Growth of private exchanges leading to two-tier system

Posted by on Thursday, Aug 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.

The Evolution Of A Two-Tier Health Insurance Exchange System

By Rosemarie Day, Pamela Nadash and Angelique Hrycko
Health Affairs Blog, August 13, 2014

Health reform has been a catalyst for change. It has fostered the creation of public health insurance exchanges and accelerated existing trends in health insurance coverage for employees. Many employers are reevaluating their coverage offerings, some employers are no longer providing insurance coverage, and, among those who continue to offer it, high deductible plans with restricted networks are becoming the norm.

In addition, employers are increasingly outsourcing health insurance benefits management by moving employees to private health insurance exchanges – often in combination with a shift toward a defined contribution approach. Estimates vary, but surveys show that anywhere from 9 to 45 percent of employers plan to implement private exchanges in the future.

Accenture has predicted that by 2018, private exchange enrollment will outpace public exchange enrollment.

Consulting firms and benefits consultancies are positioning themselves to grab this market, and are generating interest by publicizing upbeat projections of conversions to private exchanges. This publicity means that attention is focused on these firms and the large employers they target.

However, another, less visible movement is taking place among small to mid-size employers, whose employees may not be so well served by private exchanges. Not only do small employers lack the negotiating power of large employers, but exchange operators for this market may be unable to offer the same level of service; nor does it seem likely that the public small business exchanges will offer sufficient competition.

Benefits consultancies, such as Aon Hewitt, Towers Watson, and Mercer, have been actively recruiting employers to switch to this model, and — with notable success — have acquired large well-known companies like Walgreens. Other major employers are currently negotiating arrangements, planning to phase in private exchanges over time, focusing on different groups of employees.

Two Tiers: Small vs. Large Employers

However, these established consulting firms and benefits consultancies are, by and large, initially focusing on large employers, which represent only one segment of the American workforce. Small employers (with 2-50 employees working at least 30 hours a week) make up nearly 96 percent of all U.S. businesses and employ nearly 34 million workers – and the health insurance picture here isn’t pretty.

People working at firms with fewer than 50 employees are disproportionately uninsured, constituting 25 percent of American workers, but 40 percent of the uninsured. The smaller the firm, the less likely they are to cover their workers.

Moreover, the health insurance that they do provide has tended to be less robust than that offered by large employers – the phenomenon that the term “underinsurance” was created to describe. This is largely because small businesses pay, on average, 18 percent more for health insurance than large employers do, due to higher administrative costs.

The Affordable Care Act (ACA) attempts to address this problem by establishing the Small Business Health Options Program, or SHOP exchanges.

SHOP vs. Private Exchanges

However, like the public exchanges for the individual market, SHOP exchanges have had their problems. For the 32 states participating in the federal SHOP exchange, the picture is gloomy: the administration delayed implementation and dropped the requirement that insurers participating in the public exchange also participate in the federal SHOP exchange, reducing choice for employees, and making life more complicated for the federal SHOP exchange – they will now need to negotiate with each carrier individually to encourage participation.

In addition, the “employee choice” option was delayed for the federal SHOP exchanges until 2015, and most recently, 18 of these exchanges sent a request to CMS to opt-out of employee choice for another year, pushing this delay to 2016.

The picture for the 17 states and DC running their own SHOP exchanges is somewhat better, but not great. Currently, only 3,000 out of roughly 120,000 small businesses in Colorado participate in its SHOP exchange, while enrollment in other states has been low: in Connecticut, only 330 lives are insured, along with only 4,900 lives in California.

Are There Any Downsides to These Private Sector Efforts?

Given the slow start-up of the SHOP exchanges, the private exchanges may provide a valuable service, and, because they have the chance to corner the market before the SHOP exchanges are fully up and running, they may provide public exchanges with stiff competition.

Yet, with private exchanges, employers are likely to get what they pay for. Consequently, large employers will likely have the interest and capacity to demand quality from the sophisticated organizations competing for their private exchange business. These entities are likely to do a good job, using well-designed websites and decision support tools that promote product transparency.

Less sophisticated organizations, dealing with employers who have less negotiating power and insurance expertise, may not.

Private exchanges may well end up segmenting based on the markets they are catering to: more bare-bones, with fewer options and decision support tools for the small employer sector, and more generous, better options with more sophisticated decision support tools for large employers.

Moreover, if private exchanges corner the market, SHOP exchanges may never get off the ground.…

It’s complicated. As insurance coverage expands, inside and outside of the ACA marketplace (insurance exchanges), it looks like some of the current inequities and injustices will be expanded as well.

Briefly, here is what we are looking at:

  • The public ACA exchanges are now covering individuals, but primarily with plans that have lower actuarial value (pay a smaller percentage of health care costs) and with narrow networks (greatly limiting choice of physicians and hospitals). These undesirable features slow the growth of insurance premiums though, even with government subsidies, they are still too high for many who are then allowed to opt out on a hardship basis.
  • Federal and state SHOP exchanges (Small Business Health Options Program) are being established to provide a health insurance market for small businesses now, and eventually for large employers as well. For reasons explained in the article, these government SHOP exchanges are off to a very slow start and may become inconsequential as employers turn to private insurance exchanges instead.
  • Employers have been seeking relief from the burdens of their employee health benefit programs. They are turning to private insurance exchanges which employees accept as a means of providing them with greater choices of health insurance plans. However, employers are using this opportunity to increase deductibles and other cost sharing, reduce provider choice through narrower networks, and switch from defined benefit to defined contribution – placing more of the burden on employees. It may take a while before employees realize what happened.
  • Large employers will still have leverage to negotiate more favorable features with the competing private exchanges.
  • Small employers will not have leverage and will be stuck with higher administrative costs and bare minimum, lower actuarial value plans. They likely will end up using private exchanges by default because of the implementation difficulties that the government SHOP exchanges are experiencing.
  • As this article explains, it appears that we will perpetuate and expand the two-tiered nature of lousy plans for small employers and slightly better but mediocre plans for large employers.

Where is health care justice in all of this? Not to be found. We need an equitable single payer national health program. The sooner the better.

Health navigators for everyone

Posted by on Wednesday, Aug 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.

More Employers Limit Health Plan Networks But Seek To Preserve Quality, Says Adviser

By Mary Agnes Carey
Kaiser Health News, August 13, 2014

Dr. Robert Galvin is chief executive officer of Equity Healthcare (a wholly owned subsidiary of Blackstone, a global investment and advisory firm), where he works with executives of nearly 50 companies that purchase health coverage for 300,000 people. Galvin says the 2010 Affordable Care Act has made employers more engaged in health benefits while encouraging their workers to be savvier health care consumers.

“I think what the ACA has done more than anything is it has made every employer examine their strategy and in every case it’s bringing the CFO and the CEO” into decisions about the company’s health care, which often didn’t use to happen, he said.

Q: We’re hearing a lot these days about narrow networks. While they existed before the ACA, how are employers using tools like narrow networks or high-deductible plans to control costs?

