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.
Obamacare Premiums Climb, But Insurers Struggle for Profit
By Zachary Tracer
Bloomberg Business, October 30, 2015
Many people shopping for health coverage this weekend on the websites created by Obamacare are going to see double-digit percentage increases in their premiums. That’s still not enough for some insurers.
Anthem Inc. says there remain competitors in the government-run marketplace offering premiums that aren’t enough to profitably provide the coverage patients will require. Prices in some areas probably will have to climb in 2017 and even 2018 to reach levels that make sense, according to Chief Financial Officer Wayne Deveydt. Meantime, Anthem will sacrifice market share to keep its plans profitable, he said.
“When you have fewer national enrollees and you have price points that we don’t believe are sustainable, we’ve just made a conscious decision we’re not going to chase it,” Deveydt told analysts on a conference call on Wednesday. “We are going to need to be patient until this works itself out.”
Deveydt’s remarks spotlight a problem for the Patient Protection and Affordable Care Act’s marketplaces as the third annual sign-up period begins Sunday. Set prices too low to lure customers, and losses can mount. Some smaller firms already have closed, and some bigger insurers have withdrawn from markets — such as Aetna Inc., which will offer coverage in two fewer states this year.
The conundrum has led to this year’s price increases, which have been higher, on average, than last year’s hikes. But the danger is that premiums are now too expensive for some families to afford coverage, especially the uninsured people the Obama administration is trying to persuade to shop on the exchanges for the first time.
But the remaining uninsured are poorer and younger than those who’ve already signed up, and they’re more difficult to reach, Health and Human Services Secretary Sylvia Mathews Burwell has said. That may mean slower growth for the insurers.
Charles Gaba, who tracks the health law on ACASignups.net, estimates that the rate increases across the U.S. will average about 12 percent to 13 percent, based on a weighted average of current enrollment.
“Some of the large carriers are having pretty significant rate increases,” said Jeff Smedsrud, who runs the private insurance shopping site Healthcare.com.
Price isn’t the only challenge for insurers, according to Shawn Guertin, Aetna’s CFO. Membership levels are lower than expected, and some individuals are sticking with pre-Obamacare plans, cutting into the size of the market. There’s also been lots of churn — customers signing up and then dropping their policies throughout the year.
Aetna hasn’t been turning a profit in Obamacare plans, the company has said. Guertin said its price hikes range from high single digits to the mid-teens, depending on the market. UnitedHealth Group Inc., the largest U.S. health insurer, has said its premium increases are in the double digits as well.
The performance of competing private insurance plans within the ACA exchanges is not much different from the performance of the pre-ACA private plans in the individual market. Trends in higher insurance costs, greater cost sharing, and narrower choices were already occurring, and they continue to grow progressively worse. Access and affordability can only suffer.
Higher premium credits and out-of-pocket subsidies are helping individuals with incomes near poverty levels, but, for middle-income families, they are inadequate to provide much benefit.
Higher premiums and more cost-shifting to patients are adequate to maintain profits for most larger insurers, but where even these measures are inadequate, insurers are pulling out of the exchanges, and some of the smaller insurers are even folding. Market manipulations create instability.
The insurers show their true colors through statements such as that of Anthem’s Chief Financial Officer Wayne Deveydt. Reporting to Wall Street analysts, Deveydt said about the market, “When you have fewer national enrollees and you have price points that we don’t believe are sustainable, we’ve just made a conscious decision we’re not going to chase it.”
Higher premiums, greater cost-sharing, narrower networks – the behavior of the private insurers is not changing in spite of the promise of higher value and lower costs through the ACA Marketplaces. The ACA exchanges are a creeping failure that is growing worse. Congress enacted the wrong model of reform. We need single payer.
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.
Editorial: End of Arches points to single-payer
The Salt Lake Tribune, October 29, 2015
The collapse of Utah’s cooperative insurance provider, the Arches Health Plan, was not unforeseen, either by those who favor the Affordable Care Act or those who have always hated it.
