Fixing consumer-directed health care by making physicians financial counselors

Posted by on Wednesday, Apr 6, 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.

Study Of Physician And Patient Communication Identifies Missed Opportunities To Help Reduce Patients’ Out-Of-Pocket Spending

By Peter A. Ubel, Cecilia J. Zhang, Ashley Hesson, J. Kelly Davis, Christine Kirby, Jamison Barnett and Wynn G. Hunter
Health Affairs, April 2016


Some experts contend that requiring patients to pay out of pocket for a portion of their care will bring consumer discipline to health care markets. But are physicians prepared to help patients factor out-of-pocket expenses into medical decisions? In this qualitative study of audiorecorded clinical encounters, we identified physician behaviors that stand in the way of helping patients navigate out-of-pocket spending. Some behaviors reflected a failure to fully engage with patients’ financial concerns, from never acknowledging such concerns to dismissing them too quickly. Other behaviors reflected a failure to resolve uncertainty about out-of-pocket expenses or reliance on temporary solutions without making long-term plans to reduce spending. Many of these failures resulted from systemic barriers to health care spending conversations, such as a lack of price transparency. For consumer health care markets to work as intended, physicians need to be prepared to help patients navigate out-of-pocket expenses when financial concerns arise during clinical encounters.

From the Introduction

In recent years an increasing number of Americans have chosen health insurance plans with high out-of-pocket expenses, in the form of deductibles, copayments, or coinsurance rates. According to economic theory, such plans should make consumers more sensitive to the price of health care services. Indeed, copayments have been shown to reduce health care use. However, high out-of-pocket spending can also create financial burdens for patients. In 2014 one in three Americans reported having difficulty paying health care bills. Many patients did not adhere to prescribed health care interventions because of difficulty paying for them. In addition, some patients reported that the financial burden of paying for medical care caused them to miss mortgage payments or led them to personal bankruptcy.

On the one hand, patients with high out-of-pocket spending have an opportunity to behave as informed consumers in the health care Marketplace. On the other hand, their status as consumers exposes them to potential financial burden. Ideally, patients will recognize this trade-off between the medical benefits and the financial costs of receiving health care services, incurring out-of-pocket expenses only when the benefits of receiving the services outweigh the costs.

In this article we present a qualitative content analysis of health care spending discussions from outpatient clinic visits for patients with breast cancer, rheumatoid arthritis, or depression who saw specialists who treat these conditions. We present a series of physician behaviors that interfered with patients’ efforts to either lower their out-of-pocket expenses or understand the pros and cons of less costly health care alternatives.

From the Study Results

Our qualitative content analysis revealed two broad categories of physician behaviors that led to missed opportunities to reduce out-of-pocket expenses. The first set of behaviors involved the physician’s failure to address the patient’s financial concerns, in which the physician did not make an explicit effort to either acknowledge or deal with the seriousness of the patient’s concerns. The second category involved instances where physicians did make explicit efforts to deal with patients’ financial concerns but failed to resolve such concerns satisfactorily.

From the Discussion

Many health care policies are ultimately played out “at the bedside,” by influencing the way doctors and patients make medical decisions. In the case of policies promoting health care consumerism, many patients are faced with important decisions about whether the benefits of health care interventions justify their financial cost. In this qualitative, observational study of outpatient interactions, we identified a range of physician behaviors that stand in the way of helping patients make informed decisions about ways to potentially lower their out-of-pocket spending. Some behaviors reflect physicians’ failures to fully engage with patients’ financial concerns, from never acknowledging such concerns, to dismissing them too quickly, to getting sidetracked discussing frustration with a system that creates such high out-of-pocket spending. Other behaviors reflect physicians’ efforts to engage patients about their financial concerns but efforts that potentially fall short, because physicians fail to resolve uncertainty about out-of-pocket expenses or turn to temporary solutions without making long-term plans to reduce patients’ spending.

We recognize that physician-patient communication is a two-way street and that some of the failures described here resulted in part from patients having difficulty clearly and explicitly expressing their financial concerns. Patients have difficulty partly because health care consumerism is a relatively recent phenomenon in the United States for most people, meaning that patients have not had substantial experience that would help them become savvier about the health care marketplace. Nevertheless, it is still incumbent on physicians to do their best to overcome patients’ difficulties communicating about their expenses.

