Insurer exclusions put women at risk

Posted by on Tuesday, Aug 2, 2016

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.

Women’s Health Coverage Since the ACA: Improvements for Most, But Insurer Exclusions Put Many at Risk

By Dania Palanker (National Women’s Law Center) and Karen Davenport
The Commonwealth Fund, August 2, 2016

Issue:  Since enactment of the Affordable Care Act (ACA), many more women have health insurance than before the law, in part because it prohibits insurer practices that discriminate against women. However, gaps in women’s health coverage persist. Insurers often exclude health services that women are likely to need, leaving women vulnerable to higher costs and denied claims that threaten their economic security and physical health.

Goal:  To uncover the types and incidence of insurer exclusions that may disproportionately affect women’s coverage.

Method:  The authors examined qualified health plans from 109 insurers across 16 states for 2014, 2015, or both years.

Key findings and conclusions:  Six types of services are frequently excluded from insurance coverage: treatment of conditions resulting from noncovered services, maintenance therapy, genetic testing, fetal reduction surgery, treatment of self-inflicted conditions, and preventive services not covered by law. Policy change recommendations include prohibiting variations within states’ “essential health benefits” benchmark plans and requiring transparency and simplified language in plan documents.

Problems from lack of transparency

There is little transparency in plan documents regarding health insurance exclusions. As a result, women may unwittingly enroll in plans containing exclusions that impact their coverage, and remain unaware of the exclusions until they seek services or have a claim denied. The short overview of coverage provided for each plan on the marketplace—called the “Summary of Benefits and Coverage”—includes space for information on exclusions. However, only 13 exclusions are required to be listed, and none of the exclusions described in this brief are in that group. Identifying all exclusions requires reading the underlying plan document, such as the evidence of coverage; yet some plan documents are over 100 pages long and exclusions appear in various sections. Terminology also varies among insurers; for example, some plans exclude “maintenance therapy” and others exclude “maintenance care.” In addition, some exclusions appear among only a small number of insurers, so women cannot know all the exclusions to look for in their plans. For example, six insurers exclude services resulting from an enrollee’s failure to comply with or accept recommended treatment, which is problematic for women who are less likely than men to adhere to prescription protocols. These factors make it difficult for women to identify and compare exclusions across plans.

The Affordable Care Act included provisions to prohibit discrimination against women in health insurance plans. However it is in the DNA of private insurers to work around regulations in order to serve their own interests, and this is what they have done regarding discriminatory policies against women, as this study shows.

We put our health care financing in charge of individuals who are running a private business. It would be unrealistic for us to expect them to do anything other than to optimize the business opportunity for themselves.

Had we established our own public program – a single payer national health program – our public employees would have been dedicated to service – trying to make the program work in getting us the health care that we need. Further, they would have done it without all of the expense and administrative complexity that characterizes our dysfunctional multi-payer system.

Better service for less money? We can still do it.

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Don’t forget the underinsured

Posted by on Monday, Aug 1, 2016

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.

High Out-of-Pocket Medical Spending among the Poor and Elderly in Nine Developed Countries

By Katherine Baird
HSR, August 2016

Objective:  The design of health insurance, and the role out-of-pocket (OOP) payments play in it, is a key policy issue as rising health costs have encouraged greater cost-sharing measures. This paper compares the percentage of Americans spending large amounts OOP to meet their health needs with percentages in eight other developed countries. By disaggregating by age and income, the paper focuses on the poor and elderly populations within each.

Principal Findings:  The United States is not alone in exposing large numbers of citizens to high OOP expenses. In six of the other eight countries, one-quarter or more of low-income citizens devoted at least 5 percent of their income to OOP expenses, and in all but two countries, more than 1 in 10 elderly citizens had high medical expenses.

Conclusions:  For some populations in the sample nations, health insurance does not provide adequate financial protection and likely contributes to inequities in health care delivery and outcomes.

From the Results

In five nations, more than ten percent of individuals lived in households with high medical spending (United States, Poland, Israel, Switzerland, and Russia), and only in France (2.9 percent) did less than five percent of the population incur high OOP expenses.

From the Discussion

This study provides some of the best comparative evidence to date of the variation within and between countries of the percentage of citizens exposed to high OOP medical expenses. The results foremost underscore the very high financial burden that using health care places on many Americans.

But unlike other studies, I also find that high spending among poor and elderly Americans is equally common among their counterparts in many other countries. In seven of the nine countries (United States, Japan, Australia, Poland, Israel, Russia, and Switzerland), one-quarter or more of poor citizens devoted at least 5 percent of their income to OOP expenses; and in all nine countries, at least one-in-ten poor citizens did. Underinsurance rates among the elderly were somewhat lower than among the poor, yet the results show that one-in-four elderly citizens had high OOP expenditures in Switzerland, Russia, Poland, and Israel, while more than 15 percent did in Australia, Slovenia, Japan, and the United States.

