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.
Reforming Medicare: What does the public think?
AEI and the Brookings Institution, September 19, 2014
Panelists: Joseph Antos (AEI), Marge Ginsburg (CHCD), Robert Moffit (Heritage), Kavita Patel (Brookings) and John Rother (NCHC)
On Friday at AEI, Marge Ginsburg of the Center for Healthcare Decisions (CHCD) opened a discussion on redesigning Medicare by presenting new findings from the CHCD’s MedCHAT study, which engaged diverse participant groups in reviewing current Medicare benefits and addressing the potential for budget reallocation.
How To Fix Medicare? Ask The Public
By Mary Agnes Carey
Kaiser Health News, September 23, 2014
While participants did not eliminate benefits, they accepted stricter criteria or new limitations on current coverage. For example, 82 percent supported the use of defined networks of providers, but allowed the use of a provider outside the set network if approved by a primary care provider.
OK to Limit Medicare Provider Choices, but Don’t Cut Benefits
American Academy of Family Physicians (AAFP), September 26, 2014
Overall, participants did not choose to cut benefits but opted instead for increased restrictions regarding how and when those benefits would be provided, said Ginsburg. Of those who participated, 82 percent said they would require Medicare enrollees to choose a provider network rather than continue the current carte blanche approach to seeing health care professionals. Most stipulated that referrals outside the network should be covered with consent from a patient’s primary care physician.
Findings from the California Medicare CHAT Collaborative
Center for Healthcare Decisions, September 2014
The Center for Healthcare Decisions (CHCD) in partnership with LeadingAge California developed the California Medicare CHAT Collaborative (“MedCHAT”) to encourage public input on Medicare.
MedCHAT is an interactive, computer-based simulation, in which participants create a benefits package when potential coverage options exceed current Medicare funding.
82% of participants accepted a network model when it was presented as a trade-off for new Medicare benefits.
Participants were presented with several categories where coverage could be improved or new benefits added to Original Medicare. The majority of participants opted to include all of them. (Long term care; dental, vision and hearing; mental health; transportation)
Of the 82% of participants that agreed to the network model, most included the flexibility of allowing the primary care provider to authorize out-of-network use. The remaining 17% chose to retain Medicare’s current provider model.
Participants’ views were also captured via the pre/post survey questions regarding the actions they could support to reduce the impact of Medicare on the federal budget. Before the MedCHAT discussion, “requiring Medicare users to choose a specific provider network” was an option supported by 23% of participants. After MedCHAT, 34% supported this requirement. However, 82% of participants accepted a network model when it was presented as a trade-off for new Medicare benefits. Thus it appears that requiring use of provider networks was not as acceptable when the purpose was to reduce the federal cost burden.
(As a way of reducing the federal budget, lowering the amount Medicare pays doctors was supported by 14%, the lowest of any recommendation.)
Citing this study from the Center for Healthcare Decisions, it is being widely reported that 82 percent of the public would be willing to accept provider networks for Medicare. Conservatives particularly are touting the fact that the public is no longer demanding unlimited choice of physicians and hospitals under Medicare. Is this what the study really showed?
A few specifics:
So the public can accept provider networks in exchange for more generous benefits as long as the networks do not limit provider choice and do not fulfill their function of reducing payments to physicians.
This study will be used to claim that Medicare beneficiaries prefer limited provider networks. They do not. The majority of seniors are still enrolled in the traditional Medicare program. Those who select the private Medicare Advantage plans (MA) do not do so in order to decrease their choices in health care providers. They do so because they pay less for premiums and cost sharing while receiving additional benefits such as the Part D drug benefits – benefits made possible by federal legislation authorizing overpayments to the MA plans, much of which is retained by the insurers.
The claim that patients do not mind losing their choice of physicians and hospitals as long as the insurance product is a better deal has almost become a meme. But patients supporting networks did not intend that that limitation be applied to their own doctors and hospitals. As that reality is now hitting home, we’re beginning to hear the rumblings.
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.
Doctors Hit a Snag In the Rush to Connect
By Julie Creswell
The New York Times, September 30, 2014
Regardless of who is at fault, doctors and hospital executives across the country say they are distressed that the expensive electronic health record systems they installed in the hopes of reducing costs and improving the coordination of patient care — a major goal of the Affordable Care Act — simply do not share information with competing systems.
While most providers have installed some kind of electronic record system, two recent studies have found that fewer than half of the nation’s hospitals can transmit a patient care document, while only 14 percent of physicians can exchange patient data with outside hospitals or other providers.
Epic and its enigmatic founder, Judith R. Faulkner, are being denounced by those who say its empire has been built with towering walls, deliberately built not to share patient information with competing systems.
Where interconnectivity between systems does occur, it often happens with steep upfront connecting charges or recurring fees, creating what some see as a digital divide between large hospital systems that have the money and technical personnel and small, rural hospitals or physician practices that are overwhelmed, financially and technologically.
A research report from the RAND Corporation described Epic as a “closed” platform that made it “challenging and costly for hospitals” to interconnect with the clinical or billing software of other companies.
