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.
Primary Care Providers’ Views of Recent Trends in Health Care Delivery and Payment
By Jamie Ryan, Michelle M. Doty, Liz Hamel, Mira Norton, Melinda K. Abrams, Mollyann Brodie
The Commonwealth Fund and The Kaiser Family Foundation, August 5, 2015
In recent years, the U.S. primary care delivery system has experienced many changes in the way health care is organized, delivered, and financed. Some of these changes have been strengthened or accelerated by the Affordable Care Act (ACA). For instance, there has been an increased use of health information technology, a move toward team-based care and using nonphysician clinicians, an effort to better coordinate care through medical homes and accountable care organizations, and the introduction of financial incentives and quality metrics to determine how providers are paid.
Using data from the Commonwealth Fund/Kaiser Family Foundation 2015 National Survey of Primary Care Providers, this brief examines providers’ opinions about the changes in primary care payment and health care delivery. Between January 5 and March 30, 2015, a nationally representative sample of 1,624 primary care physicians and a separate sample of 525 midlevel clinicians (i.e., nurse practitioners and physician assistants) working in primary care practices were surveyed online and by mail.
New primary care payment and delivery models have emerged in recent years as part of efforts to improve patient outcomes and lower health care costs, with the Affordable Care Act accelerating many of these changes. It may be too early to reach a conclusion on the quality or cost effects of these primary care reforms, but assessing the perspective and experience of those on the front lines is critical to understanding the implementation of these reforms, including any challenges that could potentially undermine the process.
The survey results indicate that primary care providers’ views of many of these new models are more negative than positive. There are exceptions: health information technology gets mostly positive views and medical homes receive mixed opinions with a positive tilt. With regard to HIT, our study indicates that primary care providers generally accept the promise of HIT to improve quality of care even if previous research shows they dislike the process of transitioning from paper-based records. Our survey results also may reflect clinicians’ earlier exposure to certain models and tools National adoption of electronic health records received a boost from the Health Information Technology for Economic and Clinical Health (HITECH) Act of the federal stimulus package of 2009, while the four primary care specialty societies announced a joint statement regarding medical homes in February 2007, several years before passage of the Affordable Care Act.
Though many providers are unsure of the impact of ACOs on quality of care, those physicians who do have an opinion are more likely to say ACOs are having a negative rather than a positive impact on quality of care. ACO implementation is a somewhat more recent development, and primary care providers are not as involved in the day-to-day management of organizational change. Primary care clinicians’ views are also decidedly negative when it comes to financial penalties and the increased use of quality metrics in judging their performance. It may be some time before they can become comfortable with these new payment models.
More primary care providers may be participating in ACOs and relying on quality metrics for performance assessment in the near future. In early 2015, the Centers for Medicare and Medicaid Services announced that 85 percent of Medicare fee-for-service payments should be tied to quality or value by 2016. And, by the end of 2018, 50 percent of all Medicare payments should be tied to quality or value through specific alternative payment models, like ACOs and bundled payments. Dissatisfaction with new models may not be solely attributable to a difficult transformation process; larger culture change within the practice of medicine may be a necessary first step before delivery system reforms such as ACOs and medical homes are fully accepted on the ground.
As primary care transformation efforts mature and spread, it will remain important to judge their effects on patients in terms of access, quality, and costs of care. However, it is also important to assess their effect on primary care clinicians. Of concern, nearly half of primary care physicians say that recent trends in health care are causing them to consider retiring earlier than planned. Market trends in health care have been affecting physicians’ satisfaction for more than 20 years. It will be important to monitor providers’ satisfaction with delivery reform efforts.
The intent of health care reform, reinforced through the Affordable Care Act, was not only to improve the financing of health care by increasing the numbers insured and providing more government support through insurance subsidies and Medicaid, but it was also to improve the health care delivery system through structural changes that theoretically would improve quality while controlling costs.
Some of the structural reforms included increased use of health information technology (HIT), establishment of accountable care organizations (ACOs), reinforcing primary care through medical homes, use of alternative payment models with financial incentives, and quality metrics to determine how health care professionals are paid.
So far, evaluation of these efforts have provided us with mostly weak and inconclusive data, with initial results suggesting that the effectiveness in improving quality and controlling spending has been very unimpressive, with little positive impact.
Although the public and private bureaucracies are not providing us with enough impressive data to move forward aggressively with these programs, the physician and non-physician clinicians on the front lines can give us a better perspective of just what is happening. This report provides us with their insight.