We acknowledge that many of the potential failures we have identified here, if they truly do reflect physician failure, also reflect more general failure of the US health care system. Physicians in the United States have difficulty factoring financial concerns into health care decisions in part because out-of-pocket spending is often difficult to determine and health care prices are often opaque. Consequently, physicians under time constraints cannot be expected to fully resolve patients’ financial concerns in the space of any single outpatient appointment.

From the Conclusion

Ideally, when people face high out-of-pocket spending for health care services, they will act like savvy consumers, exploring the pros and cons of their alternatives with full knowledge of the financial consequences of those alternatives. This confidence is undermined whenever clinical interactions lead patients to miss opportunities to explore less costly alternatives or to identify means by which they can receive their current interventions at lower prices.

Although the theme of this article seems to be that physicians should improve their skills in communicating with patients about their out-of-pocket spending for health care in order to enable spending reductions that are the goal of the ever-increasingly prevalent consumer-directed health care plans. But there is a much more important message buried in this study. Physicians do not have the time nor the tools and are basically incapable of assisting patients with their burdensome cost sharing.

Patients are mostly on their own to try to negotiate past the financial barriers to care, or, failing to do so, accept the fact that they may have to forgo the recommended health care simply because they cannot afford to pay for it. Training physicians in personal financial management so that they can counsel patients on how they can manage their deductibles and other expenses, and then expecting physicians to dedicate a significant portion of the patient interaction time to that counseling are just not practical uses of the very limited time the physician has with the patient – time that should be fully dedicated to managing the patient’s medical problems.

Also buried in the full article is this comment: “From this sample of 3,000 transcripts, we excluded visits that were conducted by primary care physicians, nurse practitioners, or nurses because these clinicians are often not the ones that prescribed the expensive interventions relevant to the diseases in question.”

Wow! Primary care was excluded because that is not where the expensive interventions occur? So primary care really does provide greater value? Yet most primary care (except sometimes certain preventive services) falls below today’s higher deductibles, and thus the patient is quite sensitive to primary care costs because it usually lacks first dollar coverage.

It is not the lack of training of health care professionals in patient-consumer financial counseling that is the problem. It is the transfer of financial responsibility to the patient that is causing the difficulties. Many other nations that spend much less on health care than we do are able to provide first dollar coverage. We can as well. We can control costs in a much more patient-friendly manner through an improved Medicare that covers everyone.

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The Salt Lake Tribune editors make case for Medicare for all

Posted by on Tuesday, Apr 5, 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 costs of hepatitis medicine make a good case for universal Medicare

The Salt Lake Tribune, April 4, 2016

Those who continue to argue that there is a “free market solution” to the unconscionable costs and gaps in the American health care system have to explain away the train wreck surrounding new cures for hepatitis C.

The good news is that there is a cure for hepatitis C, a blood disease that can lead to a slow and painful death as it destroys a victim’s liver. In fact, now there are a few. Gilead Sciences markets concoctions called Sovaldi and Harvoni. Janssen Research offers a drug called Olysio.

The bad news is that the cost of the full treatment regimen for a single patient can run from $83,000 to $189,000. That, obviously, is well beyond the reach of nearly every household and understandably enough to scare off both private insurance carriers and government-funded Medicaid.

The worse news is that, because the United States clings to the idea that wellness is a commodity subject to rational market forces, nobody is trying to limit these awful costs.

The drug companies charge so much for these medications for one reason: Because they can.

Functioning free markets do not — and never will — exist in health care because the sellers so often hold all the cards.

Civilized nations — a term that excludes the United States when discussing health care — either regulate the prices of drugs or use their concentrated purchasing power to negotiate a reasonable cost.

Drug makers argue that even the staggering cost of Sovaldi or related drugs is a bargain compared to avoided costs of more treatment, surgeries, disability, early death, etc.

It is notable that single-payer systems, such as in the United Kingdom, have done the math and agreed to pay high — though less than in the U.S. — prices for these drugs. That’s because, in those nations, the single payer does, indeed, come out ahead by paying a lot now but saving many multiples of that later.

In other words, the case made by the drug companies for allowing them to charge such high prices is also an argument for Medicare for all.