A sort of Microsoft of the Midwest, built on a sprawling campus on nearly 1,000 acres of farmland near Madison, Wis., the privately held Epic has emerged as a leader in the race to digitize patient medical records. Its systems hold the health records of nearly half the country.
In 2005, when it became clear to her that the government was not prepared to create a set of rules around interoperability, Ms. Faulkner said, her team began writing the code for Care Everywhere. Initially seen as a health information exchange for its own customers, Care Everywhere today connects hospitals all over the country as well as to various public health agencies and registries.
Careful in her choice of words, Ms. Faulkner offered muted criticism of regulators for, essentially, failing to create what she did — a contract to help providers connect to one another and a way to authenticate that only the correct person could view the patient information.
“I’m not sure why the government doesn’t want to do some of the things that would be required for everybody to march together,” she said.
The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care
By David J. Brailer, MD, PhD, National Coordinator for Health Information Technology
PNHP Quote of the Day (excerpts), July 21, 2004
While the federal government plays an important role in HIT adoption, the effective use of, and value creation from, this technology lies predominantly with the private sector. The federal government will provide a vision and a strategic direction for a national interoperable health care system, but will rely on a competitive technology industry, privately operated support services, and shared investments in HIT adoption. The private sector must develop the market institutions to deliver the products and services that can transform the paper-based health care system into an electronic, consumer-centered, and quality-based system. The private sector can best ensure that HIT products are successfully implemented in ways that meet the varying needs of American health care across settings, cultures, and geographies. The private sector can also continue constant innovation in HIT and ensure that products are delivered on an affordable basis.
Comment by Don McCanne (July 21, 2004)
What has the magic of the competitive marketplace produced in the way of an integrated IT system to this date? High costs, very poor penetration, and system failures! Competitive market theory dictates that we should be leading the world with a high quality health care IT system at a low cost. What went wrong?
First of all, a fragmented system of multiple private plans, public programs and uninsurance does not provide an infrastructure that is very conducive to an integrated IT system. A single payer system, or, at minimum, a highly regulated system of universal coverage through multiple plans, would provide a framework that would ensure adaptability of an integrated IT system. Of course, a single, publicly administered system would be much preferred for an integrated IT system.
But the greatest difficulty with private IT solutions lies in the very nature of these marketplace models. Their goals are, above all, to maximize profits and to maximize the market price of their shares.
What might the private sector do that doesn’t serve our interests well? They will produce products that command the highest prices that the market will bear. They will design the products to provide a continuing revenue stream. Once gaining a significant share of the market, they will design incompatibility with other systems in an attempt to garner the entire market. They will design obsolescence into their systems to ensure future markets for their new innovative products. They will partner with and perhaps acquire other related entities that can expand profit potentials through greater control of components of the health care system which their products can influence. Although these are good business practices, they are terrible policies for our health care system.
The health information technology report released today (July 21, 2004) should alarm us all. Although we all agree on the importance of an integrated IT system, the Bush administration is limiting the role of the government to being an enabler that encourages the private sector to develop a successful business model. Rather than higher quality at a lower cost, we’ll end up with mediocrity at a much higher cost, wasting even more of our health care dollars.
A decade ago we already had a very successful, publicly-owned health information technology system (HIT) with interconnectivity – VistA – the system in use by the Veterans Health Administration. Under the leadership of President George W. Bush, it was decided that we should move forward with interconnecting our entire health care system through HIT, but that the system should be developed in the private sector instead. What has happened since?
President Bush appointed David Brailer as his National Coordinator for Health Information Technology. On July 21, 2004 he released a 178 page report describing the framework of his proposal – The Decade of Health Information Technology (a decade just completed). Although the link to their report is no longer active, perhaps the most informative sentence in the report is the following: “The private sector must develop the market institutions to deliver the products and services that can transform the paper-based health care system into an electronic, consumer-centered, and quality-based system.” Although the federal government would provide “a vision” for HIT, it would be developed and operated exclusively in the private market.
In my Quote of the Day comment on the day the report was released 10 years ago, I wrote: “What might the private sector do that doesn’t serve our interests well? They will produce products that command the highest prices that the market will bear. They will design the products to provide a continuing revenue stream. Once gaining a significant share of the market, they will design incompatibility with other systems in an attempt to garner the entire market. They will design obsolescence into their systems to ensure future markets for their new innovative products. They will partner with and perhaps acquire other related entities that can expand profit potentials through greater control of components of the health care system which their products can influence. Although these are good business practices, they are terrible policies for our health care system.”
So what did they do? The New York Times article reveals that Epic, a privately held company, “holds the health records of nearly half the country.” Epic is “a ‘closed’ platform that made it ‘challenging and costly for hospitals’ to interconnect with the clinical or billing software of other companies.” “Where interconnectivity between systems does occur, it often happens with steep upfront connecting charges or recurring fees.” Recognizing the need for interoperability, Judith Faulkner, the founder of Epic, established “Care Everywhere” which performs well as a new profit center for Epic but performs poorly in establishing universal connectivity. How could anyone know ten years ago that this might happen? Well, it was known.