Count Utah’s Sen. Orrin Hatch among the latter.
Hatch’s preferred alternative, the Patient CARE Act, has the advantage of not being Obamacare. But it is at least as complex as the ACA, shifts more costs onto consumers and more work onto states. Worst of all, passing it would force millions of Americans who have finally found health care under the current law back to square one.
Which is what just happened to 63,000 Utahns who will have to find new coverage now that Arches has tanked.
All of this fiddling with rival steampunk assemblages of subsidies, mandates, taxes, exchanges and co-ops continues to burden Americans because Republicans have never accepted, and Democrats have never fully sold, the realization that a country where millions of people do not have access to affordable health care is the skunk in the garden party of First World nations. No truly civilized society would tolerate such a condition.
The establishment of non-profit co-ops was one of many unsatisfying compromises between those who wanted a single-payer, Medicare-for-all design — or, at the least, a government-run public option — and those who irrationally trusted the private sector to provide what it simply is not willing or able to provide, now or ever, affordable health care for all.
The original ACA had funds to back the co-ops if — when — they ran out of money. But the Republican-controlled Congress, frustrated by many failed attempts to repeal Obamacare outright, cut back on the guarantees. So at least 10 such organizations around the country have now failed.
Meanwhile, premiums continue to rise and the private insurance sector is consolidating as big firms are bought by bigger ones. There is less and less of the competition that reformers of all ideological stripes were hoping, some with more faith than others, would keep costs down.
What Obamacare opponents do not seem to grasp is that, if it doesn’t work, if the co-ops fail and the exchanges don’t meet the needs of working families, going back to a pre-ACA jungle will not be a workable or ethical option.
It’ll be single-payer, or at least a robust public option. As it should have been from the beginning.
What a great opener for this weekend’s national meeting of Physicians for a National Health Program. An editorial in The Salt Lake Tribune tells us that, as we see the failures of the co-ops, the inadequacies of the exchanges, and “rival steampunk assemblages,” it should have been single payer from the beginning.
They mention, “or at least a robust public option.” But lost in the prior enthusiasm for the public option was the fact that it would not have been an adequate solution since it would have been only one more player in our highly dysfunctional, fragmented health care financing system. But this does not reduce the impact of their message since the prevalent belief was that the public option would eventually lead to single payer (a highly unlikely event since it would not have fundamentally altered the highly flawed, complex financing infrastructure). So their intent is certainly well meaning.
Yes, single payer, as it should have been from the beginning.
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.
Adequacy of Outpatient Specialty Care Access in Marketplace Plans Under the Affordable Care Act
By Stephen C. Dorner, MSc; Douglas B. Jacobs, ScB; Benjamin D. Sommers, MD, PhD
JAMA, October 27, 2015
In this study of federal marketplace plans, nearly 15% completely lacked in-network physicians for at least 1 specialty. We found this practice among multiple states and issuers. This likely violates network adequacy requirements, raising concerns regarding patient access to specialty care. Such plans precipitate high out-of-pocket costs and may lead to adverse selection (ie, sicker individuals choosing plans with broader networks), which is similar to concerns over restrictive drug formularies.
We also found substantial turnover in directory listings. This may contribute to inaccuracies in listings, which prompted more stringent federal requirements for 2016. However, physician listings without any specialists (even if inaccurate) may confuse or impede consumers’ access to physicians.
(R)ural regions are known to have fewer physicians and may have an even higher prevalence of specialist-deficient plans.
This study shows that not all health plans in the ACA insurance exchanges have a full complement of specialists in their networks. When patients have to obtain their care out of network, they may face impaired access and financial penalties. If private insurers cannot provide the basics, why would we want to include them in our health care system in the first place?
Brief Comments on ColoradoCare
By Ida Hellander, M.D., David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, October 27. 2015
Organizers for the ColoradoCare ballot initiative have contacted some activists in Physicians for a National Health Program seeking their endorsement and financial support. We summarize, below, our understanding of the initiative.