If there is any good in the fact that drug companies are gouging patients and payers it is that the citizenry may finally awaken to the fact that we need the government involved to straighten out this crisis, and, by extension, that we can finally get past the anti-government hangup preventing us from enacting a single payer system. We can thank the editors of The Salt Lake Tribune for reminding us that the solution we need is a single payer Medicare for all.

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Anthem and Dignity collude with employers, shafting employees

Posted by on Monday, Apr 4, 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.

Anthem Blue Cross, Dignity Health Partner to Improve Health, Lower Employer Costs

Business Wire, March 31, 2016

Anthem Blue Cross and Dignity Health, one of the largest hospital systems in the country, have collaborated to introduce a new tiered EPO/PPO plan designed to improve employee health and lower costs through an integrated care management system.

The Premier Tiered EPO/PPO product is designed for self-insured large groups, or employers with more than 101 employees and will launch on May 1, 2016 in Ventura County.

The plans are designed to offer choice and flexibility for employees who are members. They can select from either the Exclusive Provider Organization (EPO) that provides the best price with a pre-determined network of high value Dignity Health providers, or a Preferred Provider Organization (PPO) which provides access to a wider range of providers to choose from at varying copay and cost share levels. The new product combines the managed care capabilities and expertise of both organizations, with a focus on clinical quality, access and efficiency of health care services.

“As health care providers, we understand the challenges employers face in managing health care access and cost of care,” said Duncan Ross, Dignity Health Vice President, Employer Relations. “This collaboration with Anthem creates a care management model that will help employers reduce costs and provide a better patient experience for their employees, and reflects our mission of service and commitment to our communities.”

In announcing their new program that will “improve health and lower employer costs,” Anthem Blue Cross and Dignity Health show us once again that by relying on the private sector to control health care financing, we will continue to see innovations that serve their industries well, but at a cost to patients.

In this case Anthem and Dignity are providing a competitively priced product that will be cheaper for employers, but it will cause employees to choose between either an exclusive provider organization with severe restrictions in choice of providers or a preferred provider organization with moderate restrictions in provider choice but greater exposure to out-of-pocket spending. Either choice is worse for the employees than under more typical employer-sponsored plans of the past.

Under a well-designed single payer system, patients would have choice of their health care professionals and hospitals, and financial barriers would be removed by providing first dollar coverage. Many other features of a single payer system would control costs in a patient-friendly manner.

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Oklahoma physician leaders vote to abandon Medicaid patients

Posted by on Friday, Apr 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.

Oklahoma State Medical Association urges doctors to mull leaving Medicaid over 25 percent rate cut

By Barbara Hoberock
Tulsa World, April 1, 2016

Oklahoma State Medical Association leaders have voted unanimously to urge members to consider dropping out of Medicaid.

The association’s executive committee took the unanimous vote on Wednesday following an announcement earlier in the week by the Oklahoma Health Care Authority that Medicaid rates could be cut by as much as 25 percent effective June 1.

For the current fiscal year, the state has seen a deepening revenue failure requiring state-appropriated agencies to make cuts.

“We are fully aware this will create an access-to-care crisis for rural residents, vulnerable seniors, the disabled and the nearly 60 percent of Oklahoma babies born under Medicaid,” said OSMA President Woody Jenkins. “But a 25 percent rate cut, combined with previous cuts that had already been made in recent years, will leave many of our members with little choice.”

He said the association in coming days will be offering guidance on its website for doctors on how to opt out of the Medicaid program.


KGOU Update:

The third part of the plan would restore the Medicaid reimbursement rate to 86.5 percent of Medicare. Earlier this week, the Oklahoma Health Care Authority proposed reducing the reimbursement rate to providers by 25 percent as a result of the estimated $1.3 billion general revenue shortfall in the upcoming fiscal year.

One of the flaws in our fragmented, multi-payer system of financing health care is that low-income patients tend to be lumped into the Medicaid program. Since it is a welfare program serving individuals who do not command much political capital, politicians are more willing to use cuts in Medicaid to balance their budgets than cuts for programs designed to serve the general population such as Medicare and Social Security. What lessons can Oklahoma’s proposed 25 percent cut in Medicaid rates provide for us?

As a welfare program, Medicaid does remain chronically underfunded. As such, access problems occur because of a lack of willing providers since there is reluctance on the part of others to accept the lower Medicaid rates. But should the less fortunate members of society be relegated to a lower standard of health care, or should everyone have the equivalent access to essential health care services? That question has been answered by our politicians even if it was never asked.