From the Conclusions

The finding that the United States is not an outlier when it comes to the financial burden resulting from health care consumption in the sample of countries here highlights the fact that health insurance in many countries is commonly porous: high levels of OOP spending frequently occur in many countries despite universal insurance and the existence of policies that supposedly limit citizens’ financial exposure. The complicated nature of health care and health insurance benefits; the complex ways in which consumers respond to insurance benefits and their limits; and finally the often significant health risks not covered by insurance policies: all of these combine to leave large numbers of people across many countries devoting considerable resources to meeting their health care needs. Considering the evidence, then, solving the problem of the uninsured in the United States will most likely leave standing the separate one of underinsurance, unless policy seeks to tackle them both.

Underinsurance – excessive out-of-pocket expenses for health care – results in financial hardship not only in the United States but also in other developed nations as well. Of the nine nations in this study, only France has insurance that is adequate to prevent financial burdens from out-of-pocket spending.

During reform processes, there is always a struggle on how to make insurance affordable. When the Affordable Care Act was crafted, to keep insurance premiums down it was decided that the benchmark plan would have an actuarial value of only 70 percent – the patient would be responsible for covering an average of 30 percent of the bill. It was obvious that this was too much of a burden for most individuals so they provided subsidies for out-of-pocket expenses for low-income individuals and placed a cap on out-of-pocket spending for covered benefits, but not for out-of-network care. This has left too many exposed to the very high deductibles that were required to keep the actuarial value down to 70 percent.

Yet France, with a per capita spending on health care near the OECD average, has shown us that patient cost sharing is not necessary to slow health care spending. Other studies have shown that, not only does cost sharing frequently create financial hardship, it also causes patients to forgo beneficial health care services. Both are bad, and they are avoidable.

The lesson is that getting everyone insured is not enough. We also need to eliminate underinsurance. We need to keep that in mind when we enact a single payer national health program – the improved in an Improved Medicare for All. There are too many in the policy community who accept, as blind faith, the necessity of high deductibles, so it will be a battle.

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Does The U. S. Ration Health Care?

Posted by on Monday, Aug 1, 2016

It is a widespread myth, long a meme, among conservatives and many in the public that national health insurance would be “government run” health care with rationing of services, as opposed to the free market offering more choice without rationing.

Here are examples of this deceptive, misguided, and uninformed mantra:
•  In the debate over the Affordable Care Act in 2009, Sarah Palin, former governor of Alaska and candidate for vice president, had this to say about the ACA’s coverage of physician visits for seniors to discuss living wills and other end-of-life issues:

Who will suffer the most when they ration care? The sick, the elderly, and the disabled, of course. The America I know and love is not one in which my parents or my baby with Down’s Syndrome will have to stand in front of Obama’s ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care. Such a system is downright evil. (1)

•  This concern by Sally Pipes, president and CEO of Pacific Research Institute, a right-wing think tank:

Once the government takes over the healthcare system, it’s nearly impossible to undo the damage. That’s why U. S. lawmakers must repeal and replace Obamacare sooner than later. Canada proves that single-payer health care inevitably results in rationing and lost lives. Government-run health care is one Canadian import we should turn away. (2)

These kinds of views presume that our free market-based system offers full choice of health care without rationing—completely untrue.

Rationing in our present multi-payer system
These are some of the many ways that we ration health care in our largely private, under-regulated for-profit health care marketplace:

  • By insurance status. Six years after the passage of the ACA, we still have almost 30 million uninsured. Among the uninsured, tens of thousands die each year because of lack of health insurance. (3) There are also tens of millions of underinsured without access to necessary care.
  • By high prices and unaffordable costs. The costs of health insurance and care have reached more than $25,000 a year for a typical family of four insured by an average employer-sponsored PPO (4), having doubled over the last ten years—clearly a huge burden when we consider that the median household income is now about $53,000.
  • By decreased choice and access. Even with the ACA, insurers have many ways to limit choice and access to care, including high-deductible plans (annual deductibles of $5,000 for an individual and $10,000 for families are part of bronze policies), narrow networks without coverage of out-of-network costs, high co-insurance for specialty drugs, restrictive definitions of medical necessity, and denial of services.
  • By employers’ cutbacks. There has been a large cost shift from employers to employees in employer-sponsored health insurance as employees find themselves with higher deductibles, higher coinsurance, and a higher share of premiums. (5)
  • An underfunded, tattered “safety net.” Political decisions in 20 states rationed care by not expanding Medicaid under the ACA, leading to a projection that more than 7,000 people will die without access to necessary care in those states. (6) Moreover, the ACA resulted in a Medicaid coverage gap affecting almost 5 million Americans who fell in between eligibility requirements of the ACA and the states, and consequently had no insurance. (7).

Rationing in countries with national health insurance
Countries with universal access provide comprehensive benefits with greater efficiency and value, at far less cost than in the U. S., and also with better outcomes. (8)

It is useful and necessary to “ration” services that are not efficacious or cost effective based on scientific evidence, as is done successfully by such countries as the United Kingdom, with their National Institute for Health and Care Excellence (NICE). We do the opposite with our industry-friendly FDA approval process. One good example of that is the FDA’s approval of a 23 mg dose of the Alzheimer’s drug Aricept despite the lack of clinical evidence that it is better than a 10 mg dose and without concern that patients taking the larger dose stopped taking it twice as often due to adverse side effects. (9)

All health care systems ration care one way or another. There are good ways and bad ways to do it. Ours is a bad and irrational way. It allows for excess, often inappropriate and ineffective care for those who can pay and exclusion of those who suffer worse outcomes due to lack of access and affordability. It is unfair and inhumane when so many millions of Americans cannot gain access to necessary care because of financial barriers. As a result, we have a system of rationing based on ability to pay without regard to medical need. Moreover, we still have no significant containment of prices and costs of health care as well as the worst health care outcomes compared to ten other advanced countries, including Canada. (8)

Without looking at the experience of countries around the world with one or another kind of universal coverage, opponents of single-payer national health insurance (NHI) claim that it will ration care to their detriment. But they deny or seem unaware that we already ration care way beyond what NHI would do. This denial is a moral blind spot for our society, as our country still does not recognize health care as a human right, as do most other industrialized countries around the world.