A:  Those employers who are going to stay in the game – which is the majority of them – in many cases have to [improve] what they’re covering. They now have to use the managed care tools that they all abandoned 15 years ago.

So the answer is narrow networks – we now call them “performance networks” – they are definitely increasing in popularity.  And I think what we’re trying to do differently this time is to make them performance [based] and not just narrow.

The second change from the ‘90s is always offering options outside of the narrow network.  So rather than “Here’s your narrow network, that’s it,” it’s, “Here’s your performance network that is going to be less expensive for you.  If you want to, [you have the option] of paying considerably more money,  and getting to another network, or another physician.”

I think what we learned in the ‘90s was that Americans want choice, even if it’s the wrong choice.

On the high deductible side, there’s absolutely a move in that direction.  The way we think about it, we’re trying to make more informed consumers.

This is a more intelligent way of getting people more involved in their health decisions. I think the thing to watch, honestly, is the full replacement high deductible.  [There’s] no [preferred provider option], no point-of-service.  All you have is a high deductible.  There’s still in and out of network but what it means as an employee is you can’t choose between a PPO where you pay $20 to see your doctor or a high deductible where you’ll have to pay $120.  The only option you have is the high deductible.  About 20 percent of the commercial companies have that.  The key thing to watch is how many companies basically only offer high deductibles. It’s about 20 percent now but I think that’s going to grow double-digits every year.

Q: Does the ACA need the employer mandate to work?

A: My bottom line feeling about that is no.

I think people in government have absolutely no idea what kind of work and complexity [employers face] for what seems like a simple regulation. In terms of who’s eligible, who’s tracking hours, doing the look back, what you have for HR systems to manage the reporting requirements, actually administering that is a nightmare.

Q: How do employers help their employees understand more about the health care they’re purchasing?

A: The first thing  is they need to make employees price sensitive.  Time has shown that all the education you can give someone really only impacts a small percent of employees who are interested anyway.

With more price sensitivity is an obligation, if you want the market to work, for information. And information that works for individuals.  More companies are giving [employees] access to health navigators, or health coaches.  So that if you look at information on the computer or you don’t have broadband or you don’t know what it means, you have someone to call who can walk you through it.

It’s a real need in the market to be able to call a navigator or a coach, not through an insurance company, but a free-standing company and have that person help employees figure things out.

Along with price sensitivity has to come the support.…


Equity Healthcare (a subsidiary of Blackstone)

Equity Healthcare works with private equity firms and their portfolio companies to bring innovative solutions to manage health care costs.



At Blackstone, we apply our strengths as a leading global investment and advisory firm to deliver solutions, unlock value and propel growth.

Above all, we have made it our No. 1 priority to serve the needs of our investors and clients.

Follow the logic. To receive greater value in health care, we need to put the patients in charge of purchasing decisions by exposing them to price sensitivity – requiring out-of-pocket payment of high deductibles. We also have to use the managed care tools of 15 years ago – provider networks – but which are now narrower, so we are renaming them “performance networks.” But this does increase the complexity of a system already infamous for its administrative excesses. So what can we do to improve the patient’s ability to negotiate this complex maze of market-oriented health care?

Simple. Let’s provide each patient with a “health navigator” or “health coach.” They can help patients figure out how this thing works. Of course, they can’t give medical advice, but they can provide additional administrative services to assist the patient. Equity Healthcare promotes free-standing companies that provide health navigator services – more administrative services, but no health care services, but at least these entities can help fulfill the mission of serving the needs of Blackstone’s investors.

We gain more administrative services and greater investor opportunity at a cost of reducing patient choices in health care while exposing them to potential financial hardship. Is that how markets are supposed to work? Making things worse for patients while imposing on them the costs of yet more superfluous administrative services? Adam Smith would be perplexed. Producers gain by serving consumers, yet today producers are abusing consumers to achieve their gains. Isn’t it time to replace the invisible hand of the market with the opaque hand of government by establishing our own single payer national health program?

Both Medicaid and uninsured patients face disparities in care of deadly cancers

Posted by on Tuesday, Aug 12, 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.

Disparities in Stage at Diagnosis, Treatment, and Survival in Nonelderly Adult Patients With Cancer According to Insurance Status

By Gary V. Walker, Stephen R. Grant, B. Ashleigh Guadagnolo, Karen E. Hoffman, Benjamin D. Smith, Matthew Koshy, Pamela K. Allen and Usama Mahmood
Journal of Clinical Oncology, August 4, 2014



The purpose of this study was to determine the association of insurance status with disease stage at presentation, treatment, and survival among the top 10 most deadly cancers using the SEER database.

Patients and Methods 

A total of 473,722 patients age 18 to 64 years who were diagnosed with one of the 10 most deadly cancers in the SEER database from 2007 to 2010 were analyzed. A Cox proportional hazards model was used for multivariable analyses to assess the effect of patient and tumor characteristics on cause-specific death.


Overall, patients with non-Medicaid insurance were less likely to present with distant disease (16.9%) than those with Medicaid coverage (29.1%) or without insurance coverage (34.7%; P < .001). Patients with non-Medicaid insurance were more likely to receive cancer-directed surgery and/or radiation therapy (79.6%) compared with those with Medicaid coverage (67.9%) or without insurance coverage (62.1%; P < .001). In a Cox regression that adjusted for age, race, sex, marital status, residence, percent of county below federal poverty level, site, stage, and receipt of cancer-directed surgery and/or radiation therapy, patients were more likely to die as a result of their disease if they had Medicaid coverage (hazard ratio [HR], 1.44; 95% CI, 1.41 to 1.47; P < .001) or no insurance (HR, 1.47; 95% CI, 1.42 to 1.51; P < .001) compared with non-Medicaid insurance.


Among patients with the 10 most deadly cancers, those with Medicaid coverage or without insurance were more likely to present with advanced disease, were less likely to receive cancer-directed surgery and/or radiation therapy, and experienced worse survival.

Clearly, insured patients with one of the most deadly cancers have better outcomes than uninsured patients. Of concern is that this study shows that patents on Medicaid do not do much better than uninsured patients. What can we make of this?

Medicaid coverage is limited to low-income populations. These people have many other problems that can result in impaired access and impaired outcomes – conceivably enough to explain these differences. However, Medicaid also may result in impaired access because of a lack of an adequate number of physicians who are willing to care for Medicaid patients. This is particularly true of specialists, such as oncologists who would otherwise care for these patients with the most deadly cancers. Impaired access due to a lack of willing providers applies to both uninsured and Medicaid patients. That is not true for either privately insured or Medicare patients.

Under a well designed single payer system – an improved Medicare for all – physicians would not cull patients out of their practices merely because they were on Medicaid or uninsured. Enacting single payer would allow us to remove barriers based simply on the type of insurance coverage or lack thereof. That would then allow us address other important societal issues that result in impaired access, delayed or forgone management, and impaired survival.