That said, what response should organized medicine have to these cuts in Medicaid? Perhaps we should ask whom they perceive as being victimized here. The Oklahoma State Medical Association (OSMA) has recommended that all physicians drop out of the Medicaid program in order to protect themselves from underpayment for their services.

What about the patients otherwise qualified for Medicaid who need health care? OSMA has provided no recommendation. Do the physicians simply refuse to see those patients if they cannot pay cash for their services? Would some physicians agree to see them on a charitable basis at the risk of having their schedules swamped because too many others would continue to boycott the patients until their fee demands were met?

Although we can sympathize with physicians who are being requested to practice in a toxic environment because of unreasonable policy decisions made by the politicians, we can also be troubled by their abandonment of the needy patients who seem to be the real victims here. This is not unlike some members of Congress who have repeatedly voted to repeal the Affordable Care Act yet have offered no replacement to ensure that people can get the health care that they need.

We could replace the politicians who have refused to enact policies that would ensure health care for everyone. Physicians could also replace their medical association delegates with those who follow modern Hippocratic traditions: “I will remember that I remain a member of society, with special obligations to all my fellow human beings, those sound of mind and body as well as the infirm.”

What was it the OSMA president said? “We are fully aware this will create an access-to-care crisis for rural residents, vulnerable seniors, the disabled and the nearly 60 percent of Oklahoma babies born under Medicaid,” but they are left with little other choice than to abandon them. Really?


It appears that they may receive a reprieve with a new proposal from the state Medicaid agency, but that does not excuse them from the fact that they were willing to abandon their Medicaid patients.

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Who isn’t insured, and how can we change that?

Posted by on Thursday, Mar 31, 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.

Who Are the Remaining Uninsured, and What Do Their Characteristics Tell Us About How to Reach Them?

By Linda J. Blumberg, Michael Karpman, Matthew Buettgens, and Patricia Solleveld
Robert Wood Johnson Foundation
Urban Institute, March 2016

From the Introduction

Although the ACA was not designed to eliminate uninsurance, a detailed assessment of those remaining uninsured after reform can provide insight into the potential to increase coverage further.

Main Findings

*  According to the CPS-ASEC, 32.9 million nonelderly residents of the United States remained uninsured as of March 2015, constituting 12.2 percent of the total non-elderly, civilian, non-institutionalized population of the country.

*  The rate of uninsurance is significantly higher in (Medicaid) nonexpansion states, where 15.4 percent of the nonelderly are uninsured compared with only 10.1 percent in expansion states, a relative difference of over 50 percent.

*  About 28 percent of the uninsured are eligible for Medicaid or the Children’s Health Insurance Program (Medicaid/CHIP), and 21 percent are eligible for marketplace tax credits.

*  Fully 66.5 percent of uninsured children are eligible for Medicaid/CHIP compared with only 20.6 percent of uninsured adults.

*  We posit that the uninsured who are eligible for the greatest amount of financial assistance under the ACA — 12.4 million uninsured in total — are those for whom additional outreach and enrollment efforts are likely to be most successful.

*  Absent further policy changes (e.g., more states expanding Medicaid, increased financial assistance, and expanded eligibility for assistance), we do not expect that a substantial share of the other uninsured — who constitute 20.6 million of the total — will gain coverage.

*  Targeting of resources to those 12.4 million uninsured with the greatest potential to enroll in either Medicaid/CHIP or marketplace coverage can be improved by understanding their characteristics.

From the Conclusion

Our analysis of the CPS-ASEC combined with past work on program participation rates and case studies on insurance enrollment behavior under the ACA suggests that two subpopulations of the uninsured have the most promise in further expanding coverage: the Medicaid eligible and the low-income marketplace tax credit eligible. These are the uninsured eligible for the most comprehensive coverage at the lowest direct cost under current law, and those eligible for this level of assistance have relatively high rates of participation in health insurance programs. Together, these subgroups account for 37.5 percent of the remaining uninsured, or approximately 12.4 million people.

Under current law, however, expectations of increasing coverage substantially among the other 62.5 percent of the remaining uninsured should be tempered. Although some additional coverage within these groups is likely as the individual mandate penalties increase and information on available coverage alternatives spread further, gains are likely to be quite modest unless further financial assistance is provided.