This is analogous to the decision made to rely heavily on private health insurance in our efforts to expand health care coverage to everyone, based on the idea that the market can do it better than the government. We have been predicting the adverse consequences of this, and every day we see more evidence that our predictions, based on solid health policy science, are all coming true. In health care we are facing excess costs and poor performance, just as we are with our private HIT systems.
Under a single payer system we would have a cost-effective, publicly-owned, integrated HIT system that is designed to serve patients and their health care professionals, rather than a system that is designed to serve, well, Judith Faulkner (#261 on Forbes 400, Net worth $2.3 billion).
Public meeting of the Medicare Payment Advisory Commission (MedPAC)
September 11, 2014
From the transcript:
MR. [GLENN] HACKBARTH [MEDPAC CHAIR]: It is time to begin our afternoon session. We have three topics … this afternoon, the first being ACOs …. [p. 118]
MR. [DAVID] GLASS [MEDPAC STAFF]: Good afternoon. … I will … look at recent developments in the two Medicare ACO programs: the Medicare shared savings program, or MSSP, and the Pioneer demonstration [p. 118]. … In summary, the ACOs in the MSSP program had aggregate savings of about 0.3 percent [p. 121]. … Turning now to the Pioneer ACO model … CMS reports the program saved about 0.5 percent [p. 122]. …
DR. [DAVID] NERENZ: [Y]ou used the phrase “low overhead.” … Is it low overhead in practice? Do we know anything about that?
DR. [JEFF] STENSLAND [STAFF]: [P]eople we talk to and the data we have seen, it looks like maybe 1 to 2 percent of your spend, that that’s what they’re spending on their ACO to operate it. … [p. 133].
DR. NERENZ: [I]f I could go back to the overhead cost issue, I just want to … see if I’m thinking about this correctly. If, say, Jeff, as you said, two percent of overall spend might be administrative – you said one to two, but let’s just use two – in order, then, for the ACO to make money net, it would have to achieve four percent savings if the shared savings ratio is about 50 percent. … I’m just trying to figure out, in the data you’ve seen, are there ACOs who have actually made money net of overhead cost? Do we know that yet?
DR. STENSLAND: [I]f you averaged everybody [all Medicare ACOs] so far … the share of savings, on average, that they get is going to be less than their administrative costs. … [p. 144].
DR. [MARY] NAYLOR: Do we have a sense of the overhead cost for the Medicare program as we’re doing this model development? It’s just something that I think is really important. … [p. 165].
I would say that in assessing [savings or losses] we have to look at the total program costs . … [p. 168].
In a comment I posted on this blog last December, I noted that the Medicare Payment Advisory Commission (MedPAC) refuses to ask a very obvious question about the two Medicare ACO programs authorized by the Affordable Care Act: Do the administrative costs of running an ACO exceed the savings ACOs allegedly achieve for Medicare?
Specifically, I noted that a MedPAC employee by the name of Kate Smalley told the commissioners at their November 7, 2013, meeting that the Pioneer ACO program (the smaller of the two programs) was saving Medicare 0.5 percent of total spending but that the ACOs were spending 1 to 2 percent of their revenues on administrative costs. Then I leveled what appears to me to be an extremely obvious criticism: “Neither Ms. Smalley nor any commission member pointed out the obvious: While Medicare may have saved a half percent, the health care system as a whole suffered an increase in total spending on the order of half to one-and-a-half percent.”
I’m happy to report that at MedPAC’s last meeting (September 11, 2014) at least two commissioners (out of 17 who sit on the MedPAC commission) finally got around to raising that obvious question. I’m unhappy to report, though, that the two commissioners, Nerenz and Naylor, got only the vaguest of answers from MedPAC’s staff and absolutely no expression of interest in this issue from the other 15 commissioners.
The exchange between the two commissioners and staff began when Commissioner Nerenz inquired of staff member Jeff Stensland whether “we know anything about” the overhead costs of ACOs. The accurate answer would have been, “We know next to nothing about ACO overhead costs because we have ignored the issue over the seven years we’ve been recommending ACOs to Congress.” Instead, Stensland said “it looks like maybe 1 to 2 percent.” That is the same estimate Ms. Smalley reported at the November 2013 meeting.
Neither Stensland nor other commissioners pursued Nerenz’s question. Nerenz bided his time, and came back to the overhead issue 11 pages later in the transcript. This time he asked the obvious question: Do we know whether any ACOs are making money AFTER taking their overhead costs into account?
Stensland’s answer was vague. “There would be some,” he replied. He didn’t name any. Then he went on to state that the average ACO is losing money.
Only one other commissioner, Mary Naylor, expressed interest in Nerenz’s question. She said it was important to know not only the ACO’s overhead costs but the overhead costs to CMS of running the ACO experiment.