Description of the program
ColoradoCare is a ballot initiative for a publicly financed, universal health plan for the state of Colorado that would be operated by a private cooperative under a 21-person elected Board. While the ballot measure spells out the program’s governance and Board structure in considerable detail, key aspects of the program are not specified, and/or left to the discretion of the Board. In the past the drafters made clear in public statements that ColoradoCare is NOT a single-payer plan.
The initiative would cover all Colorado residents under a publicly funded, cooperative insurance plan. While the new program would replace most private insurance, Medicaid and CHIP coverage, it would serve only as supplemental coverage for those covered by Medicare, the VA and TriCare. The initiative would not prohibit the purchase or sale of private coverage duplicating the public plan. However, proponents expect that little private insurance would persist, since most businesses and individuals would not want to pay twice for coverage.
The proposal would cover a broad range of benefits, but would not cover dental care for adults, or long-term care for most individuals.
ColoradoCare would be funded via a payroll tax of 6.67 percent on employers and 3.33 on employees, or 10 percent of non-payroll income (excluding pensions and annuities), along with federal funds that would have come to the state via subsidies for private coverage under the ACA, for Medicaid, and for other programs.
The drafting of ColoradoCare was spearheaded by Colorado Sen. Irene Aguilar and psychologist Ivan Miller. Volunteers and paid staff gathered the signatures necessary to put it on the ballot. Journalist T.R. Reid has become a champion and spokesperson for the plan both inside and outside of Colorado.
Strengths of ColoradoCare
1. The proposal if implemented would cover all, or nearly all of Colorado’s uninsured – apparently (and laudably) including the undocumented.
2. The proposal includes some useful cost-control features, notably the creation of an annual budget, and the ability to negotiate lower prices with pharmaceutical companies.
3. The plan allows for a free choice of primary care doctor.
4. The financing plan is more progressive than the current system.
5. ColoradoCare’s organizers have mounted an impressive campaign with considerable mobilization.
Weaknesses of ColoradoCare
1. Multiple payers would persist – probably including private insurers. As a result, it sacrifices much of the administrative savings that could be realized through a true single-payer reform because providers would have to maintain much of their current cost tracking and billing apparatus in order to apportion costs among the multiple payers. Published cost estimates for ColoradoCare overstate the savings that could be achieved through single payer, and do not take into account the additional costs entailed by ColoradoCare’s failure to adopt a full single-payer structure.
2. The initiative makes no mention of how hospitals or other institutions would be paid – apart from a rhetorical nod favoring ACOs. It makes no mention of global budgeting, separating operating and capital payments, or other constraints on hospital capital spending. Global budgeting is critical to achieving administrative savings; separating operating and capital payments is a bedrock of effective health planning, which is essential for long-term cost containment.
3. The initiative would not ban for-profit hospitals or other providers, despite clear evidence that they inflate costs and compromise quality. For-profit ACOs (indistinguishable from HMOs in most respects) might also flourish.
4. The initiative specifies that patients would have a free choice of primary care physicians, but makes no mention of whether the choice of specialist or hospital could be restricted.
5. While the plan would outlaw deductibles, the Board would be empowered to impose copayments.
6. While the 10 percent tax rate would apply to both the rich and poor (including those with incomes below the poverty line), income over $350,000 would not be taxed.
7. The campaign’s anti-government rhetoric is problematic.
8. Rather than specifying critical aspects of the plan, the initiative leaves many of these to be decided later by the Board. Delaying such decisions has often favored corporate interests, who can intervene after the popular mobilization required to pass a reform has subsided. In the case of the ACA, corporate lobbying during the rule-making process attenuated cuts in Medicare HMO overpayments; reduced promised funding for public health and community clinics; effectively neutered limits on insurance overhead; and watered down the mandated benefit package. In Vermont, the broad-brush program initially passed by the legislature was whittled down in the detailed design stage, leading to rising cost estimates and ultimate rejection by the governor.
Dr. Ida Hellander is director of health policy and programs at Physicians for a National Health Program. Drs. David Himmelstein and Steffie Woolhandler are internists, professors at the City University of New York School of Public Health, lecturers in medicine at Harvard Medical School, and co-founders of PNHP.