Although this study will be used by opponents as an excuse not to fund Medicaid based on the fact that Medicaid patients did not do much better than the uninsured, we cannot allow them to discount the other factors faced by low-income patients that undoubtedly played a greater role in these disparate outcomes. Many other studies have shown that Medicaid patients definitely fare better than the uninsured. Until we can enact and implement a single payer system, it is imperative that Medicaid continue to be offered as an interim measure.

First Look At Medicare Quality Incentive Program Finds Little Benefit

By Jordan Rau
Kaiser Health News, August 6, 2014

One of Medicare’s attempts to improve medical quality – by rewarding or penalizing hospitals – did not lead to improvements in the first nine months of the program, a study has found.

The quality program, known as Hospital Value-Based Purchasing, is a pillar of the federal health law’s campaign to use the government’s financial muscle to improve patient care. Since late 2012, Medicare has been giving small increases or decreases in payments to nearly 3,000 hospitals based on how patients rated their experiences and how faithfully hospitals followed a dozen basic standards of care, such as taking blood cultures of pneumonia patients before administering antibiotics. …

The study, published last month on the Health Services Research journal online site, is the first to look at how hospitals performed under the value-based purchasing program. The researchers, led by Andrew Ryan, … analyzed hospitals’ performances in the five years before the program began and the period from July 2011 through March 2012, the nine months of data that Medicare used to determine the first year of bonuses and penalties. The researchers compared how the hospitals in the program did with the performance of several hundred hospitals that were exempted from the program. … The researchers found no significant difference in performance, with both groups of hospitals improving at equal rates.

Evidence refuting the claims made for pay-for-performance (P4P) is piling up. The paper by Andrew Ryan et al. is just the latest example. Ryan et al. found that yet another P4P experiment with hospitals, this one ordered by Congress in 2010, isn’t working. We already knew that. An enormous P4P experiment involving hospitals, ordered by Congress in 2003, didn’t work either. That project, known as the Premier Hospital Quality Incentive Demonstration, has been shown to have no effect on quality.

The best that can be said for P4P is that it can sometimes cause doctors to score slightly higher on measures linked to financial incentives, but only at the expense of patients whose care is not being measured. We know this teaching-to-the-test effect is real because research indicates doctors must work 22 hours a day to meet existing guidelines for preventive and chronic care and still address the acute care needs of their patients. Obviously, under those constraints, P4P can work only by shifting physician priorities away from priorities previously established by doctors and their patients.

The teaching-to-the-test effect of P4P was demonstrated at Kaiser Permanente Northern California which began experimenting with P4P in the late 1990s. Lester et al. found that removing incentives for screening for diabetic retinopathy and cervical cancer led to “a decrease in performance of about 3 percent per year on average for screening for diabetic retinopathy and about 1.6 percent per year for cervical cancer screening.”

Lester et al. speculated that they had demonstrated the teaching-to-the-test effect. In my view, they demonstrated it. Even assuming the worst about Kaiser Permanente’s doctors – that large numbers of them had no idea they should examine the retinas of diabetics or screen for cancer in women, and that this widespread ignorance was corrected by Kaiser’s P4P scheme – we must still conclude that the decline in the scores on these measures after the P4P incentives were removed reflected a return to physician-patient priorities uncontaminated by P4P incentives. The alternative explanation – that a substantial number of doctors reacquired a previous ignorance about the measured services, and there were no competing demands on their time – makes no sense.

Before wrapping up this indictment of P4P I should note that P4P harms poor people, and as of this date we have virtually no information on what it costs to administer the myriad P4P schemes in operation today.

It is timely, therefore, to ask, What happens when health policy experts commit errors? Do we say, “To err is human,” and move on?

Errors by doctors and hospitals trigger a variety of responses, including investigations, malpractice suits, loss of patients, loss of licenses, and criminal prosecution. But when health policy experts make mistakes, nothing happens, at least nothing potent enough to alter expert behavior. The P4P fad illustrates this double standard. P4P was endorsed by the Institute of Medicine (IOM) and many other prominent groups and individuals with no evidence to support it, and now that the evidence indicates P4P doesn’t work, not one of these groups and individuals has stepped forward to admit error.

We need an analysis of errors in health policy and why those errors go uncorrected long after they have been revealed. I would like to suggest that the IOM undertake this task. I suggest they entitle their report, To Err is Human, and Health Policy is No Exception.

In 1999, the IOM released a highly influential report entitled To Err is Human which estimated errors in hospitals caused 44,000 to 98,000 deaths per year.  The IOM said this was “not acceptable” and called for a “comprehensive strategy [to] reduce preventable medical errors.” It defined “medical errors” as “the failure of a planned action to be completed as intended or the use of a wrong plan to achieve an aim.”

The experts’ endorsement of P4P meets the IOM’s definition of “error”: “The use of a wrong plan to achieve an aim.” For several reasons, the P4P fad constitutes an especially good case study for the study of errors by health policy experts:

•  The fad had a rather discrete beginning date (about 2000),
•  it was clear when the fad began that there was no evidence to support it,
•  the proponents of the fad left behind a rather extensive paper trail revealing their flimsy justification for recommending it, and
•  evidence indicting the fad accumulated quickly.

The P4P fad sprang up around 2000 not because research suddenly demonstrated it would work, but because the insurance industry, self-insured employers, and their allies in government and academia wanted desperately to find a new cost-control tactic to replace the more intrusive tactics that inspired the “HMO backlash” of the 1990s. (See, for example, this comment by Paul R. Reich, MD, the medical director of Blue Cross and Blue Shield of Rhode Island, in a 2003 article: “With the decline of capitation as a means of compensating doctors, ‘paying for performance’ has become a viable alternative.” [“Pay for performance,” Managed Care Interface 2003;16:14])

By 2005 the health policy establishment’s interest in P4P had exploded into a full-fledged fad. The Leapfrog Group (a creation of the Business Roundtable) endorsed P4P in 2000, the IOM endorsed it in 2001, an association of eight insurers in California (the Integrated Healthcare Association) established a large P4P program in 2001, and Medpac endorsed P4P in reports to Congress published in 2003 and 2005. In 2003 a group of prominent managed care advocates, including Donald Berwick, Nancy-Ann DeParle, Paul Ellwood, Alain Enthoven, and John Wennberg, published a paper in Health Affairs entitled “Paying for Performance: Medicare should lead.” By 2005, according to the Congressional Research Service, at least 107 P4P programs were underway in the US in the private and public sectors, and Congress was considering authorizing more.

This call for P4P from the health policy elite was not supported by evidence that P4P in medicine was safe, effective, or affordable. For example, in the paper mentioned above by Berwick et al., the authors cited not one study supporting their assertion that “payment for performance should become a top national priority.”