But that was it. No other commissioners expressed interest in Nerenz’s and Naylor’s questions. The only impact Nerenz’s question had was to generate a discussion among the commissioners about whether to reduce the number of “quality” measures ACOs have to report on and whether to give ACOs more money, either in the form of a higher share of any savings or in the form of outright subsidies. Naylor’s question had no impact at all. Chairman Hackbarth closed the discussion within seconds after Naylor made her statement.
MedPAC’s assiduous avoidance of the issue of ACO overhead is consistent with its assiduous avoidance of the overhead costs of the Medicare Advantage (MA) insurers. To its everlasting credit, MedPAC has consistently called on Congress to stop overpaying MA plans. But MedPAC has never acknowledged the obvious consequences of doing that, namely, the mass withdrawal from the program by private insurers. That would happen because the traditional fee-for-service Medicare program is more efficient than the private insurance industry, in large part because the traditional program’s administrative costs are so low (1 to 2 percent) compared with those of the insurance industry (they average 15 to 20 percent).
But MedPAC commissioners and staff would rather crawl over broken glass than admit a fee-for-service program could be more efficient than the MA program where insurers allegedly “manage care.” Ditto for the ACO programs. The fee-for-service method of payment is MedPAC’s Great White Whale. Conceding that fee-for-service Medicare is more efficient than either the MA or ACO programs, after all these years of promoting the managed care fads MA and ACO programs are supposed to use, would make MedPAC look foolish.
MedPAC’s avoidance of administrative costs is, of course, characteristic of the health policy establishment. One-third of U.S. health care spending is devoted to administrative costs. We could cut that fraction in half with a single-payer system and use the savings to finance universal coverage.
But we mustn’t think about that. We must continue to flog the conventional wisdom that our health care costs are high because MEDICAL spending, not administrative spending, is high. And, in our relentless focus on medical spending as opposed to administrative spending, we must fixate on the VOLUME of medical spending, not the price at which medical goods and services are sold. And we must fixate on volume rather than price because that is consistent with our undocumented theory that fee-for-service is the root cause of the U.S. health care crisis.
Kip Sullivan, J.D., is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program. His writing has appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.
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.
Auto-Renewing Your Health Plan May Be Bad for You, and for Competition
By Austin Frakt
The New York Times, September 29, 2014
Overwhelmed with increasing choice in the new exchanges, returning consumers may not relish the idea of selecting a new plan. A feature built into the exchanges practically invites them not to do so: auto-renewal. Consumers insured by an exchange plan this year who do not actively choose a new one for next year will be automatically re-enrolled in their current plan or automatically enrolled in a similar one if their plan is discontinued. This auto-renewal is meant to help increase and maintain the size of the insured population and to promote continuous coverage. But if people rely on auto-renewal without evaluating all available options, some may end up in plans that aren’t ideal for them.
Next year, the premiums of the currently cheapest silver-rated plans are going up by an average of 8.4 percent. Because of that, many of those plans will no longer be the cheapest. The customers who switch to the silver plans that are the cheapest in 2015 will see their premiums rise by only 1 percent on average.
Auto-renewal also offers insurers a way to retain customers without vigorously competing for them, counting on the fact that some consumers will stick with their plans even when, rationally, they should not.
Here, basic economic theory is in conflict with the finding from behavioral economics that when choices become too numerous and complex, consumers resort to heuristics (or shortcuts), leading to suboptimal decisions. For instance, when we can’t fully evaluate all options, we tend to default to familiar brands. And, because it takes time and effort to re-evaluate options, we tend to stick with our initial choice of brand when making a new purchase.
If we want more competition, we need to induce fewer people to default to auto-renewal.
Auto-renewal exists for a reason, but if consumers rely on it too much, the results will include higher premiums and greater market power for insurers.
Under a well designed single payer national health program there would be no need to choose networks since the entire health care delivery system is covered, and there would be no need to shop deductibles since they would be eliminated.
The problem of auto-renewal would disappear since enrollment would be for life.
Costs Can Go Up Fast When E.R. Is in Network but the Doctors Are Not
By Elisabeth Rosenthal
The New York Times, September 28, 2014
Patients have no choice about which physician they see when they go to an emergency room, even if they have the presence of mind to visit a hospital that is in their insurance network. In the piles of forms that patients sign in those chaotic first moments is often an acknowledgment that they understand some providers may be out of network.
But even the most basic visits with emergency room physicians and other doctors called in to consult are increasingly leaving patients with hefty bills: More and more, doctors who work in emergency rooms are private contractors who are out of network or do not accept any insurance plans.
When legislators in Texas demanded some data from insurers last year, they learned that up to half of the hospitals that participated with UnitedHealthcare, Humana and Blue Cross-Blue Shield — Texas’s three biggest insurers — had no in-network emergency room doctors. Out-of-network payments to emergency room physicians accounted for 40 to 70 percent of the money spent on emergency care at in-network hospitals, researchers with the Center for Public Policy Priorities in Austin found.
“It’s very common and there’s little consumers can do to prevent it and protect themselves — it’s a roll of the dice,” said Stacey Pogue, a senior policy analyst with the nonpartisan center and an author of the study.