Until the nation supports a political environment in which a bona fide single payer national health program can be enacted, it is wise for activists to advance beneficial health policies that can reduce suffering and hardship on an interim basis. Until then, PNHP will continue to carry out its mission of educating the public as we advocate for a single payer system. As others continue with their efforts to improve the system, we encourage them to simultaneously actively support the golden standard of a single payer national health program. All of us share the common goal of health care justice for all.
2016 Marketplace Affordability Snapshot
CMS.gov, October 26, 2015
The 2016 Affordability Snapshot provides a review of the final rate increases for second lowest cost silver plans, known as benchmark plans, which will be available for purchase in the 37 states that used the HealthCare.gov platform in 2015, including those in the Federally-facilitated Marketplace, State Partnership Marketplaces, and supported State-based Marketplaces.
Across all 37 states that used the HealthCare.gov platform, the cost of the benchmark plan will increase on average 7.5 percent in 2016. These increases do not take into account advanced payments of premium tax credits, which lower the monthly costs for the overwhelming majority of Marketplace consumers.
The second-lowest cost silver plan is notable because it serves as the benchmark plan to calculate the amount of advanced premium tax credit consumers may be eligible for to help lower the cost of their Marketplace coverage.
Consumer Price Index Summary
U.S. Bureau of Labor Statistics, October 15, 2015
Consumer Price Index for All Urban Consumers (CPI-U)
Percent changes, unadjusted 12 months ended September 2015
0.0% All items
1.9% All items less food and energy
2.4% Medical care services
2.7% Medical care commodities
Although there are many variables that produce a wide variation in premiums for plans offered in the health insurance exchanges (Marketplaces), the second lowest cost plans in the silver tier serve as the benchmark for premium tax credits and thus can provide an anchor for determining health care inflation as reflected by the premiums for the plans offered by the exchanges.
Many reports in the media today are celebrating the fact that average increases in the benchmark premiums were held to a single digit. But these increases in insurance premiums were about 5% greater than the consumer price index (CPI-U) increases for medical care services and commodities, and a 7.5% increase over CPI-U for all items.
Our health care financing system that has been heavily dependent on private insurance plans has been ineffective in slowing health care inflation to sustainable levels. The Affordable Care Act was supposed to have made health care more affordable by creating a separate competitive market of regulated private plans within government-operated insurance exchanges. With a 7.5% increase above the CPI-U, we can say that this experiment with private health plans has been failure.
If we want affordable health care for all, we need to eliminate the private insurers and establish a single payer national health program. As Fareed Zakaria said last week, “It’s absolutely clear that is the only way you can achieve that goal.”
Thousands Who Didn’t File Tax Returns May Lose Health Care Subsidies
By Robert Pear
The New York Times, October 25, 2015
Tens of thousands of people with modest incomes are at risk of losing health insurance subsidies in January because they did not file income tax returns, federal officials and consumer advocates say.
Under federal rules, anyone who receives an insurance subsidy must file a tax return to verify that the person was eligible and received the proper amount of financial assistance based on household income.
When the federal insurance marketplace opens for the third enrollment season next Sunday, users will see a new question: “Did your household file a 2014 tax return and reconcile any premium tax credit you used?”
If the answer to that question is no, consumers risk losing the subsidies they receive to help pay premiums. Without such assistance, many would find insurance unaffordable.
Many of the people potentially affected have incomes so low that they would not otherwise have to file tax returns. But if they received insurance subsidies in 2014, they were required to file this year.
(Christine Speidel, a tax lawyer at Vermont Legal Aid) identified three groups of people at risk: those who did not file a tax return; those who filed a return without the correct form to reconcile advance payments of the premium tax credit; and those who filed and reconciled this fall, too late for the information to be made available to health insurance exchanges before the open enrollment period.
In July, the Internal Revenue Service said 710,000 people who had received subsidies under the Affordable Care Act had not filed tax returns and had not requested more time to do so.