P4P proponents did not justify their call for P4P with evidence because there was none to invoke. Rather, their justification boiled down to, “The status quo is terrible; P4P can’t be worse than the status quo.” Glenn Hackbarth, chairman of Medpac, offered that rationale for Medpac’s endorsement of P4P in a 2006 paper:

Why is MedPAC confident that P4P is the proper thing to do, especially given the limited amount of hard evidence on its impact? Two reasons. First, there is overwhelming research documenting the poor performance of our health care system…. The status quo is unacceptable…. Second, there is abundant evidence that health care providers respond to incentives. For people with substantial experience in health care delivery and policy, like the MedPAC commissioners, it does not seem like much of a leap to conclude that P4P is a step in the right direction.” (“Commentary,” Medicare Care Research and Review 63:1 (Supplement to February 2006), 118S.

In a 2005 press release, Robert Wood Johnson’s president and CEO offered a similar justification: “Whether or not you believe P4P will make a significant difference, it’s time for payers of health care to reward providers who are improving quality rather than turn a blind eye.” (“Pay for performance improving health care quality and changing provider behavior; but challenges persist,” press release, November 15, 2005.)

I will leave aside for now the question of whether P4P proponents have vastly exaggerated the “quality” problem and ignored the role that administrate waste (including the cost of running P4P projects), high prices, and managed care play in preventing patients from getting recommended medical care. I’ll note merely that if doctors adopted the same excuse for trying out risky, expensive and unproven treatments on their patients – “My patient was very sick, the status quo was unacceptable, I couldn’t turn a blind eye” – the health policy elite would raise holy hell, and rightly so. But the standards for “people with substantial experience in health care delivery and policy,” to quote Hackbarth, are different. If you are one of those people, raw, fervently held opinion will suffice.

This devil-may-care attitude toward evidence is a root cause of error in health policy. We badly need research on why this attitude exists and its role in our nation’s inability to adopt effective health policies.

Kip Sullivan, J.D., is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program. His writing has 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.

ACA plan renewal leads to rate shock and delayed tax refunds

Posted by on Monday, Aug 11, 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 Ounce Of Prevention For The ACA’s Second Open Enrollment

By Jon Kingsdale and Julia Lerche
Health Affairs Blog, August 4, 2014

Since recovering from its flawed rollout, the ACA has enjoyed a string of successes. By April, some eight million Americans managed to enroll.

Approximately 87 percent of Marketplace enrollees claimed premium tax credits, of which an estimated 85 percent, or six million, actually paid premiums. Many of the original six million, plus more recent enrollees, will experience their second enrollment between November 15, 2014 and February 15, 2015. They will also file with the IRS for a premium tax credit as early as January 2015.

The two events in combination represent a huge risk.

However, moderate rate actions, and even rate decreases, can translate into huge, net (after-subsidy) rate hikes. This is one of the challenges that Marketplaces and other stakeholders must anticipate and address. The other potential crisis for enrollees, coinciding with the last month of open enrollment, is filing for their 2014 tax refunds; while most high-income filers with complex returns file in March, April or later, many low-to-moderate-income taxpayers who anticipate a refund file by February. But doing so in 2015 may be impossible. If not addressed, rate shock followed by refund delays will deliver a one-two punch.

I. Rate Shock

Premium subsidy calculations are based on household income and the benchmark premium (second-lowest-cost silver plan) available to each household. For the benchmark plan, a subsidy-eligible enrollee’s monthly contribution is based solely on the household’s modified adjusted gross income (“MAGI”); but for any other qualified health plan, the subsidized enrollee’s contribution is based on MAGI plus/minus the difference in premium between that plan and the benchmark.

There is a very high likelihood that the price and identity of the benchmark plan will change from year to year, as issuers adjust premiums, offer new, narrow network plans, enter new Marketplaces, and expand or contract service areas. A recent study of proposed premium changes in the largest city in each of nine states indicated a change in benchmark plans in eight of them. The impact on after-subsidy rates will be very significant.

Because subsidies are tied to a benchmark plan, the only way a subsidy-eligible consumer can ensure relatively stable premiums is to enroll in the benchmark plan each year. Consumers could even move to another state and pay similar after-subsidy rates, if they were committed to enrolling in the benchmark plan. However, consumers may resist changing plans each year, because they like their current plans, they like their current providers, and/or because of simple inertia.

The calculus is even more complicated for enrollees in non-benchmark plans. Since they contribute the rate they would have paid for the benchmark plan, plus or minus the difference in premiums between their plan and the benchmark, their monthly contributions will change if either the benchmark or their current plan’s premium changes. In other words, it is the difference between two moving targets that determines the net contribution for a subsidized household in a non-benchmark plan. This creates counter-intuitive results.

II. Delayed Tax Refunds

Fifteen public Marketplaces, hundreds of issuers, and CMS/IRS have been trading information for months now in a massive effort to reconcile who is enrolled in what coverage for which months, and who owes what to whom. These are the “back-office” processes that are still being worked on, months after most consumer-facing web sites were fixed. This kind of reconciliation among accounting entities can continue for years; indeed, it is generally “tolerated” ad infinitum among insurers, Medicare, Medicaid, and hospitals with respect to claims submitted, approved, and actually paid, not to mention COB and subrogation. The firms estimate year-end liabilities and reserve for them; auditors check their credibility.

The “tolerable” accounting timeframe for taxpayers of modest means is entirely different. They typically file returns soon after receiving their W-2s in January. Why the rush? According to H&R Block, the country’s largest tax preparer, many of their 21 million clients fit the socio-economic profile of subsidy-eligible enrollees, and most of those receive tax refunds. Refunds average $2,500 to $3,000 and often represent the filers’ largest financial transaction of the year; filers may urgently need the refunds to pay rent, utilities, medical and other bills.

The annual cycle for these tax filers begins to build in January, and it crests in mid-February. No doubt, this is why the IRS requires Marketplaces to provide all their enrollees with the information required to claim and reconcile premium tax credits by January 31. However, meeting this deadline in 2015 will be a challenge, to say the least. Anticipating the need for corrections, IRS/CMS will allow Marketplaces to update these notices monthly, until April 15, 2015. They also want Marketplaces to start sending CMS this information (year-to-date) no later than October 15, but the ability of some Marketplaces to comply is in serious doubt. Even for Marketplaces that have been tracking and reconciling these data all along, two other problems will arise.

First, there will be hundreds of thousands of “open” issues in December 2014, which probably cannot be resolved in time for the January notices. If not delayed, these January notices must be subsequently “corrected.” For example, consider the impact of the 90-day grace period for late premium payment: subsidy-eligible enrollees who do not pay their share of October-through-December premiums until late December will have received APTCs for October, but not for November and December. If the late-payment is received within 90 days (December 29), the issuer must post and report it to the Marketplace, and the Marketplace must reconcile this report with prior data, report that to CMS/IRS, and incorporate it into the enrollee’s 1095-A by January 31 — smack in the middle of its busy open enrollment season. On the other hand, if late payment is not received by year-end, and there were other lapses in coverage, the enrollee may be subject to a tax penalty. (A filer may qualify for both premium tax credits and the penalty.)