Perhaps the most important statement in this report on the remaining uninsured is the following: “The ACA was not designed to eliminate uninsurance.” It should be no surprise that we are left with trying to figure out why so many are uninsured and who they are when the architects of the Affordable Care Act abandoned, in advance, any effort to make health care insurance truly universal.

If there is good news in this report it is that there are two groups in which, with concerted effort, we can increase rates of enrollment: the uninsured eligible for Medicaid/CHIP, and the lower-income uninsured eligible for government subsidies for ACA exchange plans. These eligible individuals are more likely to accept coverage because government subsidies make it free or very low cost to them. But those eligible are still a minority of the uninsured – 12.4 million individuals.

The majority of the uninsured – 62.5 percent, 20.6 million individuals – have no publicly-supported programs available for them and are likely to remain uninsured. It has been suggested that we can expand coverage through incremental changes in ACA, but, because of political, logistical and financial barriers, it would be very difficult to design add-on programs that would be effective in bringing these individuals under the coverage umbrella.

Another problem is that a static picture at one point in time does not lead to policies that would address the instability in coverage due to changes in income, employment, age, residency, and other requirements that determine the type of coverage for which an individual may or may not be eligible. As we work on the front end to expand coverage to the currently uninsured, people are falling off of the back end as they lose their coverage and may face new barriers to transitioning to other programs. This instability makes it virtually impossible to ever cover everyone simultaneously under our fragmented system that has been perpetuated by ACA.

So do we want everyone insured? I would say absolutely yes, but it is not going to happen under a system that was clearly not designed to do that. In contrast, an Improved Medicare for All would be designed to actually cover everyone, permanently, not to mention the multitude of other social and health benefits that it would bring to all of us.

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IMPORTANT: ACA-compliant plans have been subjected to adverse selection

Posted by on Wednesday, Mar 30, 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.

Newly Enrolled Members in the Individual Health Insurance Market After Health Care Reform: The Experience from 2014 and 2015

BlueCross BlueShield, March 2016

This report is a comprehensive, in-depth study of medical claims among those enrolled in BCBS individual coverage before and after the ACA took effect.

Comparing the health status and use of medical services among those who enrolled in individual coverage before and after the ACA took effect, as well as those with employer-based health insurance, the study finds that:

•  Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who already had BCBS individual coverage.

•  Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical services in their first year of coverage, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health coverage.

•  The new enrollees used more medical services across all sites of care—including inpatient hospital admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.

•  Medical costs associated with caring for the new individual market enrollees were, on average, 19 percent higher than employer-based group members in 2014 and 22 percent higher in 2015. For example, the average monthly medical spending was $559 for individual enrollees versus $457 for employer-based group members in 2015.

Compared with members previously enrolled in BlueCross BlueShield plans, those enrolling after the Affordable Care Act (ACA) took effect have higher rates of certain diseases, use more medical services across all sites of care, and have higher medical costs associated with care – 22 percent higher in 2015. Adverse selection – concentrating more costly patients in the ACA-compliant plans – was a consequence of the design selected for expanding health care coverage in the United States.

Although required benefits were increased by ACA, to keep premiums affordable patients were leveraged into lower actuarial value plans, especially plans like the silver plans that pay 70 percent of allowable charges. Outside of the exchanges, the other 30 percent is paid by patients, especially through much higher deductibles. Also some income is forgone by providers who contract for lower fees to serve in narrow networks that take away patients’ choices in health care.

It was obvious that many people with modest incomes would not be able to afford their share of the costs of these plans so the politicians included income-based federal subsidies for both the premiums and the cost sharing of the silver plans purchased through the ACA insurance exchanges (marketplaces).

Fine, but what about the hard working middle-income individuals and families who have just enough income that they are disqualified from receiving the subsidies? They are hurting. The higher premiums, the higher deductibles, and the decrease in choices through narrower networks are a greater burden that has been placed on these individuals and families.

This new BCBS report is further bad news for middle-income Americans. It shows that the ACA-compliant plans, both within and outside of the exchanges, have been subjected to adverse selection – the individuals pooled in these plans have greater medical needs and thus are more expensive – driving up premiums and increasing deductibles, with the full brunt borne by middle-income families that do not qualify for subsidies.