When emergency medicine emerged as a specialty in the 1980s, almost all E.R. doctors were hospital employees who typically did not bill separately for their services. Today, 65 percent of hospitals contract out that function. And some emergency medicine staffing groups — many serve a large number of hospitals, either nationally or locally — opt out of all insurance plans.
Regulations created by the Affordable Care Act specify that insurers must use the best-paying among three methods for reimbursing out-of-network physicians dispensing emergency care: pay the Medicare rate; pay the median in-network amount for the service; or apply the usual formula they use to determine out-of-network reimbursement, which often depends on “usual and customary rates” in the area.
But in most states, doctors can then bill patients for the difference between their charge and what the insurer paid.
Center for Public Policy Priorities study of out-of-network emergency room doctors:http://forabettertexas.org/images/HC_2014_09_PP_BalanceBilling.pdf
KFF on state balance billing restrictions: http://kff.org/private-insurance/state-indicator/state-restriction-again…
A consequence of allowing health insurers to contract selectively with health care professionals (physicians) and institutions (hospitals) is that patients not only are financially penalized should they elect to obtain their care outside of the contracted networks, they may unavoidably face such penalties when they have sought care only within networks.
One of the more egregious examples is when they obtain emergency services at a contracted emergency room only to find out after the fact that the physicians staffing the emergency room are not in the network. The patient then is billed not only for deductibles and copayments applied to allowed charges, but also for the balance of the charges in excess of the allowed charges – a process known as balance billing.
“The Affordable Care Act provides some protections for enrollees in need of emergency services, but does not prohibit balance billing by out-of-network providers” (KFF). For further information on state restrictions on balance billing, use the KFF link above.
When something is not right, as it clearly isn’t here, it is important to define the problem before crafting a solution. State regulators and legislators are defining this as a problem of balance billing “abuse” and are looking at mechanisms to prohibit balance billing. But is that really the problem?
Insurers, with the complicity of state and federal legislators, have established limited networks of providers to leverage more favorable payment rates for health care services. But these rates neglect the health care delivery system outside of the networks. Now states are considering making out-of-network physicians comply with contracts to which they never agreed. That is as unreasonable as making insurers pay out-of-network fees in full simply because the insurers did not have a contract with the physicians. Do you have a contract or not? You can’t have it both ways.
The problem here needs to be redefined. Balance billing is not the primary defect. It is the nature of our complex, dysfunctional financing infrastructure that leads to a multitude of perverse consequences such as balance billing – an infrastructure that was perpetuated and expanded by the Affordable Care Act. We need to rebuild the infrastructure. We need a single payer national health program. Balance billing would not exist under such a system.
Underinsured ACA Enrollees Strain Community Health Centers
Kaiser Health News, Daily Health Policy Report, September 26, 2014
Obamacare enrollees are straining the finances of community health centers around the country, some health center leaders say. The issue is that many lower-income patients with insurance coverage through the federal and state exchanges bought bronze-tier plans with lower premiums but high deductibles, coinsurance and copayments and no federal cost-sharing subsidies. When these patients face high out-of-pocket costs for care that falls below the deductible, they can’t afford it. So the centers are subsidizing that care by offering them means-tested sliding-scale fees. When the centers, which are not allowed to turn away patients for inability to pay, try to get the insurers to pay, the claims are usually denied, and the centers have to write it off as uncompensated care (Modern Healthcare, Dickson, 9/25).
One of the advantages of reform that ensures that everyone would have health care coverage is that safety-net institutions, such as community health centers (CHCs), could be assured that payments would be made for the services they provide, ending the continual struggle of funding these institutions. As it turned out, reform will still leave 31 million uninsured, perpetuating this problem. But at least those now insured will no longer stress the budgets of the CHCs. Or will they?
Those purchasing the cheapest plans on the exchanges – the bronze plans – have an average of only 60 percent of their health care costs covered. This requires very high deductibles which are not affordable for many of the low-income individuals purchasing these plans. Because of high deductibles which are difficult to collect after services are rendered, many health care providers are requiring payment upfront. Many would-be patients end up walking away because of the lack of funds.
Where are these people to turn? The CHCs of course. They cannot turn patients away, so they see them. When the CHCs then bill the bronze plan insurers, the charges are below the deductibles and so the claims are denied. They can then turn to the patients to try to collect means-tested fees that would apply to the deductibles, but such efforts are often futile, and so the CHCs end up writing off the charges as uncompensated care.
This is the plight of the underinsured and of the providers who care for them. With low actuarial value plans and often-inaccessible narrow networks, underinsurance has become ubiquitous. It is one of the most serious flaws in health care financing today, not only for the exchange plans but now also for a rapidly growing percentage of employer-sponsored plans.
This is just one of thousands of major flaws in our financing system. It just isn’t right. We can fix this by changing to a single payer national health program. Let’s do it. Now.
How to fix Obamacare
The Economist, September 20, 2014
It is now nearly a year since the roll-out of Obamacare.