Second, for tax filers accustomed to handling one or more W-2s and perhaps their bank’s 1099, the new 1095s with over a dozen data fields will be mystifying. Some tax filers will receive multiple 1095s from Marketplaces, employers and insurers. Many subsidized enrollees will probably not recall “receiving” advance tax credits, since the advance credits simply offset QHP premiums. Reconciliation will also require filing a new (8962) tax form; and filers who previously used the short form (1040EZ) must switch to a long form (1040 or 1040A).

And this is the simple scenario. The IRS regulations also describe multiple formulas for allocating premiums and tax credits among (a) members of one tax-filer’s household enrolled in multiple health plans, or (b) members of one subscriber’s family who file taxes separately.

Difficulties in projecting tax credits at the time of enrollment and fear about “claw-back” later on have received much attention. Far more significant may be the dislocation that will occur if millions of low-to-moderate income enrollees cannot file their tax returns in January and February 2015 because they lack accurate 1095s, cannot decipher them, or are stymied by the new tax forms.

Ducking This One-Two Punch

Those closest to these issues, the IRS, CMS, and Marketplaces in particular, may have more practical solutions, but we offer a few suggestions for consideration. First, urge enrollees to compare premiums and shop for the best choice of health plans, rather than auto-renew their current health plan. Exchanges were developed to facilitate comparison shopping and they should continue to engage consumers. Doing so will minimize rate shock in 2015 and can actually reduce monthly contributions for some subscribers. This means overcoming consumers’ natural inertia and the policy arguments in favor of auto reenrollment.

Second, help subsidized enrollees understand the gyrations in their net (after-subsidy) rates and select the best option. This will require decision-support tools which customer service representatives, navigators, brokers, and outreach workers can use to assist shopping and APTC redetermination. “Premium migration tables,” developed at the rating region or county level, by FPL level and household size, plus guidance as to which plans offer enrollees’ current providers, could help with renewals. The premium tables are readily doable, but they require advance notice to develop and disseminate.

Third, consider one-time “fixes” to the premium tax credit reconciliation process for 2014, in order to enable timely filing for refunds. One option might be to cut off reconciliation of premium tax credits for 2014 prior to the end of December, so that carriers and Marketplaces have enough time to issue accurate 1095 forms by January 31, 2015. Another might be for the IRS to apply Marketplace-generated data on premium tax credits, even if tax filers omit the long form and 8962s. This might even mean carrying over some 2014 reconciliations into tax-year 2015.

Fourth, prior to January 2015, mail Marketplace enrollees a partial-year 1095-A, reporting advance tax credits paid through September or October 2014. Doing so would remind enrollees that they are benefiting from these tax credits, and allow them to scrutinize and seek corrections of the calculations.

Fifth, provide clear, detailed training from the enrollees’ perspective to health plans, brokers, navigators, and tax preparers on both premium tax credits and counter-intuitive changes in enrollees’ contributions.

The next customer experience with new enrollments, renewals, and tax filings is the next big opportunity to reset public perception of the ACA. At a minimum, those who will be holding enrollees’ hands next winter, must understand these challenges and be given the tools and training to help their clients cope.…

Easy. Set up marketplaces (ACA insurance exchanges), let each shop for his or her own preferences, then apply premium subsidies based on income. Then next year let the plan automatically renew. Then why does it require so many words for Jon Kingsdale and Julia Lerche to describe this simple process?

Clearly, when you read this article, you see that the process is not simple, and, at that, only some of the complexities are discussed here. These complexities are directly due to the highly flawed model of reform selected by President Obama and the Democratic members of Congress.

The authors suggest five possibilities for getting around the two problems they discuss – rate shock and delayed tax refunds. But when you read their proposals for negotiating your way around these complications, you see that they are not so simple either. You almost need an accountant, though that is not affordable for most people who are eligible for premium subsidies because of their lower incomes.

According to the authors, “The next customer experience with new enrollments, renewals, and tax filings is the next big opportunity to reset public perception of the ACA.” And where will that reset of public perception land? In a sea of ACA complexities.

How would renewal under a single payer system compare to renewal in the ACA marketplaces? Renewal wouldn’t exist. Your initial enrollment is for life, not to mention that it is an exceedingly simple process – a matter of simply identifying who you are for purposes of enrollment.

Most uninsured will be exempt from penalties

Posted by on Friday, Aug 8, 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.

Fewer Uninsured Face Fines as Health Law’s Exemptions Swell

By Stephanie Armour
The Wall Street Journal, August 6, 2014

Almost 90% of the nation’s 30 million uninsured won’t pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement.

The architects of the health law wanted most Americans to carry insurance or pay a penalty. But an analysis by the Congressional Budget Office and the Joint Committee on Taxation said most of the uninsured will qualify for one or more exemptions.

The Obama administration has provided 14 ways people can avoid the fine based on hardships, including suffering domestic violence, experiencing substantial property damage from a fire or flood, and having a canceled insurance plan. Those come on top of exemptions carved out under the 2010 law for groups including illegal immigrants, members of Native American tribes and certain religious sects.

Factoring in the new exemptions, the congressional report in June lowered the number of people it expects to pay the fine in 2016 to four million, from its previous projection of six million.…


Payments of Penalties for Being Uninsured Under the Affordable Care Act: 2014 Update

Congressional Budget Office, June 5, 2014

Under the Affordable Care Act, most legal residents of the United States are required to obtain health insurance or pay a penalty.

CBO and JCT have estimated that about 30 million nonelderly residents will be uninsured in 2016 but that the majority of them will be exempt from the penalty. Those who are exempt include:

  • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
  • People with income low enough that they are not required to file an income tax return;
  • People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
  • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and
  • People who are incarcerated or are members of Indian tribes.

CBO and JCT estimate that 23 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or for other reasons.

All told, CBO and JCT estimate that about 4 million people will pay a penalty because they are uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf).

The Affordable Care Act was designed with incentives for almost everyone to obtain insurance. A financial penalty was to be assessed against any individual who remained uninsured, but now almost 90 percent of the uninsured will be exempt from the penalty. Larger employers were to be penalized if their employees remained uninsured, but now there is bipartisan support to eliminate the employer mandate. The expansion of Medicaid was to occur in all states but it has now been declined by about half of the states. Even with legislative patches, this fragmented system can never ensure that everyone has adequate health care coverage.

Compare this to a single payer system in which absolutely everyone would have been automatically enrolled in a better plan than any of those currently available, including Medicare. Why is there no clamoring for change?

Government evidence of Medicare Advantage cheating

Posted by on Thursday, Aug 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.

How Medicare Advantage plans code for cash

By Fred Schulte
The Center for Public Integrity, August 7, 2014

A new federal study shows that many Medicare Advantage health plans routinely overbill the government for treating elderly patients — and have gotten away with doing it for years.