A few conclusions:
The Affordable Care Act and the various measures leading up to it did not adequately address the financing issues in that it left it place our expensive, dysfunctional, fragmented financing system and left far too many people uninsured and even more with under-insurance. Nevertheless, the legislators and bureaucrats have demonstrated even greater incompetence in putting into effect these changes supposedly designed to improve the health care delivery system, when the evidence does not support these particular transformational changes.
These screwball ideas simply thought up by non-clinician policy academics are wasting valuable resources while having negligible or negative impact on health care delivery. What is worse is that they have diverted us from proceeding with reform that would have a very positive impact on health care for all of us.
The greatest driver of quality is to have a system that delivers the right care to the right people at the right time. This is exactly what a single payer national health program is designed to do. Let’s do that instead of wasting our time and resources with measures that do not do much more than to alienate our clinicians.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
The All-Payer Rate Setting Model for Pricing Medical Services and Drugs
By Gerard Anderson, PhD, and Bradley Herring, PhD
AMA Journal of Ethics, August 2015
In theory, the price set by a competitive market-oriented health care system should result in efficient (and presumably ethical) rates for hospitals, physicians, drugs, and other health care services. In practice, however, price efficiency does not generally occur for many health services. Because of health insurance, most patients are less sensitive to prices than they would be if they paid the full price. In addition, in some geographic areas, health systems with significant market power can negotiate very high prices, while in other areas, one or two dominant private health insurers have great power to set relatively low prices. As a result, prices paid by individuals for the same service can vary by a factor of 10 at some hospitals. Moreover, a side effect of all these negotiations is that the private insurers and health systems spend millions of dollars negotiating and carrying out unique deals with each other—dollars that could be better spent delivering care.
At the same time, the public Medicare and Medicaid programs in the US have set payment rates using a totally different approach from that of the private insurers. The Medicare program has used a diagnosis-based prospective payment system for hospitals since 1984 and the Resource-Based Relative Value Scale (RBRVS) payment system for physicians since 1992. Both attempt to estimate the underlying costs of providing a given service, resulting in a distinct amount for each of about 750 different hospital services and 16,000 different physician services. There is, however, wide variation in payment rates among state Medicaid programs; the average Medicaid payment rates are comparable to Medicare for hospitals but about one-third lower than Medicare for physicians.
Consequences of Price Inefficiency in Health Care
The result of the wide variations in payment rates and methods among private and public insurers can lead to access problems. When the payment rate of one insurer is much lower than that of other insurers, patients have access to a restricted number of participating hospitals and clinicians. And when the premium rates of some insurers are much higher than those of other insurers, people have difficulty paying for health insurance. Moreover, as noted above, the complexity of numerous insurer payment methods means that health systems have to negotiate payment rates with various insurers and hire many people to keep track of these different payment methods, leading to higher administrative costs embedded in these prices. The end result is that prices in the US are typically much higher than they are for similar services in other industrialized countries, or, as one of us wrote years ago, “It’s the prices, stupid.” In addition, when the payment methods differ from one insurer to another, hospitals and clinicians are given mixed messages about exactly what services to provide and whether to emphasize quality, price, or satisfaction.
Are there alternatives?
Alternate Model: The Common Payment Method
One option is for all insurers—public and private—to use the same method for paying hospitals, but not necessarily the same rates. This would reduce the administrative costs associated with each insurer’s developing and maintaining its own payment methodology and each health system’s learning each new methodology. A common payment system (but not necessarily the same payment rates) could be adopted voluntarily or imposed through legislation.
The US has developed a variant of this approach already: the RBRVS payment system for physicians used by Medicare since 1992. Subsequently, nearly all private insurers have chosen to adopt Medicare’s relative value units as the starting point for negotiating payment rates to physicians. Although most private insurers pay higher rates than Medicare does and some pay less, nearly all insurers use relative value units as the basis for starting the negotiation.
Alternate Model: All-Payer Rate Setting
A significant step beyond the common payment method approach is “all-payer rate setting.” In this approach, there is both a uniform payment method and a single rate that all private and public insurers pay for a service. In some variants, all hospitals and physicians are paid the same rate, while in other variants each hospital and clinician has a unique rate. An international example of all-payer rate setting is the German system. In Germany, all insurers sit on one side of the proverbial table and representatives for the hospitals and physicians sit on the other side. Their objective is to negotiate a single payment rate for each service that all health insurers and all health systems will accept. The rates are binding on all insurers and all hospitals and clinicians. There are no special deals for a dominant organization in a local market.