Ironically the “socialist” Mr Obama did not do the one thing that might have cut taxpayers’ costs dramatically: introduce a European “single payer” health-care system. Instead he tried to tweak America’s system in two ways – to expand coverage and to reduce costs.
The results are mixed. Practically every competent health-industry lobbyist managed to insert a line protecting the services his paymasters provide – so Obamacare is too costly and too complicated.
So what would make American health care better now? Since its failings lie more within the system than with the president’s attempt to reform it, health reformers should concentrate on three areas that could make its flawed market work better: directing handouts towards the poor rather than the affluent, nudging individuals to take charge of their own health care, and making sure that prices are transparent.
If America wants to stick to the idea that it has a health-care market, then it should focus on trying to make it more like a market – with prices, competitors and some form of choice.
After telling us that it is ironic that President Obama did not introduce a single payer system, The Economist tells us that we should use prices, competitors and choice if we want to make our health care system more like a market. That seems odd advice since their system is not only single payer, it is socialized medicine – a national health service.
The Economist is not naive. They certainly know of the work of Nobel laureate Kenneth Arrow showing us that markets do not work in health care. Maybe their recommendation for market reform of U.S. health care stems from their reputation as excelling in understated wit, but what the market approach has done to drive up costs and impair the functioning of our health care delivery system isn’t really very funny.
Let’s just take them at their word that a single payer system would have been a much more effective choice. And we can still make that choice.
U.S. hospital chain HCA must face class action over 2011 IPO
By Jonathan Stempel
Reuters, September 23, 2014
HCA Holdings Inc, one of the largest U.S. hospital chains, must face a shareholder class-action lawsuit accusing it of concealing revenue declines and its routine performance of unnecessary cardiac procedures prior to its $4.35 billion initial public offering in March 2011.
U.S. District Judge Kevin Sharp in Nashville, Tennessee, rejected HCA’s claim that the plaintiffs had missed “multiple opportunities” to learn more about the company before buying their shares, including from media reports, conference calls, and disclosures during the IPO road show.
Shareholders alleged that HCA, its directors, its former private equity owners and its investment banks concealed how the company was seeing adverse trends in Medicare revenue including cardiology, and Medicaid revenue per admission; and accounted improperly for a 2006 reorganization and a 2010 restructuring.
“Given defendants’ alleged violation of the federal securities law and its impact on a large number of geographically dispersed investor(s), a class action is the superior vehicle for adjudication of the claims,” Sharp wrote. “The alternative would be to have (potentially) thousands of individual actions, which is likely impractical for most investors, and which would risk burdening the judicial system.”
The IPO had been the largest by a company owned by private equity firms. HCA had been taken private in 2006 by a group led by Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch’s private equity arm.
The case is Schuh et al v. HCA Holdings Inc et al, U.S. District Court, Middle District of Tennessee, No. 11-01033.
The private insurers are not the only villains that are driving high health care costs in the United States. The private, investor-owned segment of the health care delivery system is also bringing us higher costs, often with inferior quality. A case in point is HCA – one of the nation’s largest investor-owned hospital chains.
HCA is already infamous for having set a record in paying a $1.7 billion settlement for Medicare fraud. This new allegation of fraud does not directly involve patients or taxpayers, rather it involves potential shareholders at the time of their 2011 initial public offering (IPO). The private owners at that time included the Frist family and some private equity firms, including Bain Capital.
The reason that this is important to those of us concerned about health care reform is that these people are so dishonest that they not only cheat patients and taxpayers, they also cheat their own shareholders!
When we expel the private insurers from our health care system, we need to expel the passive investors as well. HR 676 – the Expanded & Improved Medicare For All Act, sponsored by John Conyers (now with 62 cosponsors) does both. It converts the health care delivery system to non-profit status, and it replaces private insurers with a single payer national health program.
HCA was founded by the family of Bill Frist, former leader of the U.S. Senate. The Medicare fraud case was initiated when Florida Governor Rick Scott was head of HCA. Bain Capital was co-founded by presidential candidate Mitt Romney. If we are going to achieve health care justice for all, the voters do have some responsibility here.
The Cost of Defensive Medicine on 3 Hospital Medicine Services
By Michael B. Rothberg, MD, MPH; Joshua Class, BS; Tara F. Bishop, MD, MPH; Jennifer Friderici, MS; Reva Kleppel, MPH, MSW; Peter K. Lindenauer, MD, MSS
JAMA Internal Medicine, September 15, 2014
The overuse of tests and procedures because of fear of malpractice litigation, known as defensive medicine, is estimated to cost $46 billion annually in the United States, but these costs have been measured only indirectly. We estimated the cost of defensive medicine on 3 hospital medicine services in a health system by having physicians assess the defensiveness of their own orders. We hypothesized that physicians who were concerned about being targeted by litigation would practice more defensively and have higher overall costs.