Analyzing government data never before made public, Department of Health and Human Services researchers found that many plans exaggerate how sick their patients are and how much they cost to treat. Medicare expects to pay the privately run plans — an alternative to traditional Medicare — some $160 billion this year.

The HHS study does not directly accuse any insurers of wrongdoing or name specific plans that were scrutinized. But the researchers offer the most comprehensive evidence to date that suspect billing practices have been common across much of the Medicare Advantage industry and are likely to get worse unless officials crack down.

Medicare pays the Advantage health plans higher rates for sicker patients and less for healthy people using a complex formula called a “risk score.” But the HHS study spells out several ways health plans have inflated those scores, from reporting implausibly high levels of medical conditions such as alcohol or drug dependence to billing for an inordinately high number of patients with complications of diabetes.

Despite its broad implications for Medicare spending, the study by HHS researchers Richard Kronick and W. Pete Welch has attracted scant notice in Washington. It was quietly posted late last month on an online research site run by the Centers for Medicare and Medicaid Services, part of HHS.

Kronick directs the HHS Agency for Healthcare Research and Quality, whose mission is to improve health care delivery. Welch works for the HHS Office of the Assistant Secretary for Planning and Evaluation.…


Measuring Coding Intensity in the Medicare Advantage Program

By Richard Kronick and W. Pete Welch
Medicare and Medicaid Research Review (MMRR), A publication of the Centers for Medicare & Medicaid Services, 2014: Volume 4, Number 2

In 2004, Medicare implemented a system of paying Medicare Advantage (MA) plans that gave them greater incentive than fee-for-service (FFS) providers to report diagnoses.

The increase in relative MA scores appears to largely reflect changes in diagnostic coding, not real increases in the morbidity of MA enrollees.

Concerns about overpayment as a result of favorable risk selection have confronted the Medicare program throughout the history of Medicare contracting with health maintenance organizations and other private plans. In the late 1980s, Medicare paid health plans using a system that adjusted for demographic factors such as age and gender, but plan enrollees were healthier than fee-for-service beneficiaries with the same demographic characteristics, and, as a result, health plans were estimated to be overpaid by approximately 11%.

In order to reward health plans for attracting sicker-than-average enrollees, and to discourage plans from constructing business models designed to avoid risk, Medicare and other payers have increasingly turned to diagnosis-based risk- adjusted payment systems in which health plans are paid more for enrollees expected to need more care. While mitigating the incentive to enroll only healthy people, diagnosis-based risk adjustment creates another set of incentives: to find and report as many diagnoses as possible.

The MA payment system uses diagnostic information to assign a risk score to each beneficiary.

This payment system creates incentives for MA plans to find and report as many diagnoses as can be supported by the medical record.

In addition to the incentives to report more completely, the method of collecting diagnostic information also provides MA plans additional opportunities to increase risk scores. FFS diagnoses are drawn only from health care claims submitted for payment. MA plans may also review medical records and can report all diagnoses that are supported in the record, including those that were not reported by physicians on any health care claim or encounter record. MA plans can also employ nurses to visit enrollees in their homes to conduct health assessments and report diagnoses that are found.

From the Discussion

It appears that most of the reason that MA risk scores increased more quickly than FFS scores is due to increases in relative coding intensity—measured as increases in risk scores for stayers—with little of it accounted for by changes in enrollment mix. There is little sign of coding intensity slowing; in fact, Exhibit 2 shows that it may be increasing.

CMS and the Congress have responded to the increase in risk scores over time in several ways. First, starting in 2010, CMS lowered payment by 3.41% by applying an across-the-board coding adjustment. The coding intensity adjustment will increase to 4.91% in 2014 and to at least 5.91% in 2018. Second, starting in 2013, CMS set the four most severe diabetes HCCs (Hierarchical Condition Category) to have the same payment coefficient (Department of Health and Human Services, 2012). As a result, recording diagnoses that move enrollees from HCC18 (diabetes with ophthalmologic or unspecified manifestation) into HCC15 (diabetes with renal or peripheral circulatory manifestation) will no longer increase revenue for MA plans. Third, CMS made further changes to the model in 2014, removing some of the HCCs that were the subject of MA efforts at increasing coding intensity.

Relative MA risk scores have been increasing at least 1% per year and are likely to continue to do so, even though MCBS-based risk scores have been roughly constant.8

Footnote 8:  Some would expect that MA plans will react to the 2013 and 2014 model changes by finding other HCCs on which to focus their efforts, and the success of coding intensity efforts may well increase in the future.

We have discussed before the ways in which the private Medicare Advantage (MA) plans have been cheating the taxpayers, including cheating the beneficiaries in the traditional Medicare program who are paying higher premiums to support these private MA plans. Today’s message is especially significant since it cites a detailed 19 page report from the director of AHRQ and his colleague – a report which further confirms the private insurers’ distortion of Hierarchical Condition Categories (HCC) to receive extra risk adjustment payments based on upcoding that reports their patients as being more ill than they actually are (i.e., they pad the diagnoses).

The history of Medicare Advantage is that of a steady string of abuses. The program began with overpayments of about 14 percent over the cost of caring for Medicare patients in the traditional program. That overpayment was a deliberate ploy of Congress to give the private plans a competitive market advantage in an effort to privatize Medicare. The plans then selectively enrolled healthier, less expensive patients through deceptive marketing practices. When an effort to correct this favorable selection was made through risk adjustment using Hierarchical Condition Categories, the insurers then padded the diagnoses, as mentioned above. Further, since the Affordable Care Act included adjustments to correct the overpayments, the insurance industry heavily lobbied Congress and the Obama Administration to use three years of accounting gimmicks to reduce the impact of these adjustments. Cheat, cheat, cheat.

What can we expect now? Richard Kronick and W. Pete Welch are reserved in their language when they state, in a footnote, “Some would expect that MA plans will react to the 2013 and 2014 model changes by finding other HCCs on which to focus their efforts, and the success of coding intensity efforts may well increase in the future.”

I’ll be more frank. These crooks will continue to cheat the American taxpayers. They will surely use other HCCs to upcode their patients, until that door is finally slammed shut. What then? The private insurers continually tout to their shareholders the importance of “innovation” in health care coverage. They will always be able to find new and more effective ways to cheat us.

One of the more important improvements in an Improved Medicare for All would be to get rid of these crooks once and for all. The sooner the better.

Free Medicaid? Gotcha!

Posted by on Wednesday, Aug 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.

You Qualify for Medicaid: Don’t Sign Up

By Christopher Flavelle
Bloomberg View, August 4, 2014

The debate over Obamacare’s Medicaid expansion divides states into two broad categories — those that expand their program and those that don’t. New research suggests we should talk more about a third group: States that agree to expand Medicaid, then impose premiums whose only purpose seems to be keeping people out of the program.

A paper released today in the journal Health Affairs, written by researchers from the federal government’s Agency for Healthcare Research and Quality, seeks to quantify the effect of premium increases on children’s enrollment in Medicaid or its sister plan, the Children’s Health Insurance Program. They found that even small premiums lead to big drops in sign-ups.