The rising burden of health care costs is unsustainable for patients, families, and taxpayers. We will have to deal with it sooner than later. When that time comes, we will have to take a societal perspective in deciding, based on scientific evidence, what services can be provided for all Americans, not just the most affluent among us.

John Geyman, M.D. is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans


1. Palin, S. as quoted by Drobnic, A. Sarah Palin falsely claims Barack Obama runs a ‘death panel.’ Politifact, Truth-o-meter, August 10, 2009.

2. Pipes, S Don’t import Canada’s ideas on health care. Real Clear Politics, April 28, 2015.

3. Wolfe, S Outrage of the Month. 50 million uninsured in the U. S. equals 50,000+ avoidable deaths each year. Health Letter 28 (1): 11, January 2012.

4. Milliman, 2015 Milliman Medical Index. May 2015.

5. Spiro, T, Calsyn, M, O’Toole, M. The great cost shift: Why middle-class workers do not feel the health care spending slowdown. Center for American Progress, March 3, 2015.

6. Dickman, SL, Himmelstein, DU, McCormick, D et al. Health and financial harms of 25 states’ decision to opt out of Medicaid. Health Affairs Blog, January 30, 2014.

7. Appleby, J, Gorman, A. Obamacare enrollment: second year even tougher. Kaiser Health News, October 6, 2014.

8. Davis, K, Stremikis, K, Squires, D et al. Mirror, mirror on the wall, 2014 update: How the U. S. Health System Compares Internationally. The Commonwealth Fund, June 16, 2014.

9. Holzer, B. FDA ignores negative feedback on Alzheimer’s drug Aricept. Public Citizen News 31 (4): 20, 2011.

The tradeoff between equity and efficiency in health care financing

Posted by on Friday, Jul 29, 2016

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.

NBER Working Paper 22440
Demand Heterogeneity in Insurance Markets: Implications for Equity and Efficiency

By Michael Geruso
National Bureau of Economic Research, July 2016


In many markets insurers are barred from price discrimination on consumer characteristics like age, gender, and medical history. By themselves, such restrictions are known to exacerbate adverse selection problems. But the conventional wisdom — widely reflected in policy — is that with regulatory tools like premium subsidies, it is possible to address selection and induce efficient plan choices without price-discriminating. In this paper, I show why this conventional wisdom is wrong: As long as different sets of consumers (men and women, rich and poor, young and old) differ in their willingness-to-pay for insurance conditional on the losses they generate, then price discrimination across such groups is welfare-improving. The conventional wisdom is wrong because it implicitly assumes a one-to-one mapping from insurable risk to insurance valuation. I show that demand heterogeneity that breaks this one-to-one relationship is empirically relevant in a consumer health plan setting. Younger and older consumers and men and women reveal strikingly different demand for health insurance, conditional on their objective medical spending risk. This implies that these groups must face different prices in order to sort themselves efficiently across insurance contracts. The theoretical and empirical analysis highlights a previously unexplored, but fundamental, tradeoff between equity and efficiency that is unique to selection markets.

Individuals vary in their preference for insurance and willingness to pay for it. Michael Geruso explains that insurance pricing that takes preference into consideration is welfare-improving and thus efficient. Yet efforts to improve equity by compensating for price discrimination result in a tradeoff between equity and efficiency. Do we care?

What the majority of us want is a health care system that is accessible to all and funded equitably based on ability to pay. Using the analogy of the tradeoff between equity and efficiency, a system funded by progressive taxes would be highly equitable but might be terribly inefficient because wealthier individuals might not have a preference to pay higher taxes.

The efficiency that we actually want to see is greater value in our health care purchasing through eliminating much of the administrative waste that occurs in our dysfunctional financing system. The economist’s construct of efficiency as representing a measure of individual preference should be a negligible consideration when we have the ability to create a health care financing system that is equitable – fair – for everyone regardless of ideological preference.

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RAND exploration of single payer alternatives

Posted by on Friday, Jul 29, 2016

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.

Exploring Single-Payer Alternatives for Health Care Reform

By Jodi L. Liu
Pardee RAND Graduate School Dissertation, May 2016


The Affordable Care Act (ACA) has reduced the number of uninsured and established new cost containment initiatives. However, interest in more comprehensive health care reform such as a single-payer system has persisted. Definitions of single-payer systems are heterogeneous, and estimates of the effects on spending vary. The objectives of this dissertation were to understand single-payer proposals and to estimate health care spending under single-payer alternatives in the United States.

