insurance Exchange

BlueCross BlueShield Association, April 24, 2015

Blue Cross and Blue Shield (BCBS) companies will launch a health insurance exchange this summer that will support employers’ efforts to help retirees transition from group health benefits to individual Medicare coverage that starts Jan. 1, 2016.

BCBS Marketplace will offer Blue Cross and Blue Shield Medicare Supplement Insurance (Medigap), Medicare Advantage Plans and Medicare Part D prescription drug coverage in more than 45 states and Washington, D.C.


The BlueCross BlueShield Association is a national federation of 37 independent, community-based and locally-operated Blue Cross and Blue Shield companies that collectively provide health care coverage for nearly 105 million members – one-in-three Americans. They now intend to establish a health insurance exchange that will promote transition of employer-sponsored plans to Blue Cross and Blue Shield Medicare Supplement Insurance (Medigap), Medicare Advantage Plans and Medicare Part D prescription drug coverage.

Some employers are already transitioning to private insurance exchanges (similar to but separate from ACA exchanges), converting their employer-sponsored plans into defined contribution plans. As employees retire and become eligible for Medicare coverage, the BlueCross BlueShield retiree health insurance exchange will simplify the transition from employer sponsored group plans to individual Medicare coverage, but doing it with private plans. Since employer-sponsored plans are the largest sector of health care coverage, this transition could cause a massive influx of plans into the private Medicare insurance market.

The retiree exchanges will offer Medigap plans, Medicare Advantage plans and Part D drug plans.

Medicare Advantage plans (Part C plans) are able to offer greater benefits with minimal or no premiums, and thus they continue to grow in popularity. Enrollees are not concerned that taxpayers are providing greater subsidies for these plans, even if CMS is using accounting gimmicks to do so. Plan beneficiaries will always place their own interests above the collective interests of us all.

As Medicare Advantage enrollment is increasing, enrollment in Medigap plans is declining. The Medigap premiums are relatively high considering the limited benefits. The decline in Medigap enrollment may accelerate even more once the Medigap plans are prohibited from covering Part B deductibles (a provision of the recently enacted Medicare SGR fix).

Medicare Advantage plans frequently include the Medicare Part D drug benefits, obviating the need to purchase a separate Part D plan as Medigap enrollees would have to do if they wanted drug coverage.

You can see where this is headed. Employers will be enabling BlueCross BlueShield to enroll retirees into the private BlueCross BlueShield Medicare plans wherein the Medicare Advantage plans (Part C) will experience preferential enrollment. Thus enrollment in the traditional Medicare program (Part A and Part B) will decline substantially. Once the private Medicare Advantage plans become the dominant player (and they are well on their way already), the traditional Medicare program will lose political support and will be converted to a chronically underfunded welfare program, if it survives at all.

Although the establishment of the BlueCross BlueShield Medicare exchanges will likely be lost in the fog of all of the innovative changes taking place under the Affordable Care Act, they are coming. They will be here in only eight months. As the political and policy communities continue to fiddle with other aspects of implementing the Affordable Care Act, the privatization of Medicare will have taken place right before our eyes, and they do not even need Paul Ryan’s premium support vouchers to do it. (In fact, the Republicans just struck premium support from the budget proposal they agreed to this week.)

Just try to stop this one.

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CMS passively rejects any government role in reducing Part D drug costs

Posted by on Wednesday, Apr 29, 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.

Medicaid Rebates for Brand-Name Drugs Exceeded Part D Rebates by a Substantial Margin

Department of Health and Human Services, Office of Inspector General, April 2015


Drug rebates reduce the program costs of both Medicare Part D and Medicaid. Medicaid rebates are defined by statute and include additional rebates when prices for brand-name drugs increase faster than inflation. In contrast, Part D sponsors (or contractors acting on their behalf) negotiate rebates with drug manufacturers, and there are no statutory requirements regarding the amounts of these rebates. In fact, the law establishing the Part D program expressly prohibits the Government from instituting a price structure for the reimbursement of covered Part D drugs.