Using data from 1999-2010, the researchers — Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Selden — found that for children in families making from 101 percent to 150 percent of the federal poverty line, a $10 increase in monthly premiums was associated with a 6.7 percent reduction in enrollment. For the subset of families not eligible for health coverage through their jobs, that grew to 7.3 percent.

The authors of the Health Affairs study don’t examine the effect of premium increases on adults. But Laura Dague, a professor at Texas A&M University, has. In an article published in the Journal of Health Economics in May, Dague looked at three years of data from the Wisconsin BadgerCare Plus program, which offers subsidized health coverage to families with low incomes. She found that moving from $0 to $10 a month reduced enrollment among children and adults by 12 percent to 15 percent.

What struck Dague about those results was that it’s not just the magnitude of the premium that matters, but the existence of a premium.

“The biggest effects in my data were at the margin where folks start having to pay premiums at all,” she told me by phone last week. She wasn’t sure why that was — perhaps the difficulty of paying another monthly bill or the psychology of having to pay in the first place.

What makes these papers relevant is that at least four states — Indiana, Iowa, Michigan and Pennsylvania — have expanded or are trying to expand Medicaid access in a way that imposes premiums on those making from 101 percent to 138 percent of poverty. Those premiums aren’t high: $25 a month in Indiana, $10 in Iowa, $25 in Pennsylvania ($35 for a household) and 2 percent of income in Michigan. But these new studies show that even those small amounts can significantly reduce the number of people who sign up.

That seems to be the point. After all, Medicaid spending per beneficiary will reach almost $6,400 in 2014, against which $120 in premiums each year generates additional revenue that’s barely significant. And as Dague notes, imposing a premium at all means spending money to obtain and process those payments.

“If the administrative costs of collecting premiums are high relative to revenue collected,” she wrote, “small premiums seem difficult to justify as anything other than a measure to discourage enrollment.”

If the states that have already imposed premiums were the outliers, then this would be a frustrating story but a limited one. However, 24 states still refuse to expand their Medicaid programs, and there’s a strong chance that some of those will change their minds on the condition that they can impose premiums, too. There’s an equally good chance that the Centers for Medicare and Medicaid Services, which faces pressure to bring those states into the fold, will go along with it.

Unquestionably, access to Medicaid for a small premium is better than no access at all. But this new research says we shouldn’t mince words about the point of those premiums. They’re designed to get fewer people to sign up.…


Children’s Health Insurance Program Premiums Adversely Affect Enrollment, Especially Among Lower-Income Children

By Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Seedless
Health Affairs, August 2014

In this article we have examined the effects of public premiums on insurance coverage of children who were eligible for Medicaid or CHIP and whose family incomes were above 100 percent of the federal poverty level in 1999–2010. Higher public premiums are associated with lower public coverage and with increases in private coverage and uninsurance. The magnitudes of these premium effects vary considerably by poverty level and by parental coverage offers.

Among lower-income children, premium increases are associated with larger reductions in enrollment in public coverage, and a larger share of the decline in enrollment takes the form of increased uninsurance. The association between premiums and uninsurance is particularly strong among lower-income children who lack access to employer-sponsored insurance through parental offers.


The effect of Medicaid premiums on enrollment: A regression discontinuity approach

By Laura Dague
Journal of Health Economics, September 2014

This paper estimates the effect that premiums in Medicaid have on the length of enrollment of program beneficiaries. Whether and how low income-families will participate in the exchanges and in states’ Medicaid programs depends crucially on the structure and amounts of the premiums they will face.

The obsession of the policy and political communities with requiring even low income families to experience consumer sensitivity to costs has crossed the bounds into blatant psychopathology, as these studies confirm.

The Medicaid and CHIP programs were specifically designed to provide health care coverage for low income families – a goal with which most caring individuals agree. The very modest Medicaid and CHIP premiums extracted from these families are so small that they have no impact on the overall financing of the programs. Yet they are enough that these families with no discretionary income find these programs to be unaffordable, and so they remain uninsured.

The screwball idea that these premiums somehow make these low income families better consumers is totally void of reason. These premiums merely defeat the purpose of the programs – getting these people the coverage that they need. The psychopathology rests with those who insist that cash payments, no matter how small, are absolutely essential for these families to appreciate the benefits of actively participating in markets rather than passively accepting a government handout. This is ideology gone mad!

Under a well designed single payer system, premiums and cost sharing are eliminated. People simply get the heath care they need when they need it. Paying for the system is totally removed from the delivery of care since it is financed through progressive taxes that everyone can afford.

Higher costs and lower quality in for-profit Medicare home health agencies

Posted by on Tuesday, Aug 5, 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.

For-Profit Medicare Home Health Agencies’ Costs Appear Higher And Quality Appears Lower Compared To Nonprofit Agencies

By William Cabin, David U. Himmelstein, Michael L. Siman and Steffie Woolhandler
Health Affairs, August 2014


For-profit, or proprietary, home health agencies were banned from Medicare until 1980 but now account for a majority of the agencies that provide such services. Medicare home health costs have grown rapidly since the implementation of a risk-based prospective payment system in 2000. We analyzed recent national cost and case-mix-adjusted quality outcomes to assess the performance of for-profit and nonprofit home health agencies. For-profit agencies scored slightly but significantly worse on overall quality indicators compared to nonprofits (77.18 percent and 78.71 percent, respectively). Notably, for-profit agencies scored lower than nonprofits on the clinically important outcome “avoidance of hospitalization” (71.64 percent versus 73.53 percent). Scores on quality measures were lowest in the South, where for-profits predominate. Compared to nonprofits, proprietary agencies also had higher costs per patient ($4,827 versus $4,075), were more profitable, and had higher administrative costs. Our findings raise concerns about whether for-profit agencies should continue to be eligible for Medicare payments and about the efficiency of Medicare’s market-oriented, risk-based home care payment system.


Medicare’s home health payment system aims to harness market-oriented incentives for efficiency. CMS seeks to upgrade care through a quality monitoring program that imposes substantial documentation burdens on clinicians. Our findings suggest that this program may not fully insulate patients from profit-incentivized quality compromises.

Meanwhile, the payment incentives have nourished the growth of proprietary agencies whose costs (and profits) are far higher than those of their nonprofit counterparts. Overall, it appears that proprietary home care agencies deliver slightly lower-quality care at a substantially higher cost, belying claims that for-profit incentives increase efficiency.

Further analysis of the impact of proprietary ownership (and other factors associated with poor home health agency performance) is sorely needed. If our findings are confirmed, Medicare should consider returning to the pre-1980 prohibition on investor ownership of home health agencies and simplifying the current complex payment system, which has neither contained costs nor maximized quality.


H.R. 676, Expanded & Improved Medicare For All Act

Sponsored by Rep. John Conyers, Jr and 60 cosponsors

Sec. 103.