If those people do not return to the marketplace this fall, they may be automatically re-enrolled in the same or similar health plans at full price. And when they receive an invoice from the insurance company next year, they may be shocked to see that their subsidies have been cut to zero.
The I.R.S. also said 760,000 taxpayers had received subsidies and filed returns but had not attached the required form comparing the subsidies paid with the amount they were entitled to receive. Taxpayers describe that document, I.R.S. Form 8962, as daunting.
“The premium tax credit form, the dreaded 8962, is really hard,” said Eileen P. Duggan, a piano teacher and freelance writer in Maplewood, Mo., outside St. Louis, who filed the form with her tax return. “It’s enough to make you cry, that form. It was almost impossible to figure out.”
IRS Form 8062 – Premium Tax Credit
IRS Instructions for Form 8962 (15 pages)
This is just one more small but somewhat shocking example of the unnecessary administrative complexity created by the Affordable Care Act (ACA).
Based on income alone, many people are not required to file tax returns if their income falls below a certain threshold (amount varies based on taxpayer status). However, many of these low-income individuals purchase plans through the ACA insurance exchanges and qualify for premium tax credits. All individuals who receive these credits under ACA must submit Form 8962 for the premium tax credit. It must be attached to an income tax return (Form 1040, 1040A, or 1040NR), so these people are required to submit tax returns no matter how low their incomes.
The penalty for not submitting Form 8962 attached to an income tax return is the requirement to refund any premium tax credits received and a disqualification from receiving tax credits in the following year. That’s quite a penalty for people with low incomes when you consider that ACA was supposed to make health care affordable. After all, “Affordable” is in its name.
But look at Form 8962 (click on link above). Then glance through the 15 pages of instructions for filling out Form 8962 (link also above). Sophisticated taxpayers are likely to find this daunting, but think of what it would be like for many of the low-income individuals who would have difficulties with just the simplified Form 1040A tax return, not to mention this monstrosity. It makes you think that ACA means “Administrative Complexity for All.”
Since there are no premiums in a well-designed single payer system, there would be no need for premium tax credits. The entire health care system would be funded by simplified taxes based on ability to pay. The health care system would always be there for you whenever you needed it, regardless of your tax situation. Even if delinquent, the IRS could not penalize or take away your health benefits.
Many supporters of the ACA look to its record of reducing the numbers of uninsured over the last five years as solid evidence that it is working. Paul Krugman, Nobel laureate in economics, has been in that group for years, recently touting the drop in uninsured numbers as sufficient evidence to declare the ACA a success. Much as I have admired his work in economics over many years, I remain surprised that he still gets it wrong on U. S. health care.
Krugman is still wedded to supporting some 1,300 private insurers, mostly for-profit, that continue to put their profits above serving patients in what has become an unsustainable system propped up by government subsidies. As a cheerleader for the ACA in his recent New York Times Op-Ed, he has this to say:
Obamacare has led to a rapid drop in the number of uninsured, especially in states that have fully implemented its provisions. . . meanwhile, the whole thing has come in well below projected costs; insurance premiums will rise in 2016, but after two years of remarkably small increases that still leaves things cheaper than expected. (1)
We need to drill deeper to see if we can declare the ACA a success: Yes, the numbers of uninsured have decreased, a welcome change and helpful to patients involved. What that metric misses, however, is the large number of Americans still uninsured, the growing epidemic of underinsured Americans, the continuing inflation of less affordable health care costs, the increasing numbers of people who forgo necessary care, the waste and profiteering that limit access and quality of care, and the lessons from most other advanced industrialized nations that have found ways to provide universal access to health care at much less cost and with better quality through one or another kind of public financing.
These examples, based on the latest available evidence, make the case that the ACA is not a success, that just looking at the drop in the number of uninsured is not an adequate measure, and that more fundamental reform will be required:
While it is tempting to look at just one metric—the decline in numbers of the uninsured, this is a trap if used to deceive ourselves as to the success of the ACA. As the above examples indicate, we still have a long way to go before we can say that we have reformed U. S. health care in the public interest.