We found that Part D sponsors and State Medicaid agencies paid pharmacies similar amounts for most brand-name drugs under review. However, Medicaid rebates for brand-name drugs exceeded Part D rebates by a substantial margin. Additionally, Medicaid’s net unit costs (i.e., pharmacy reimbursement minus rebates) were much lower than net unit costs under Part D in 2012 for nearly all selected drugs. Also, more than half of Medicaid rebates owed by manufacturers for selected brand-name drugs were attributed to the inflation-based add-on rebates.

A major driver of the higher Medicaid rebates was the additional amount owed when prices for brand-name drugs increase faster than inflation. This rebate not only produces additional Medicaid rebates, but also helps protect the program from increased costs when manufacturers raise prices. The Part D program does not contain a similar provision.

This is the second OIG evaluation that demonstrates the substantial difference in rebates collected under Medicaid and Medicare Part D. While we recognize the statutory limitations surrounding rebate collection under Part D, we encourage CMS and Congress to explore the costs and benefits of obtaining additional rebates under Part D.



Agency Comments

To:  Daniel Levinson, Inspector General

From:  Marilyn Tavenner, Administrator, CMS

Subject:  Office of Inspector General (OIG) Draft Report: “Update: Higher Drug Rebates Result in Lower Costs for Medicaid Compared to Medicare Part D” (OEI-03-13-00650)

The Centers for Medicare and Medicaid Services appreciates the opportunity to review and comment on the OIG’s draft report. The Part D program has significantly outperformed cost estimates, resulting in lower than expected premium levels since the inception of the program. Additionally, starting in 2011, brand drug manufacturers provide a 50 percent discount for their products to beneficiaries in the Part D coverage gap phase o f the benefit.

As this report discussed, minimum drug manufacturer rebates under the Medicaid program are defined by statute whereas similar rebates under the Medicare Part D program are determined solely through negotiations between drug manufacturers and Part D sponsors. However, Section !8600-ll(i)(1) of the Social Security Act states that CMS “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors.” Consequently, absent new legislative authority, CMS cannot interfere in the rebate negotiations between Part D sponsors and drug manufacturers to secure additional rebates.

The Part D program has significantly outperformed cost estimates, resulting in lower than expected premium levels since the inception of the program. Additionally, starting in 20 II, brand drug manufacturers provide a 50 percent discount for their products to beneficiaries in the Part D coverage gap phase of the benefit.

Thank you for the opportunity to review and comment on this draft OIG report.


Patient advocates were rightfully upset when Congress included a prohibition in the Medicare Part D drug program preventing the government from instituting a price structure for the reimbursement of covered drugs. The OIG has now released another report showing that the net cost of drugs under the Part D program, which relies on private sector negotiations, are much higher than the net cost of drugs under the government-administered Medicaid program.

CMS administrator Marilyn Tavenner has provided a response which is included in the appendix to this report. Whereas her comment appropriately concurs with the OIG observation that CMS cannot interfere in the rebate negotiations between Part D sponsors and drug manufacturers, her unsolicited comment praising the performance of the Part D program warrants concern. (The fact that the “cut and paste” error of including the comment twice shows the importance they place in including this diversionary concept in their response.)

Whenever CMS is challenged on the higher drug costs through the Part D program, their routine response is to report that “The Part D program has significantly outperformed cost estimates, resulting in lower than expected premium levels since the inception of the program.” They never suggest that CMS should be granted the authority to negotiate lower Part D costs, as they already do with Medicaid. Thus, passively, they continue to be supportive of the pharmaceutical industry and the private Part D insurers and pharmacy benefit managers.

This is part of the pattern of CMS supporting the private sector, which includes their devious innovations to increase payments to private Medicare Advantage plans when the unequivocal intent of the law was to reduce their overpayments.

It is clear that CMS, with the full support of President Obama, is providing extra financial support, directly or indirectly, to the private sector administrators of our health care dollars, when the evidence is overwhelming that the public sector would obtain for us much greater value in our health care purchasing. The Obama administration appears to be permeated with industry shills.