Single-payer proposals are wide-ranging reform efforts spanning financing and delivery, but vary in the provisions. I modeled two sets of national scenarios – one labeled comprehensive and the other catastrophic – and compared insurance coverage and spending relative to the ACA in 2017. First, I estimated the effects of utilization and financing changes, and then I added the effects of “other savings and costs” relating to administration, drug and provider prices, and implementation.

Due to coverage of all legal residents and low cost sharing and prior to adjusting for other savings and costs, the comprehensive scenario increased national health care expenditures by $435 billion and federal expenditures by $1 trillion relative to the ACA. The range of the net effect of the other savings and costs in the literature was $1.5 trillion in savings to $140 billion in costs, with a mean estimate of $556 billion in savings. If this mean estimate was applied to the comprehensive scenario, national expenditures would be $121 billion lower but federal expenditures would still be $446 billion higher relative to the ACA. The catastrophic scenario also covered all legal residents but increased overall cost sharing, resulting in a reduction in national expenditures by $211 billion and federal expenditures by $40 billion even before adjusting for other savings and costs. Average household spending on health care in both sets of scenarios could be more progressive by income than spending under the ACA.

I also developed an interactive, web-based cost tool that allows the savings and cost assumptions to be adjusted by any user. As the debate on how to finance health care for all Americans continues, this study provides increased transparency about economic evaluations of health care reform.

Full Dissertation (Free download – 157 pages):

For her doctorate dissertation at Pardee RAND Graduate School, Jodi Liu has produced a superb paper on single payer reform. Single payer supporters will want to download this paper, and I’ll explain why.

There remains some confusion as to the precise definition of single payer, and she shows us why by presenting the variations in twenty-five specific proposals, including, of course, the Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance – the 2003 version by Woolhandler, Himmelstein, Since PNHP supports a relatively precise, comprehensive model of single payer, many of the models she discusses we would not label as single payer, though we can see why others would (Vermont H 202 as an example). Because of this variation in design, it is difficult to state precisely what impact a generic single payer program would have. Each one is different.

She selects two sharply contrasting versions for specific analyses of health care spending: a comprehensive single payer proposal, the American Health Security Act (S 1782) of Sen Bernie Sanders and Rep Jim McDermott, and the Health-Insurance Solution, a “single payer” plan of catastrophic health insurance as proposed by Kip Hagopian and Dana Goldman. Although you can learn much on how not to design a single payer system from her analysis of the Hagopian/Goldman model, here we’ll mention only her findings on the Sanders/McDermott model since it is fairly similar to the PNHP proposal.

She first determines the increased spending that would occur by covering everyone with comprehensive benefits (actuarial value 98 percent). She then determines the effect of other savings and costs that are supported by published policy studies, such as the reduction in administrative waste and the greater value obtained through monopsonistic health care purchasing.

It will come as no surprise that her estimate of the mean net savings in national health expenditures would be about $121 billion under this proposal. The federal portion of spending would be about $446 billion higher than under ACA, but that is actually desirable because the proposed federal taxes would be more equitable that the fragmented funding system we have under ACA. She points out that the mean estimate of savings resulting from the other savings and costs according to the policy literature would be about $550 billion, but the range of the estimate would be between a savings of $1.5 trillion to increased costs of $114 billion. The wide variation in the interpretation of the policy literature explains to some extent the reason why various analysts have come up with very different results when analyzing single payer models.

People frequently ask what it would cost them if we had a single payer system, and they want to compare that to their current insurance premium. There are far too many variables to answer that without having a final markup of single payer legislation, plus most people do not realize how much they are paying for health care besides their insurance premiums and cost sharing, especially considering that over 60 percent of health care spending is paid through our tax system.

But people can get a good idea of average percent in personal savings by checking Figure C.2 in the Appendix of this paper. It shows that both the comprehensive base proposal (Sanders/McDermott) and the comprehensive alternative proposal (John Conyers HR 676) would provide significant savings for everyone except those over 1000 percent of the federal poverty level ($253,000 for a family of four).

Another great feature of this study is that the author has created an interactive Cost Tool which is “to improve the transparency of the estimates by disaggregating the effects and allow users to view, in real time, the results of adjusting the assumptions underlying the effects.” Although there still may be differences in opinions about the impact given to the various adjustments, it does bring us closer to understanding the overall financial impact of single payer reform. Although the Tool is not yet up on the Internet, in a personal communication Jodi Liu says that she hopes to have it available soon.

At any rate, this study shows once again that a well designed, comprehensive single payer system really would provide health care for everyone without increasing health care spending over the current level under ACA, based on the mean estimate of the financial impact of single payer.

So, again, download this paper now. It will be very helpful in your future advocacy for single payer.

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Insurers automatically enrolling their clients in private Medicare Advantage plans

Posted by on Wednesday, Jul 27, 2016

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.

Some Seniors Surprised To Be Automatically Enrolled In Medicare Advantage Plans

By Susan Jaffe
Kaiser Health News, July 27, 2016

Only days after Judy Hanttula came home from the hospital after surgery last November, her doctor’s office called with bad news: Records showed that instead of traditional Medicare, she had a private Medicare Advantage plan, and her doctor and hospital were not in its network.