It does not have to be this way. We could improve Medicare, expand it to include everyone, and pay for it with equitable taxes based on ability to pay, wherein nobody suffers a financial hardship because of health care. Adverse selection would no longer exist because everyone would be included in the same universal risk pool.

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Financing health care with consumer loans

Posted by on Tuesday, Mar 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.

Mortgages For Expensive Health Care? Some Experts Think It Can Work.

By Michelle Andrews
Kaiser Health News, March 29, 2016

A Massachusetts Institute of Technology economist and Harvard oncologist have a proposal to get highly effective but prohibitively expensive drugs into consumers’ hands: health care installment loans.

Writing last month in the journal Science Translational Medicine, the authors liken drug loans to mortgages, noting that both can enable consumers to buy big-ticket items requiring a hefty up-front payment that they could not otherwise afford.

Some consumer advocates and health insurance experts see it differently.

“Isn’t this why we have health insurance?” asked Mark Rukavina, a Boston-based health care consultant whose work has focused on affordability and medical debt. “Insurance used to protect people from financial ruin for these unpredictable, costly occurrences. Now, with large deductibles, we’ve got coverage for preventive care but not for treatment.”

Andrew Lo, a financial economist at MIT’s Sloan School of Management, and Dr. David Weinstock, an oncologist at the Harvard-affiliated Dana-Farber Cancer Institute, agree that insurance would be a better option. But for many consumers that isn’t enough protection these days.

“This is a private sector stopgap way to deal with something right now,” said Lo.

Their proposal calls for the loans to be financed by a pool of investors who would buy bonds and equities issued by an organization that makes the loans to consumers.

While it’s “distasteful” to talk about patients mortgaging their lives for treatment, Lo said, they hope the proposal will spur change.


Buying cures versus renting health: Financing health care with consumer loans

By Vahid Montazerhodjat, David M. Weinstock, and Andrew W. Lo
Science Translational Medicine, February 24, 2016


A crisis is building over the prices of new transformative therapies for cancer, hepatitis C virus infection, and rare diseases. The clinical imperative is to offer these therapies as broadly and rapidly as possible. We propose a practical way to increase drug affordability through health care loans (HCLs) — the equivalent of mortgages for large health care expenses. HCLs allow patients in both multipayer and single-payer markets to access a broader set of therapeutics, including expensive short-duration treatments that are curative. HCLs also link payment to clinical benefit and should help lower per-patient cost while incentivizing the development of transformative therapies rather than those that offer small incremental advances. Moreover, we propose the use of securitization — a well-known financial engineering method — to finance a large diversified pool of HCLs through both debt and equity. Numerical simulations suggest that securitization is viable for a wide range of economic environments and cost parameters, allowing a much broader patient population to access transformative therapies while also aligning the interests of patients, payers, and the pharmaceutical industry.

The Role of Health Insurance

Large copays are antithetical to the very purpose of health insurance. Hence, our proposal for patients to cover these costs with HCLs is only a short-run bridging solution. A more sustainable and economically more efficient approach to address the high cost of transformative therapies is for insurance companies to cover these costs, spread the amortized costs across their policyholders, finance the upfront payments using securitization, and set premiums at the appropriate levels to cover these costs. In return for larger drug purchases, insurance companies would wield substantial leverage to negotiate lower prices. Also, insurers would presumably borrow at lower interest rates than would individual patients, further reducing the overall financing cost of these therapies.


The burden of upfront payment for curative therapies makes it challenging for public and private payers to afford universal access to potentially life-saving therapies. To address this issue, we considered a new financing paradigm in which portfolio theory and securitization techniques are used to finance HCLs whose repayment is linked to ongoing value. By estimating the post-treatment mortality rates of the patients and using statistical models to gauge the default characteristics of these loans, we demonstrate viability under current practical conditions. Securitization brings new participants (for example, pension funds, mutual funds, and life insurance companies) into the financing pool and helps transform a set of disjointed and sometimes competing interests into a more cooperative system focused on improving care. HCLs, not unlike student loans, auto loans, and home mortgages, can improve access to the best health care for the less affluent.

Considering the extremely large burden of certain diseases, such as HCV, for which cures already exist, and the many transformative therapies on the horizon, developing more efficient financing methods is now a matter of life and death. Taking action is no longer a choice but has become a necessity.