In this study of hospital medicine services at 3 institutions in a health system, 28% of orders and 13% of costs were judged to be at least partially defensive, but only 2.9% of costs were completely defensive. Most costs were due to potentially unnecessary hospitalization. Defensive medicine practices varied substantially, but physicians who wrote the most defensive orders spent less than those who wrote fewer such orders, highlighting the disconnect between physician beliefs about defensive medicine and their contribution to costs.
In 2008, Massachusetts internists reported that 27% of computed tomographic scans, 16% of laboratory tests, and 14% of hospital admissions were ordered owing to concerns about liability. We allowed our physicians to offer a graded response, which revealed that defensiveness is not absolute. Compared with the previous study, our respondents reported higher percentages of defensive medicine but lower percentages of completely defensive medicine (2% of radiology, 6% of laboratory testing, and 2% of hospital days).
In conclusion, although a large portion of hospital orders had some defensive component, our study found that few orders were completely defensive and that physicians’ attitudes about defensive medicine did not correlate with cost. Our findings suggest that only a small portion of medical costs might be reduced by tort reform.
The cost of defensive medicine
By Aaron Carroll
AcademyHealth Blog, September 15, 2014
I was so pleased to see a new study published in the journal JAMA Internal Medicine, “The Cost of Defensive Medicine on 3 Hospital Medicine Services“.
As the researchers note, past studies have found that “27% of computed tomographic scans, 16% of laboratory tests, and 14% of hospital admissions were ordered owing to concerns about liability.” But such studies would include any level of defensiveness in the orders at all. We can realistically expect, however, that only completely defensive orders would be eliminated by tort reform. After all, if there are other reasons to order tests above our fears of being sued if we don’t, those reasons will still exist even after comprehensive malpractice reform became law.
If we assume that overall health care spending is about $2.7 trillion, then 2.9% of that would be about $78 billion. That’s not chump change, mind you, but it’s still a very small component of overall health care spending. Given that there’s little evidence that tort reform would lead to a significant reduction in this already small percentage of spending, there seems little reason to pursue it as a means to dramatically reduce health care spending in the United States.
From response by Uwe Reinhardt:
It is also ironic that the very folks who constantly bring up the refrain that “one size does not fit all” in health policy (and that in the land of McDonalds!) always clamor for a one-size-fits-all solution to malpractice: an upper limit on payments for pain and suffering.
At forums discussing the high costs of health care and what can be done about it, inevitably the subject of malpractice comes up. People hold very strong views on the topic. Such discussions generate much heat, often blaming frivolous lawsuits, excessive defensive medicine, outrageous jury awards, and attorney greed, but we need to step back and see if we can generate a little more light and a little less heat.
We do need medical liability reform, but not for the reasons often given. The system simply does not work well for achieving its primary goal: compensating individuals who are victims of medical injury. Most individuals who experience medical injury are never compensated; the majority do not even file lawsuits. When lawsuits are filed, much of the costs are consumed by legal processes, including paying the fees for plaintiff and defense attorneys.
The reform that we do need, assuming that we agree that individuals should be compensated for medical injuries, is to end the emotionally painful, expensive tort process and replace it with a process of alternate dispute resolution – a process not unlike workers compensation wherein the injuries are acknowledged and appropriate compensation is made.
What about some of the issues that generate so much heat?
Frivolous lawsuits are not a problem. An attorney will not accept a case in which a medical injury has not occurred. The attorney will not invest time and the expenses of an investigation if there is no possibility for an award. It may be that the medical injury might have occurred because of factors not related to medical error, but that is the point of discovery and of the followup trial, if necessary. These are not frivolous actions.
What about the costs of defensive medicine – ordering tests or procedures that are totally unnecessary but ordered only to provide defense in the event of a future lawsuit. The study by Michael Rothberg and his colleagues really helps us understand better the extent of this problem. Most tests and procedures ordered that were thought to provide some insulation against potential lawsuits were actually tests that were medically indicated and would assist in providing the best care for the patient. That is, most medicine that has been labeled as defensive medicine is simply appropriate health care. Considering this, very little could be saved by clamping down on defensive medicine.
This study supposedly does show that almost 3 percent of care was completely defensive, not an insignificant amount. But think about this. What test would a physician ever order that had a 100 percent chance that the result would provide absolutely no benefit in management of the patient? If such a test were omitted then there is no possibility of a lawsuit for having failed to obtain that test. Low yield tests may be considered to be defensive, but as long as there is a real possibility that the results could change the patient’s outcome favorably, then clinical judgement should be used to determine if the test should be ordered. If the test cannot possibly change the outcome – a no yield test – then that test should not be ordered. But that has to be a very rare occurrence, far less than the 3 percent reported in this study.
What about excessive jury awards, which are coupled with attorney “greed”? Awards that compensate for specific losses such as medical bills and loss of income are not excessive; they are simply compensating losses. General damages, often considered pain and suffering awards, along with punitive damages, are where juries may be particularly generous with rewards. However, even there judges tend to reduce the awards to levels that most people would consider appropriate.