Neither the plan nor Medicare now would cover her medical costs. She owed $16,622.

After more than five hours making phone calls, she learned that because she’d had individual coverage through Blue Cross Blue Shield when she became eligible for Medicare, the company automatically signed her up for its own Medicare Advantage plan after notifying her in a letter. Hanttula said she ignored all mail from insurers because she had chosen traditional Medicare.

With Medicare’s specific approval, a health insurance company can enroll a member of its marketplace or other commercial plan into its Medicare Advantage coverage when that individual becomes eligible for Medicare. Called “seamless conversion,” the process requires the insurer to send a letter explaining the new coverage, which takes effect unless the member opts out within 60 days.

Medicare officials refused recently to name the companies that have sought or received such approval or even to say how long the Centers for Medicare & Medicaid Services has allowed the practice. Numerous insurers, including Cigna, Anthem and other Blue Cross Blue Shield subsidiaries, also declined to discuss whether they are automatically enrolling beneficiaries as they turn 65.

(David Lipschutz, a senior attorney at the Center for Medicare Advocacy) said giving beneficiaries the chance to opt out doesn’t adequately safeguard consumers. An insurer’s notification letter can easily be mistaken or overlooked in the deluge of marketing materials seniors receive.

“The right to opt out doesn’t exist if they didn’t get the notice or if they did get the notice but didn’t understand it,” he said.

We have provided numerous examples wherein CMS has provided the private Medicare Advantage plans with an unfair advantage over the traditional Medicare program, at a considerable cost to taxpayers. This is yet one more example. In a secretive process, CMS is allowing private insurers to automatically enroll their current clients in their Medicare Advantage plans without requiring them to opt in. Patients must understand what is happening and then take specific action to opt out if they would prefer to be enrolled in the traditional Medicare program.

The is one more step towards privatization of Medicare and the transition to a premium support program (voucher equivalent, with declining purchasing value over time). This is supported by anti-government conservatives and many neoliberals, but, worse, it is with the complicity of CMS.

Once we have a dominant market of competing private Medicare plans, the egalitarian nature of the Medicare program will have been irreparably damaged, and with it our hopes for an improved Medicare for all will have been dashed. The more complex the privatization of Medicare becomes, the greater the resistance to single payer since it “will not be feasible” to dismantle the administratively complex, expensive private health care financing system. So why is it now feasible for us to dismantle our efficient and less costly public Medicare program?

The feasibility argument of the privatizers is a con job. The longer we wait to move to single payer, the worse will be the transition.

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Orszag and Emanuel do not seem to understand bundled payments

Posted by on Tuesday, Jul 26, 2016

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.

Saving Money on Cardiac Care

By Peter R. Orszag
Bloomberg View, July 25, 2016

The federal government’s own actuaries are once again pessimistic that America’s health-care costs will continue their slow growth. Thankfully, their boss, Sylvia Burwell, the secretary of Health and Human Services, is working hard to prove them wrong.

A key driver of this Medicare spending deceleration has been the health-care market’s expectation that the payment system is shifting toward value-based payments — that is, paying doctors, hospitals and other providers based on how well they treat medical problems rather than on how many services they provide.

At this point, it’s crucial to fulfill the market’s expectations. If the system now fails to move quickly away from fee-for-service payments, many recent efficiency efforts are likely to be dropped.

A big question is how. The most promising, and practical, path forward is to set up a cascading array of “bundled payments” — that is, all-inclusive reimbursement for specific episodes of care.

The bundled payments must be mandatory, as is Medicare’s bundle for hip and knee surgery — itself an historic step. Making the shift voluntary for hospitals and doctors leads to watered-down incentives, in an attempt to encourage participation. And weak incentives lead to disappointing outcomes.

Which brings us to Secretary Burwell’s important announcement Monday. She is building on the hip and knee bundle, not only by expanding into other forms of orthopedics but, importantly, by introducing mandatory bundles in cardiac care.

Medicare will pay a set fee for coronary artery bypass grafts, a form of surgery that improves blood flow to the heart. The agency will also pay a set fee for the care involved in responding to a heart attack.

The Medicare actuaries may question whether these new bundles can save much money, but that’s not too surprising; they’ve been missing the boat on the changing dynamic in health-care payments for years.

The bundled payments illustrate how the system is changing for the good. Secretary Burwell has just made it vividly clear to everyone in health care that the days of paying for volume are ending.


Medicare doubles down on bundled payments

By Dan Diamond
Politico Pulse, July 26, 2016

With all eyes on the Democratic convention, CMS on Monday made a key move to secure the party’s signature health reform: It introduced its second bundled mandatory payment program, this one focused on cardiac care.

The bundled payment program is the latest big initiative in the Obamacare effort to bend the health cost curve. It’s also positioned to play a crucial role as the White House tries to tie 50 percent of Medicare payments to alternative care models by 2018. Liberal experts say they can’t get there with accountable care organizations and voluntary models alone, and that mandatory bundled payment programs are proven successes.

The decision to make both mandatory programs eligible as Advanced APMs under MACRA is intended to entice physicians to participate.