Fareed Zakaria: Health IT is no magic bullet
By Bernie Monegain
Healthcare IT News, October 21, 2015
As Fareed Zakaria sees it, the remedy for America’s ailing and expensive health system is clear.
It might be hard for some to swallow, but, in his view, it is sure and proven.
“There’s absolutely no question that when we look at the ability to provide good healthcare at an affordable price, lower levels of massive inequality in healthcare outcomes or provision, a single government payer and multiple private providers is the answer. It’s absolutely clear that is the only way you can achieve that goal,” Zakaria said. “The revolution that’s needed here is not an information revolution, it’s a political revolution.”
Zakaria is a journalist, author and host of Fareed Zakaria GPS, a Sunday morning staple on CNN that delves into global issues and ways to solve them. For purposes of his broadcast “GPS” stands for Global Public Square.
Zakaria spoke to a crowd of more than 600 healthcare CIOs at the annual CHIME Fall Forum, October. 16 in Orlando, Fla.
“The fundamental point, I think, that you have to understand about healthcare is information technology, globalization are not magical solutions,” Zakaria told the audience.
This is especially so, because the fundamental structure of healthcare “makes it very difficult to achieve certain economies of scale.”
“What I’m always struck by when I look at healthcare,” Zakaria said, “is the fundamental accuracy, impressions of the 1961 or 1962 article written by Kenneth Arrow, a Nobel Prize winning economist, who said healthcare is not going to operate like any other market.”
Indeed, noted economist, New York Times columnist and author Paul Krugman also references Arrow’s work.
“One of the most influential economic papers of the postwar era was Kenneth Arrow’s Uncertainty and the welfare economics of health care, which demonstrated – decisively, I and many others believe – that health care can’t be marketed like bread or TVs,” Krugman wrote in a 2009 column.
Exactly Zakaria’s point.
Healthcare “is all non-tradable work,” he explained. Yet, “people look at healthcare and they ask themselves, ‘Why aren’t you getting more and more productivity?'”
That approach works in most industries.
“We have wrung inflation out of literally every industry,” Zakaria noted. “In most cases you’ve seen enormous price deflation. Think about computers; think about technology.”
Higher education and healthcare have been elusive when it comes to controlling spiraling costs. In fact inflation rates have been two to three times higher than the national average, he said.
“In both cases, you have the consumer not paying, very complicated government regulation that involves lots of third parties that pay and reimburse on very complicated schedules,” Zakaria said. “So all the normal price mechanisms that are at work that allow supply and demand to find equilibrium do not exist. ”
As Zakaria sees it, the answer does not lie in technology – at least not in technology alone, but rather in the structure of the health system itself and leaders should be prepared to unravel the structure.
“I don’t mean to be the bearer of bad news. What I mean is you have a very complicated job ahead of you, which is the structure. In addition to that you have a Democratic system, which makes it very hard to change the structure.”
Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care,” The American Economic Review, December 1963: https://www.aeaweb.org/aer/top20/53.5.941-973.pdf
Although Fareed Zakaria has wavered in the past on what we need to do to improve the health care system in the United States, he has now come to the firm conclusion that we need single payer.
As he states, “There’s absolutely no question that when we look at the ability to provide good healthcare at an affordable price, lower levels of massive inequality in healthcare outcomes or provision, a single government payer and multiple private providers is the answer. It’s absolutely clear that is the only way you can achieve that goal.”
He cites the 1963 landmark article by Nobel laureate Kenneth Arrow, “Uncertainty and the Welfare Economics of Medical Care,” (link above) explaining why health care cannot achieve a competitive equilibrium in the marketplace. In today’s terms, Arrow’s work explains why it is foolish to continue to rely on a marketplace of private health plans plus various public programs to try to manage spending in our $3 trillion health care industry.
As Nobel laureate Paul Krugman states, “health care can’t be marketed like bread or TVs.”