It is no wonder that they reject any consideration of single payer. That would ruin the corrupt relationship that they have with the private sector.

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Stuart Butler on Section 1332 waivers

Posted by on Tuesday, Apr 28, 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.

Why Section 1332 Could Solve the Obamacare Impasse

By Stuart Butler, PhD
The JAMA Forum, April 28, 2015

Section 1332 of the ACA, known as “State Innovation Waivers,” allows states, starting in 2017, to apply to the federal government for 5-year renewable waivers from key provisions of the legislation. For instance, states could request changes to or exemptions from the individual and employers mandate, the market exchanges, the exchange subsidies, the Essential Health Benefits requirements, and other provisions. Moreover, states can combine waivers from ACA provisions with waivers from Medicaid provisions (so-called 1115 waivers), Medicare, the state Children’s Health Insurance Program, and waivers available through “any other Federal law relating to the provision of health care items or services.”

Section 1332, however, is not a blank check for states to ignore the whole intent of the ACA, even assuming the White House or the next administration were open to that. It has important fine print. To obtain a waiver, a state’s proposal must retain important protections, such as guaranteeing that health plans accept an applicant regardless of their health status or other factor. The proposal’s coverage must be “at least as comprehensive” and cover “at least a comparable number of its residents” as the ACA, and insurance must be as affordable. Any state plan must also be budget neutral for the federal government.

Even with these limitations on state plans, section 1332 could lead to state health plans in the future that change the ACA beyond recognition. A Republican state like Arkansas, Utah, or Texas, for instance, could use the section to take the federal money for Medicaid expansion as a block grant and turn it into subsidies for families to buy private coverage. These or other states could also end the mandates on individuals and employers, perhaps using government-encouraged auto-enrollment for insurance to meet the ACA’s coverage projections. Meanwhile, states like Vermont, Oregon, and Hawaii could design waivers to create a form of single-payer health system.

The political ramifications of this wide flexibility under section 1332 are immense. For instance, Republican opponents of the ACA, recognizing that the foreseeable congressional makeup means outright repeal of the ACA is not feasible even if Republicans win the White House in 2016, would have a strategy for states to exit much of the ACA. Meanwhile liberals in other states would have a tool to move closer to their dream of a single-payer system. And the White House could claim that even in the Republican states with sweeping waivers, the ACA had been fully implemented. Moreover, the 1332 waivers would allow many of the technical problems of the ACA to be fixed at the state level without going to Congress.


Stuart Butler’s name may be familiar to you as he was the policy expert that described the Heritage Foundation’s model of health care reform that was a counter proposal to the Clinton effort, and later became the model that formed the basis of the Affordable Care Act. We should take heed of his words on the potential of the state innovation waivers authorized by Section 1332 of the Affordable Care Act.

After ultraconservative Sen. Jim DeMint became president of the Heritage Foundation, Stuart Butler moved to the Brookings Institution and was thus less handicapped than he had been with the extreme right-wing political polarization at Heritage. His recent messages have been directed toward solutions that supposedly defuse the politics so that we can move forward on policy.

Without repeating any of his points made above, obviously he believes that the states should move forward with their own concepts of reform that would comply with their respective political climates. However, most of the flexibility he suggests would appeal to conservatives, though he mentions single payer to appease those in liberal states.

The problem is that Section 1332 is quite amenable to piecemeal measures that would gradually move health care further in the direction of a system that places more of the responsibility on the individual, making health care less affordable and less accessible (as if it were not bad enough already). Yet Section 1332 waivers cannot lead to single payer without enabling comprehensive federal legislation. Section 1332 is a setup for conservative policies, yet hardly opens the door for single payer. Acting on a state level alone, liberals cannot expect much more than tweaks to the Affordable Care Act.

Stuart Butler is now even better positioned to drive the dialogue on reform. If the politicians continue to listen to him, forget the dream of a more egalitarian system.

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