For veterans of the White House fight over Obamacare, Monday’s news felt like a valedictory. “Finally,” said Zeke Emanuel, who served as a White House aide and pushed for mandatory bundled payments to be included in the Affordable Care Act. (Cost controls like bundled payments were left out, in part, to minimize the law’s effect on the health care industry.) “I’m glad they drank my Kool-Aid.”

The bureaucrats are fixated on the meme that we can reduce spending by paying for the value of health care rather than the volume. They have been disappointed with models such as accountable care organizations, and they are now turning to MACRA and its alternative payment models (APMs), with a renewed surge of interest in bundled payments.

The concept behind bundled payments is that, by assigning a single fee to a given intervention such as a joint replacement, you will motivate physicians to not spend money on portions of the care that are not really necessary. Medicare, as the payer, gets the advantage of a discounted price, and the physicians and hospitals get to keep whatever they save beyond the discount.

Does this really reduce volume? The joint replacement will be done regardless, so what volume will be reduced? Doing only a cursory pre-op exam, missing the ejection murmur and omitting the pre-op cardiac consult? Send a patient home earlier when it is possible that the post-op status might not be fully stabilized? Cut back on rehabilitation, risking a less favorable long term outcome? These might reduce volume, but they certain bring into question quality and thus value.

Now they want to pay a set bundled payment for a heart attack. The clinical course of a heart attack is highly variable and could involve only a few or a great many interventions. Under a bundled payment, the physicians and hospital are bearing the risk of the high costs of a potentially complicated, protracted course. Isn’t it the role of the insurer, in this case Medicare, to pool risk? Shifting that risk to the health care delivery system creates the potential for either a reduction in important beneficial health care services, or exposing the delivery system to potential monetary losses and the risk of insolvency – neither of which are desirable.

Perhaps an even more important issue is the fallacy that you can bundle most care and thus make strides in bending the cost curve. Think of the  current proposals to bundle coronary artery bypass grafts and to bundle care for a heart attack – one might work some of the time, but the other has outcomes that are too variable. Now think of other hospital admissions – such as workup of a protracted fever, diagnosis and management of an HIV positive patient who has symptoms of a potentially serious but undiagnosed complication, or perhaps a child with fatigue and weight loss. The costs and outcomes are highly variable. How can you bundle those? Or think of the multitude of patients presenting in a ten minute office visit with a set of complex clinical symptoms that would require extensive workups. How do you bundle those?

To get to the goal of fifty percent of Medicare payments being tied to APMs, you are going to have to figure how how to bundle the large numbers of common clinical presentations, like the sore throat that turns out to be due to acute leukemia, or the routine family planning visit in a patient who feels ill that day and turns out to have diabetic ketoacidosis, or the chronic headache patient who has a focal motor seizure in front of you during the visit. What would otherwise be routine medical visits are often not bundable but are better handled on a fee-for-service basis. That makes the point that most health care is provided in a relatively fixed volume. It is really difficult to reduce the volume for patients who actually need care, and that’s almost all patients. Besides, in most instances we really don’t know how to measure value and convert that into a fixed fee. Volume is relatively fixed, and value is what we all strive for anyway.

Peter Orzag and Ezekiel Emanuel don’t listen to others, not even the Medicare actuaries, but they should be able to figure out these obvious fundamentals. Since they haven’t, maybe it’s them who have been drinking Zeke’s Kool-Aid.

Since it’s really cost that they are concerned about we should move forward with reform that has been proven repeatedly to slow the rate of health care inflation – a single payer national health program. Peter and Zeke need to abandon their false meme that single payer is “not feasible.” What isn’t feasible is expecting to fix our dysfunctional health care financing system with “bundled payments.”

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Drug firms gouge taxpayers by gaming Part D catastrophic coverage

Posted by on Monday, Jul 25, 2016

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.

Pricey Drugs Overwhelm Medicare Safeguard

By Ricardo Alonso-Zaldivar
Associated Press, July 25, 2016

A safeguard for Medicare beneficiaries has become a way for drugmakers to get paid billions of dollars for pricey medications at taxpayer expense, government numbers show.

The cost of Medicare’s “catastrophic” prescription coverage jumped by 85 percent in three years, from $27.7 billion in 2013 to $51.3 billion in 2015, according to the program’s number-crunching Office of the Actuary.

Medicare’s catastrophic coverage was originally designed to protect seniors with multiple chronic conditions from the cumulatively high costs of taking many different pills. Beneficiaries pay 5 percent after they have spent $4,850 of their own money. With some drugs now costing more than $1,000 per pill, that threshold can be crossed quickly.

Lawmakers who created Part D in 2003 also hoped added protection would entice insurers to participate in the program. Medicare pays 80 percent of the cost of drugs above a catastrophic threshold that combines spending by the beneficiary and the insurer. That means taxpayers, not insurers, bear the exposure for the most expensive patients.

Concerns about catastrophic costs undercut the image of Medicare’s prescription program as a competitive marketplace in which private insurers bargain with drugmakers to drive down prices.

“The incentive is to price it as high as they can,” said Jim Yocum, senior vice president of Connecture, Inc., a company that tracks drug prices. Medicare is barred from negotiating prices, “so you max out your pricing and most of that risk is covered by the federal government.”

When the Medicare Part D program covering drugs was designed, conservatives were in control of the government. As a result it was decided that the ideology of competition in the marketplace should be used to improve value rather than using government administered pricing. Today’s message demonstrates once again that markets do not work in health care.