Imagine marketing fire or police or disaster relief services like bread or TVs. Those services should be there, ready for any of us whenever we need them. The same is true for health care. That would work just fine if we made our government the single payer.
I thought people should shop more for health care. Then I actually tried it.
By Sarah Kliff
Vox, October 19, 2015
I spend most of my time writing about the health care system. But every now and again, I actually use the system, too. This past week, those two activities collided on a very specific subject: shopping for better medical prices, and why patients don’t do it.
I recently decided to select a medical service strictly on price. This is something many economists think ought to happen more, to lower health spending. I was ready to do my part. Most patients, though, don’t do this, even when they have to spend way more out of pocket to get the more expensive care.
In retrospect, I wish I hadn’t either. The lower-cost procedure — in this case, an MRI — did indeed save my insurance plan money. But it created a worse medical experience for me, and was helpful in highlighting the trade-offs that patients must make in the shopping experience.
This past June, I stress-fractured my left foot. Though I spent six weeks in a very stylish walking cast over the summer, the injury has stubbornly refused to heal. Earlier this fall I saw an orthopedic specialist, who recommended an MRI to get a better sense of what exactly was wrong. He referred me to a large academic medical center for the scan, and I made an appointment.
My insurance quickly intervened — and, as a health care wonk, I was very excited!
I got a phone call one evening from a woman who asked if I’d consider switching to a private imaging center nearby that charged about $400 for an MRI — about half as much as the academic center cost. She offered to help me make the appointment, right then and there.
For me, the cost would be exactly the same; I’d have a $50 copay for the procedure regardless of where I got my foot scanned. But I’d long understood MRIs as a commodity health care service, essentially an advanced photograph that would come out the same regardless of who snapped it. So, in the sake of doing my part to lower national health spending, I switched to the cheaper center.
To preface: I understand my list of complaints is relative minor and at the end of the day probably won’t affect the ultimate outcome of my care. At the same time, I didn’t think I was making any trade-off when I chose a cheaper MRI. Now I know that isn’t true.
The first issue arose when I went back to the orthopedic specialist.
He wasn’t familiar with the place my insurer sent me, and the imaging center had forgotten to fax him a copy of my test. This meant a half-hour wait for me in his office, and more work for the office administrators to track down the images and radiological report.
Getting an MRI at the expensive medical center would have meant a smoother experience. The administrators there would know the exact drill of how and when to ship off my scan. Instead, I inadvertently created a new inefficiency in my own attempt to reduce wasteful spending.
Then there was the image itself. It did show a stress fracture that hadn’t healed, but it was blurry and a little harder for the doctor to make out what exactly was going on. The academic center he refers patients to, he told me, typically sends back much clearer images.
Knowing what I know now, I’m way more torn on whether I would choose the lower-cost MRI facility.
On the one hand, I did save my insurance plan about $400. If everyone at Vox shopped like I did, then that might do a lot of work to reduce our premiums. That would probably make us all pretty happy! My slightly blurry scan was still enough for my doctor to diagnose the fracture, although I still don’t know if he’d have seen something else on a clearer image.
At the same time, my own experience convinces me I’ve downplayed the trade-offs inherent in shopping for even basic health services. If I went back and did it again, I probably would have gone to the academic medical center for the scan.
Recently, I wrote about a new study looking at 75,000 patients who switched from a no-deductible plan to one requiring $3,750 in spending before the benefits kicked in. It showed that even with that really high deductible, patients didn’t shop on price. Instead, they saved money by just going to the doctor less.
One economist who contributed to the study described the finding as “surprising,” and I agreed: When patients have to cover the full cost of their health care, why wouldn’t they look for a better deal? I even called out MRIs specifically as an area where you’d expect to see price shopping but didn’t.
My own health care experience is far from unique. But it was a helpful, first-person demonstration of how shopping for health care might not be a zero-sum game, and that even with basic services, there can be clear winners and losers.
One anecdote does not a study make. But Sarah Kliff is a very astute observer of our health care system, and she has an important lesson for us that further challenges the rationale of consumer-directed health care (CDHC).