The award for general damages – non-economic damages – has received much attention, especially from conservatives, since placing a cap on such awards seems to be a simple way of limiting “outrageous” awards. Indirectly it would also limit payments to “greedy” attorneys since their fees usually come out of this portion of the award. It has been suggested that general damages should be limited to $250,000 as in California, though California now has a ballot measure to increase the cap to $1,000,000 and index it for inflation. The problem is that this does nothing to correct the fundamental structural deficiencies in our system of compensating for medical injury – a system that fails most individuals experiencing medical injury. Instead of fine tuning our system, we should be replacing it with a system that works.
One more very important point. Why does the United States have such a great problem with medical malpractice lawsuits when most other nations that have universal systems and much lower health care costs have much less of a problem? Think about that. In other nations everyone receives health care. They do not have intrusive intermediaries who tell you where you can go or what care you can have. They do not expose you to financial hardship simply because you have a medical need. Our dysfunctional system breeds animosity which is a setup for litigation. Their systems are egalitarian – health care is a given. Why would they want to sue their doctor?
Under a single payer national health program physicians are free to obtain the most appropriate care for their patients. An egalitarian, high-performance health care system would do more than anything else to reduce the scourge of medical malpractice lawsuits.
After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn’t Know
By Elisabeth Rosenthal
The New York Times, September 20, 2014
Before his three-hour neck surgery for herniated disks in December, Peter Drier, 37, signed a pile of consent forms. A bank technology manager who had researched his insurance coverage, Mr. Drier was prepared when the bills started arriving: $56,000 from Lenox Hill Hospital in Manhattan, $4,300 from the anesthesiologist and even $133,000 from his orthopedist, who he knew would accept a fraction of that fee.
He was blindsided, though, by a bill of about $117,000 from an “assistant surgeon,” a Queens-based neurosurgeon whom Mr. Drier did not recall meeting.
In Mr. Drier’s case, the primary surgeon, Dr. Nathaniel L. Tindel, had said he would accept a negotiated fee determined through Mr. Drier’s insurance company, which ended up being about $6,200. (Mr. Drier had to pay $3,000 of that to meet his deductible.) But the assistant, Dr. Harrison T. Mu, was out of network and sent the $117,000 bill.
When Mr. Drier complained to his insurer, Anthem Blue Cross Blue Shield, that he should not have to pay the out-of-network assistant surgeon, Anthem agreed it was not his responsibility. Instead, the company cut a check to Dr. Mu for $116,862, the full amount.
For months, Mr. Drier stewed over what to do with the $117,000 check Anthem Blue Cross had sent him to pass on to Dr. Mu, refusing to sign over a payment he considered “outrageous and immoral.”
Mr. Drier tried to negotiate with the surgeons to divvy up the $117,000 payment in a way he believed was more fair; he liked Dr. Tindel and felt he was being underpaid. Mr. Drier’s idea, he wrote in an email, was to settle on “a reasonable fee for both the surgeon and assistant and return the rest of the check to the insurance company/employees” of his company.
But in July, he received a threatening letter from Dr. Mu’s lawyer noting that he had failed to forward the $117,000 check. So he sent it along, with regret.
If the surgery had been for a Medicare patient, the assistant would have been permitted to bill only 16 percent of the primary surgeon’s fee. With current Medicare rates, that would have been about $800, less than 1 percent of what Dr. Mu was paid.
In recent years, unexpected out-of-network charges have become the top complaint to the New York State agency that regulates insurance companies.
Although this is an outrageous example of the perversities of private insurers using provider networks to manipulate health care spending, it nevertheless helps us understand why we should reject the private insurers and their patient-unfriendly, investor- or board-pleasing business tools of health care.
Depending on which state regulations, which insurer, and which specific insurance plan, this out-of-network billing for Mr. Drier’s assistant surgeon could have had different outcomes. The worst is that he could have been responsible for the entire $117,000 fee and that it would not have applied to his deductible nor to his maximum out-of-pocket benefit cap. In this case, Mr. Drier did not experience a major financial loss, but those who pay insurance premiums will have to pay more when considering the cumulative effect of all such benefit overpayments.
It just doesn’t seem right when you try to buy the best insurance that you can afford, and the insurers then tell you which physicians and hospitals you can use if you want full coverage. Plus they frequently expose you to high out-of-pocket costs – costs that you would think insurance should cover – when you end up under the care of an out-of-network provider, often through no fault of your own as in this instance with Mr. Drier.
Had the procedure been provided under Medicare, the assistant surgeon’s fee would have been determined automatically, and at a fraction of the billed price. An improved Medicare for all not only would have set the fee at a fair level, it also would not have had network issues to deal with since the entire health care system would be one single “network” (integrated systems such as Kaiser Permanente merely being additional providers of one’s personal choice within the universal health care delivery system).
The full New York Times article by Elisabeth Rosenthal describes many other instances of surprises and misunderstandings that stem from the complexities of various plans and their networks – surprises that would not occur in a well designed, single payer national health program. Under single payer, you get the health care that you need, wherever it’s needed, and it’s simply paid for by our own public insurer.
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