Congress knew that they would have to protect the private insurers from adverse selection – that patients with multiple chronic conditions could place an extra burden on the insurers with whom they enrolled. Thus they established catastrophic coverage with the government (taxpayers) paying 80 percent of the costs over a given threshold. This was not to protect the patients, but rather it was to protect the insurers. That is, it was not to protect the taxpayers who finance much of the program, but rather it was to protect the participants in the marketplace – the drug manufacturers, insurers, and pharmacy benefit managers – using our taxpayer funds.

Under the catastrophic coverage, insurers pay 15 percent, patients pay 5 percent, and the taxpayers pay 80 percent. This allows the drug companies to drive their prices sky high. The 15 percent paid by the insurers is closer to the reasonable price of drugs and so they have less incentive to negotiate better prices, since most of it is being paid by the government anyway. The 5 percent paid by the patient is accepted as a necessary “skin in the game” contribution so patients will not fill prescriptions that they allegedly “do not really need” (a flawed policy concept). The 80 percent paid by taxpayers perpetuates the highly dysfunctional, fragmented financing system in the U.S. – using government money for private solutions – that has driven our health care spending up to levels much higher than all other nations.

The magic of the marketplace in health care is a fraud. Taxpayers pay far less for drugs purchased by the government for Medicaid and the VA system. Other nations with greater government oversight of their health care systems also pay much less.

With a well designed single payer national health program, our nation’s pharmacy bill would be fair, and everyone would get the drugs they need. With the price of many drugs now exceeding median household income, you would think there would be a demand to fix our health care financing system. You would think so, but where’s the action?

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It is a common misperception that the U. S. has the best health care in the world, another example of “American exceptionalism.” By constant repetition over many years, this myth has become a meme, a part of our language without regard to its merit. It is assumed by many that our rapid adoption of high technology and high spending on health care must bring us the best health care. However, as Drs. Elliott Fisher and Gilbert Welch of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School pointed out early on, there are diminishing returns to many of these technological “advances”. (1)

Lewis Thomas, a leading analyst of medical progress, saw this coming as early as 1975 when he described these three useful ways of looking at medical technologies:

  1. Nontechnology—non-curative care for patients with advanced diseases whose natural history cannot be changed (e.g. intractable cancer, advanced cirrhosis).
  2. Halfway technology—also care that is non-curative but may delay death (e.g. liver or heart transplants).
  3. High technology—curative treatment or effective prevention techniques (e.g. polio vaccination). (2)

Unfortunately, most of our technological advances are of the halfway non-curative type. Since they are often overused at great expense, this presents society a challenging task to manage their adoption in a cost-effective way.

How More Technology Does NOT Bring Us Better Health Care
These are some of the factors that undermine the quality of care in our profit-driven corporatized health care system:

  • Medicalization of preventive and therapeutic services, which are then promoted by direct to consumer advertising. Examples abound, including widespread use of full-body CT scans as a screening procedure without approval by either the FDA or the American College of Radiology (3), and MRIs in completely asymptomatic patients finding “abnormalities”—one study found that one-half of young adults were found to have lumbar disc bulge without any back pain. (4)
  • Early adoption of technologies without adequate testing. Adverse events in robotic surgery give us one example. Between 2007 and 2013, more than 1.74 million robotic procedures were performed in the U. S., most commonly in gynecology and urology, with 144 deaths (1.4 percent), 1,391 patient injuries (13.1 percent) and more  than 8,000 device malfunctions (75.9 percent). (5)
  • Corporate-friendly regulators. As one example, a large part of the budget of the FDA comes from user fees from the pharmaceutical and medical device industries, which are constantly pushing the FDA for earlier, accelerated approvals of their products. As a result, many products and procedures have to be withdrawn from the market as their harms become obvious, with these decisions often delayed by their manufacturers (e.g. withdrawal of morcellators for the treatment of uterine fibroids). (6)

Although many technological advances have been of great benefit to individual patients and society, such as replacement of hips and knees, coronary bypass surgery, and cataract surgery with prescription intra-ocular lens replacement, there are downsides to the rapid adoption of new technologies as well.

Despite our emphasis on technology, comparative studies of eleven health care systems around the world show how poorly we rank in terms of access and quality of care. (Table1) (7)

Can Health Care Technologies Be Managed in the Public Interest?
We have to ask why we haven’t been more effective over the years in evaluating and regulating the adoption and use of medical technologies. The answer, not surprisingly, is the economic and political power of corporate stakeholders in our market-based system. Two national organizations were established by Congress in the 1970s—the Office of Technology Assessment (OTA) in 1975 and the National Center for Health Care Technology (NCHCT) in 1978. Both were later abolished after a strong backlash from vested interests, especially the medical device industry and several professional medical societies. (8-10)

The FDA, as our major regulator for evaluation and approval of new health care technologies, has long been handcuffed by political forces preventing comparative evaluations of competing technologies based on required evidence for positive long-term outcomes. It has been underfunded, lacks sufficient authority, and is dependent on the industries it attempts to regulate through recurrent authorizations of user fees—a fox in the henhouse situation. There are many conflicts of interest among reviewers on its panels, and it is not permitted to use cost-effectiveness in its approval process. Health care industries collectively spent $489 million on lobbying in 2014, about one-half of which was spent by the drug industry in its ongoing effort to gain more rapid FDA approval based on weaker evidence. (11) As just one example, the FDA allowed expanded marketing of off-label cancer drugs in 2009 despite the lack of clinical evidence of their effectiveness. (12)

These problems can be fixed when we come to understand their adverse impacts on patients, families and taxpayers, develop the political will to confront the power of corporate interests in the status quo, and enact legislation for universal access through single-payer national health insurance, together with a stronger science-based regulatory system free from lobbying and political interference.