The concept behind CDHC is that the consumers (i.e., patients) are placed in charge of a portion of the spending on health care, through deductibles and other cost sharing, by using their own money. They then, theoretically, are motivated to shop for better prices. Although Sarah Kliff had met her deductible and thus would not benefit by price shopping, as a well informed journalist covering health care financing, she wanted to see how this concept might work anyway.
As she explains, she accepted the advice given in a cold call from a representative of her insurer – a representative who supposedly assists with obtaining higher quality care at lower prices. Indeed, the price was lower – for the insurer – but the quality was worse, and the patient experience was inferior. (It is ironic that HHS allows the insurers to log these interventions as “quality improvement” that applies to the medical loss ratio, allowing the insurers to retain even more revenue as profits).
She mentions a recent article of hers (covered in a Quote of the Day last week) about an important study that showed that patients with high deductibles do not shop health care prices. Rather the study showed that patients reduce their use of health care services – much of it that would be beneficial – and the sick do so at a greater rate. Thus CDHC does not achieve its goal of reducing prices but rather has the perverse result of reducing beneficial health care services instead.
We want a system that improves quality and the patient experiences while using patient-friendly methods of containing spending. We will not get that from the private insurers, but we would achieve that goal if we established our own public, single-payer national health program.
Hedge Funds Attack American Health Care
Hedge Clippers, September 30, 2015
It’s not just one highly unethical man: dozens of high-flying financial speculators at hedge funds and private equity firms are driving up the price of pharmaceuticals across the country.
Out of the twenty-five drugs with the fastest-rising prices over the past two years, twenty are owned or have been acquired by firms with significant activity from hedge fund, private equity, or venture capital firms.
Yes, you read that right: 80% of the drugs with the fastest-rising prices were involved in hedge fund, private equity or similar speculative attacks in the past two years.
The exact circumstances of each deal varies, but the outcome is always the same: branded pharmaceuticals — drugs for which no lower-cost generic alternative drug exists — see their prices increase many times over to satisfy the greed of speculative investors.
One company that stands out in all this is Valeant, a drug manufacturer that partnered in 2014 with a hedge fund called Pershing Square Capital Management to attempt the takeover of Allergan, another pharmaceutical company.
Billionaire hedge fund manager William “Bill” Ackman runs Pershing Square, and his manipulative moves exploded prices for medications needed by ordinary Americans – Americans who aren’t billionaires, and who can’t afford to pay billionaire prices for their medications.
Valeant produces twelve of the twenty-five branded drugs that have increase most in price over the past two years. Among the top fifty, Valeant produces twenty-seven.
Given that branded drugs are essentially a license to print money, it appears that Valeant was pumping up the prices of these medications to finance the Allergan takeover attempt – and/or to ensure big profits for billionaire hedge fund manager Ackman.
Looking back at the data on the pharmaceuticals with the largest price increases in the past two years, Horizon Pharma’s Vimovo is at the very top of the list.
The Vimovo acquisition follows a pattern similar to other pharmaceutical purchases made by companies with hedge fund, private equity, or venture backing.
- Speculative private capital is used is used to acquire an existing branded drug from an established pharmaceutical company.
- Because the drug is branded, no generic exists, and the producer is granted a monopoly on the sale of the drug.
- Once the acquisition is completed, the company drastically increases the price of the pharmaceutical.
- Because no generic exists, customers who need the drug are forced to accept any price dictated by the companies.
The only winners in this game are the pharmaceutical companies and their financiers: the hedge funds, private equity firms, and the venture capitalists. These speculators stand to make fortunes.
The full Hedge Clippers article, available at the link above, provides many examples of outrageous drug price manipulation by hedge fund, private equity, or venture capital firms. These confiscatory price increases have not been for financing new drug research, rather they have been for the sole purpose of redistributing money from patients in need of these drugs to the the money managers at the very top of the income and wealth scales, further compounding our crisis of inequality.
Government intervention is imperative. It would be automatic if we enacted a single payer national health program.
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