(a) Requirement To Be Public or Non-Profit.–

  1. In general.–No institution may be a participating provider unless it is a public or not-for-profit institution. Private physicians, private clinics, and private health care providers shall continue to operate as private entities, but are prohibited from being investor owned.
  2. Conversion of investor-owned providers.–For-profit providers of care opting to participate shall be required to convert to not-for-profit status.

Markets, competition, investor ownership, and profits are touted incessantly as being key to higher quality and lower costs in health care, even though Noble laureate Kenneth Arrow showed us decades ago why markets do not work in health care. Previously studies of hospitals, HMOs, nursing homes, hospices, and dialysis centers have show us that investor ownership is associated with lower quality and higher costs. We can now add Medicare home health agencies to that list wherein proprietary, for-profit investor ownership is detrimental.

H.R. 676, the Expanded & Improved Medicare For All Act, sponsored by Rep. John Conyers, Jr, is a single payer bill that includes provisions that would eliminate investor-owned, for-profit providers. Today’s article adds to the evidence as to why the leadership of Physicians for a National Health Program supports the elimination of passive investors and profit diversion from our health care system. Health systems must be designed to benefit patients, not market exploiters that sacrifice quality while draining resources from health care. The primary missions are different. One is to take care of patients and the other is to make money.

Now just try to make the plans work

Posted by on Monday, Aug 4, 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.

Newly Insured, Many Now Face Learning Curve

By Abby Goodnough
The New York Times, August 2, 2014

Advocates of the Affordable Care Act, focused until now on persuading people to buy health insurance, have moved to a crucial new phase: making sure the eight million Americans who did so understand their often complicated policies and use them properly.

The political stakes are high, as support for the health care law will hinge at least partly on whether people have good experiences with their new coverage.

Many people who signed up for private coverage through the new marketplaces had never had health insurance, and even the basics — like what a premium is and why getting a primary care doctor is better than relying on the emergency room — are beyond their experience. Others have a sense of how insurance works but find the details of the marketplace plans confusing, especially if they signed up without the help of someone who understood them.

Insurers, too, are trying to help ease their new members’ confusion. Independence Blue Cross, which enrolled 165,000 people in its marketplace plans, has representatives traveling the Philadelphia region this summer in a tractor-trailer, the Independence Express, and offering educational seminars. Independence also has tried to reach all of the new members by phone to welcome them and “make sure they understand what they bought,” said Paula Sunshine, the company’s vice president of consumer sales and marketing.

The company knew going in that the learning curve would be steep. It held focus groups last year with nearly 2,000 people and found, for example, that virtually none knew what coinsurance was.

In one sign of widespread confusion, a recent Kaiser Family Foundation survey of programs that helped people apply for marketplace coverage found that 90 percent had already been re-contacted by consumers with post-enrollment questions.…

If health care reform had worked the way it should have, today anyone could get the health care that he or she needed without having to worry about how to pay for it. What are we seeing instead? Just trying to enroll in health care coverage has been a very difficult process for many, and tens of millions will still remain uninsured. And today’s article shows how problematic the next step is – trying to put your coverage to use.

Some of the problems have already been widely publicized. Newer plans, especially those in the exchanges, have low actuarial values (i.e., very high deductibles and other excessive cost sharing). Cost sharing can make care unaffordable for those with modest incomes. Plans are now using narrow- and ultra-narrow networks of hospitals and health care professionals which limit patients’ choices in their health care, often preventing access to the most appropriate physicians and hospitals. We are now seeing tiered levels of specialized services and pharmaceuticals in which patients are financially penalized if they use specialists or drugs in the higher, more expensive tiers even if they are clearly preferred for medical reasons. The penalty is assessed by the insurers strictly to dissuade patients from using more expensive care even though it may be better care. Patients are also having difficulties determining not only whether specific providers are in or out of their networks, but also which tier they are in and what that means. Furthermore, the provider enrollment in these networks is quite unstable, not to mention the instability that arises when the patient must change plans and therefore change networks. This says nothing about the problems patients face when they try to get an appointment and find that there are no openings, or find that the distances are too far – directly due to the insurance innovation that promises a higher volume of patients to fewer physicians so that insurers can get greater discounts, even though overloading their practices. The list goes on and on with administrative excesses that are designed to enhance the business performance of the insurance products at a cost to the patients that they should be serving.

It should not have been this way. A single payer national health program would have automatically enrolled everyone; it would have included all providers, and it would have been financed through equitable taxes, making it affordable for everyone.

Although this New York Times article presents the problem as a need to teach individuals the complexities of using these newer insurance products, the problem is actually the complexities themselves and the tremendous injustices that ensue.

The remainder of this comment is composed of more excerpts from the NYT article. The experience of Salwa Shabazz should enrage us and drive us to demand health care justice for all. Her case shows us the compelling need for comprehensive structural reform of our health care financing system.

The following are excerpts from the NYT article (link above):

Last week, Salwa Shabazz arrived at the office of a public health network here with a bag full of paperwork about her new health insurance — and an unhappy look on her face. She had chosen her plan by phone in March, speaking to a customer service representative at the federal insurance marketplace. Now she had problems and questions, so many questions.

“I’ve had one doctor appointment since I got this insurance, and I had to pay $60,” Ms. Shabazz told Daniel Flynn, a counselor with the health network, the Health Federation of Philadelphia. “I don’t have $60.”

Mr. Flynn spent almost two hours going over her Independence Blue Cross plan, which he explained had a “very complicated” network that grouped doctors and hospitals into three tiers. Ms. Shabazz, who has epilepsy, had not understood when she chose the plan that her doctors were in the most expensive tier.

“None of that was explained when I signed up,” she said. “This is the first I’m hearing it.”

Independence Blue Cross has focused on making sure people understand the tiered-network plan that Ms. Shabazz chose, which was popular because of its relatively low price but also particularly hard to understand. Ms. Shabazz, 38, paid only about $32 a month in premiums, with federal subsidies of $218 covering the rest. But she could not afford the $60 co-payments to see her specialists on her annual income of $19,000.

Her financial situation worsened when she had to quit her job at the Pennsylvania Liquor Control Board in June because of the epilepsy, she said. She had called the federal marketplace to report her change in income, and had received a letter that she handed to Mr. Flynn, hoping he could explain it. The news, he said, was not good: With no more paychecks, she had fallen into the so-called coverage gap, earning too little to keep qualifying for the subsidies that made her premiums affordable, but likely still not qualifying for Medicaid because Pennsylvania has not expanded that program, as 26 states have under the Affordable Care Act.

“You’ll probably have to cancel your plan,” he said.

Ms. Shabazz’s mother, Waheedah Shabazz-El, who had accompanied her to the appointment, shook her head as her daughter wiped away tears. “There are so many layers to this,” Ms. Shabazz-El said.

Closing comment by Don McCanne:  We are not powerless. Let’s demand single payer, and not let up until we get it.

About this blog

Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.