John Geyman, M.D. is the author of The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans


Fisher, ES, Welch, HG. Avoiding the unintended consequences of growth in medical care: How might more be worse? JAMA 281: 446-453, 1999.

Thomas, L. The Lives of a Cell: Notes from a Biology Watcher. New York. Bantam Books, 1975.

Brenner, DJ, Hall, EJ. Computed tomography—an increasing source of radiation exposure. N Engl J Med 357: 2277-2285, 2007.

Jensen, MC, Brant-Zaawadzki, MN, Obuchowski, N et al. Magnetic resonance imaging of the lumbar spine in people without back pain. N Engl J Med 331: 669-673, 1994.

Alemzadeh, H, Iyer, RK, Kalbarczyk, Z et al. Adverse events in robotic surgery; a retrospective study of 14 years of FDA data. Cornell University Library, July 21, 2015.

Thompson, D. FDA warns against procedure for uterine fibroids, hysterectomy. CBS News, April 18, 2014.

U. S. health system ranks last among eleven countries on measures of access, equity, quality, efficiency and healthy lives. New York. The Commonwealth Fund, June 16, 2014.

Perry, S. The brief life of the National Center for Health Care Technology. N Engl J Med 307: 1095-1100, 1982.

Mervis, J. Technology assessment faces ax. Science 266: 1636, 1994.

Leary, RL. Congress’s science agency prepares to close its doors. New York Times, September 24, 1995.

Demko, P. Healthcare’s hired hands: When the stakes rise in Washington, healthcare interests seek well-connected lobbying firms. Modern Healthcare, October 6, 2014.

Abelson, R, Pollack, A. Medicare widens drugs it accepts for cancer care: More off-label uses. New York Times, January 27, 2009.

Medical Economics: Obamacare receives a big, fat ‘F’ from physicians

Posted by on Friday, Jul 22, 2016

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.

By Joanna Haugen, Jordan Rosenfeld
Medical Economics, July 25, 2016

The Affordable Care Act (ACA) has been a lightning rod for criticism from various healthcare stakeholders, including physicians, since the law’s passage six years ago.

With the upcoming presidential election likely to alter the landscape of “Obamacare”—from simple tweaks by Democrats to outright attempted repeal by Republicans—Medical Economics asked healthcare policy experts and our readers to debate the law’s effect on U.S. physicians.

Our editorial staff, with the assistance of our physician advisers, selected eight provisions and consequences (both intentional and unintentional) stemming from the law.  Policy analysts provided their thoughts on how Obamacare has shaped the last six years. Then we  asked physicians from our editorial advisory board, our 200-member Reader Reactor Panel (comprised of physician readers nationwide who help direct our content), and our e-newsletter subscribers to grade the various elements based on their own experiences.  Each physician ranked each element in terms of how it assisted their day-to-day work as physicians on a score from 0 (not at all) to 10 (extremely helpful). The average of all respondents was used to derive the letter grade. Physicians also offered short justifications for their ranking.

Medicare bonus for primary care physicians
Grade: 33 = F

Medicaid-Medicare parity
Grade: 34 = F

Increased coverage through healthcare insurance exchanges
Grade: 35 = F

Narrow networks
Grade: 29 = F

Accountable care organizations
Grade: 29 = F

Outcomes-based reimbursement
Grade: 28 = F

Physician ratings via the Physician Compare website
Grade: 26 = F

Expansion of health IT
Grade: 31 = F

Celebrations of the success of the Affordable Care Act have to be tempered by the knowledge that it leaves too many uninsured, that health care is still not affordable for far too many, and that the benefits of tighter insurance regulation were largely offset by the insurance design changes of excessive cost sharing and restrictive narrow networks. One other goal was to improve payment systems so that patients would receive greater quality at lower costs. So what do physicians think about the implementation and effectiveness of the design changes in the payment system?

In this survey, physicians gave a grade of F to all eight of the design features evaluated. In trying to improve payment systems, the legislators and bureaucrats have certainly botched things up. Not only have they failed to achieve any improvement, they have made things worse. Not only that, they have compounded physician burnout, now affecting over half of all physicians. Having an unhappy physician negatively impacts patient care.

Much blame can be attributed to the focus of the policy community and the MBAs that guide them. Medicine is about taking care of patients, but the policy community approaches it as a business that can be improved by incentives.

Would a single payer system fix this? It would provide a more equitable, efficient and effective financing system, but it would still be subject the whims of legislators and bureaucrats who do not seem to appreciate the sanctity of the physician-patient relationship. Once we have in place a national single payer system, our work is not done.

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