So the answer to outrageously priced drugs is to pay for them through health care loans (HCLs) – the equivalent of mortgages – and then use securitization “to finance a large diversified pool of HCLs through both debt and equity.” Did we not learn anything from the subprime mortgage crisis? Just as securitization of subprime loans became a “necessity,” securitization of HCLs is now not only supposedly necessary to prevent personal insolvency, it is, according to Andrew Lo, et al, “a matter of life and death.”

In Lo’s words, “While it’s ‘distasteful’ to talk about patients mortgaging their lives for treatment, they hope the proposal will spur change.”

Oh my.

An improved Medicare for all with first dollar coverage would eliminate any need to consider such an inhumane concept.

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Part D plans moving from copayments to coinsurance

Posted by on Monday, Mar 28, 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.

Majority of Drugs Now Subject to Coinsurance in Medicare Part D Plans

By Caroline F. Pearson
Avalere, March 10, 2016

A new analysis from Avalere finds that a majority of prescription drugs covered by standalone Medicare Part D plans (PDPs) are subject to coinsurance, rather than copayments, in 2016. Coinsurance is when a beneficiary pays a percentage of the cost of the drug, rather than a fixed dollar amount, or copayment. Coinsurance often leads to patients paying more out of pocket compared to fixed dollar amount copayments. The average percentage of covered drugs facing coinsurance has risen sharply from 35 percent in 2014 to 58 percent in 2016 among PDPs. While most PDPs have historically applied coinsurance to high-cost drugs on the specialty tier, plans have extended coinsurance to drugs on lower tiers in recent years, including those covered on preferred and non-preferred brand tiers.

“These very high rates of coinsurance have shifted our understanding of Part D formulary coverage,” said Caroline Pearson, senior vice president at Avalere. “It will be important to monitor what drugs are being placed on various coinsurance tiers and how plans are using these tiers to manage cost and utilization in the program.”

Medicare Part D drug plans are shifting more drugs from a copayment requirement – a fixed dollar amount to be paid for each prescription – to coinsurance – a percentage of the charge for each prescription. This is important because coinsurance payments tend to be higher than copayments – sometimes much higher – especially with the recent increases in drug prices.

Obviously this is simply one more method of shifting the costs of health care to the patient. Many are already finding out-of-pocket costs to be unaffordable, yet it keeps getting worse. This is a one way street. The insurers are not looking for ways to reduce out-of-pocket expenses since they would have to pick up the additional costs which would then make their premiums less affordable, and the last thing that they would want to do is risk losing market share through higher premiums.

Coinsurance is a method of reducing health spending by erecting financial barriers to the care that patients should have. Instead, we should be removing financial barriers to care. That is what an improved Medicare for all with first dollar coverage would do.

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Should the insurer or the provider be in charge of integrating health care?

Posted by on Friday, Mar 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.

Mayo rebuffs Iowa Medicaid managed-care contracts

By Tony Leys
The Des Moines Register, March 24, 2016

Iowans with Medicaid health coverage will not be able to routinely use the Mayo Clinic after the state shifts the $4 billion program to private management next week.

The three managed-care companies that will run Iowa’s Medicaid program told legislators this week they’ve been unable to negotiate contracts with Mayo’s famed hospital system, which is just across the border in Rochester, Minn.

Cheryl Harding, Amerihealth’s top executive in Iowa, told legislators that her managed-care firm has signed contracts with three Mayo-affiliated primary care clinics in Iowa, but not with Mayo’s main medical center in Rochester. The other managed-care companies, UnitedHealth and Amerigroup, also said they have not obtained such contracts.

For the time being, they said, Mayo has agreed to consider single-case contracts for Iowa Medicaid recipients needing specific care that can’t be provided elsewhere.

There are so many issues here, but it really boils down to one, which we’ll get to in a moment.

One of primary the goals of health care reform is to provide integrated health care services. The participants in an ideal health care delivery system work together as a team to ensure that the patient receives the right care, at the right time, at the right place. The care pyramid is built on a solid primary care infrastructure that serves, not as a gatekeeper, but as a facilitator.

Examples range from structurally integrated systems such as Kaiser Permanente, to loosely integrated services provided by the various health care resources in a community – hospitals, outpatient centers, community health centers, and independent primary care and specialty practices. In today’s message, Mayo Clinic represents an integrated system with its mothership in Rochester and its affiliated primary care clinics serving patients in its neighboring state of Iowa.

Thus Mayo provides integrated services that would be paid for by private insurers or employer-sponsored plans, either through fee-for-service or capitated payment schedules. Low income patients would be covered by Iowa’s Medicaid program.

But wait a minute. The insurers now profess to provide higher quality and lower costs through their own integrated managed care services. Iowa is following the lead of other states and turning its Medicaid program over to private Medicaid managed care companies. Although they avow quality, early experience with other state Medicaid managed care programs indicate that it is all about saving money, as quality and access deteriorate.

So what is happening to Iowa’s Medicaid patients who are currently obtaining their care from Mayo? It seems that Mayo is no longer in charge of integrating the health care of these patients; the private insurers are instead. For most of the patients, that means they lose access to their current care. One of the insurers will still allow patients to use the Mayo affiliated primary care clinics but not the Mayo mothership in Rochester, except by special arrangement on an individual basis. Instead of integrated care, these managed care companies are providing disintegrated care (double entendre intended).

The obvious conclusion is that integration of health care services should be a function of the health care delivery system based on patient service and not a function of an intermediary payer based on business goals.

A publicly administered and financed single payer monopsony would be designed to incentivize appropriate integration of our health care delivery system so that we really could have a higher quality health care system that brings greater value to all of us.

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Valeant sells mercy, for a price

Posted by on Friday, Mar 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.

Pharmaceutical Companies Hiked Price on Aid in Dying Drug

By April Dembosky
KQED, March 22, 2016

When California’s aid-in-dying law takes effect this June, terminally ill patients who decide to end their lives could be faced with a hefty bill for the lethal medication. It retails for more than $3,000.

Valeant Pharmaceuticals, the company that makes the drug most commonly used in physician-assisted suicide, doubled the drug’s price last year, one month after California lawmakers proposed legalizing the practice.

“It’s just pharmaceutical company greed,” said David Grube, a family doctor in Oregon, where physician-assisted death has been legal for 20 years.

The drug is Seconal, or secobarbital, its generic name. Originally developed in the 1930s as a sleeping pill, it fell out of favor when people died from taking too much, or from taking it in combination with alcohol. But when intended as a lethal medication to hasten the death of someone suffering from a terminal disease, Seconal is the drug of choice.

In 2009, Grube remembers the price of a lethal dose of Seconal — 100 capsules — was less than $200. Over the next six years, it shot up to $1,500, according to drug price databases Medi-Span and First Databank. Then Valeant bought Seconal last February and immediately doubled the price to $3,000.

Most drug companies justify such hikes by pointing to high research costs. But Grube says that’s not the case with Seconal. It’s been around for 80 years.

“It’s not a complicated thing to make, there’s no research being done on it, there’s no development,”  he says. “That to me is unconscionable.”

One of my father’s favorite phrases was, “There oughta be a law…” Whenever I heard that, I knew a bit of wisdom with a moral message would follow.

Dad’s last three weeks of life was spent in a hospital and could not have been more miserable (this was in the 1970s, before hospice). He had multiple myeloma and had extensive pathological fractures. When the nurses had to turn him, the pain was intolerable. He did not tolerate the narcotics administered as they aggravated his vomiting and obstipation. As a physician, he understood well his status.

At the last relatively rational conversation I had with him, he said, “Don, there oughta be a law. When the tiny bit of good that happens in a day cannot possibly even begin to compensate for the profound, unrelenting pain and suffering, your physician should be able to authorize the placement of a bottle of sleeping pills on the nightstand next to your bed.”

No such bottle appeared. The agony persisted for several more days, without even any fleeting moments of contentment, before he slipped into his final coma. In spite of my reverence for life, I knew this wasn’t right.

Today’s message on Valeant’s price gouging for Seconal – price gouging timed to capitalize on California’s new aid-in-dying law – would normally lead to my usual diatribe on the evils of dysfunctional health market dynamics in the U.S. But this time, it led to tears – mine.

How can we leave our health care system under the control of the rentiers in the medical industrial complex? Dad would have said, “There oughta be a law.” And we know what that law would be – an improved Medicare for all that spends money exclusively for the benefit of patients.

Why am I not out there helping to organize the marches on Washington and our state capitols on behalf of health care justice for all? For that matter, why aren’t you?

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