The US attempted a number of state-specific all-payer rate setting programs beginning in the 1970s. One program that has remained operational is Maryland’s, which was fully implemented in 1977. Until 2014, the state used prospective diagnosis-based payments for each admission, a method similar to the Medicare hospital payment system. The Maryland program was able to reduce significantly the rate of increase in spending per hospital admission below the national rate of increase in the US. However, because the admission rate increased, the program was less successful in controlling overall hospital spending. This necessitated a revision to the payment system. Since 2014, Maryland has used a prospective annual global budget that requires each hospital to monitor both the number of admissions and the cost per admission.
The Maryland program has a number of features that differentiate it from other all-payer rate setting programs. Whereas the payment rates in Germany result from a negotiation between payers and hospitals and physicians, the payment rates in Maryland are established singlehandedly by a quasigovernmental agency called the Health Services Cost Review Commission (HSCRC). Moreover, all payers in Maryland—large private insurers, small private insurers, the Medicare program, and the Medicaid program—essentially pay a given hospital the same rate for the same service. Unlike the Germany system, however, each hospital negotiates its own rates.
The Maryland program has a Medicare waiver that allows it to set Medicare payment rates. Much of the attention paid to the HSCRC’s all-payer hospital rate revolves around this waiver and what Maryland must do to maintain it.
These models have numerous advantages and have worked relatively well in Maryland and in other countries. However, all-payer rate setting could be difficult to sell elsewhere in the US, inasmuch as many insurers, hospitals, and clinicians believe they live in Lake Wobegon and receive above-average rates that give them a competitive advantage. This makes them less willing to accept a regulated system that would eliminate this competitive advantage, which means that the US will continue to pay higher prices than other countries and will restrict access to health care for some Americans.
Because of the political resistance to single payer, some have suggested that we adopt an all-payer system instead, especially since we already have an example of such a system in Maryland, and it has even introduced a form of global budgeting for hospitals – a policy feature of the single payer model. Would this be an incremental step towards single payer?
All-payer leaves in place the multitude of payers, both public and private. It would perpetuate administrative complexity and would have very little impact on the inequities of our system. Although the prices public and private insurers pay would be more highly regulated, the complex system of collecting premiums for private plans, and taxes for public programs would remain in place.
The major advantage is that all-payer depends more heavily on government or quasi-government control, with experience confirming the principle that the government can do health care financing better. The major disadvantage is that all-payer likely would be considered an endpoint rather than an incremental step, with little appetite for moving forward with the disruptive changes that implementation of single payer would require. That would be unfortunate since those systems in other nations that more closely resemble all-payer tend to be more expensive than the OECD averages for per capita health spending.
In this article, Anderson and Herring make the point that all-payer could be a hard sell since many insurers, hospitals and clinicians believe they are receiving above average “Lake Wobegone” rates compared to what they would receive in an all-payer system. As the authors state, “This makes them less willing to accept a regulated system that would eliminate this competitive advantage, which means that the US will continue to pay higher prices than other countries and will restrict access to health care for some Americans.”
So we’re back to the political feasibility issue. As we’ve stated many times before, instead of modifying policy to match the politics, we should advocate for optimal policy and work on changing the politics. Instead of accepting all-payer as a compromise, let’s go for single payer.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
AMA Journal of Ethics, August 2015
“In a single-payer system, a single public or quasi-public agency organizes health care financing, but the delivery of care remains largely in private hands. Would you like to see a single-payer health care system in the US?”
“Yes.” 93% (14)
“No.” 0% (0)
“Don’t know.” 7% (1)
This online poll by the AMA Journal of Ethics only just opened for voting, garnering 15 votes so far. Also the sampling method – voluntary participation of visitors to the website – is not a scientifically valid polling method. Nevertheless, it is very encouraging to see that persons attracted to a web publication on ethics in medicine strongly support single payer.
Dentists and Skin in the Game
By Paul Krugman
The New York Times, July 30, 2015
Wonkblog (The Washington Post, 7/29) has a post inspired by the dentist who paid a lot of money to shoot Cecil the lion, asking why he — and dentists in general — make so much money. Interesting stuff; I’ve never really thought about the economics of dental care.
But once you do focus on that issue, it turns out to have an important implication — namely, that the ruling theory behind conservative notions of health reform is completely wrong.
For many years conservatives have insisted that the problem with health costs is that we don’t treat health care like an ordinary consumer good; people have insurance, which means that they don’t have “skin in the game” that gives them an incentive to watch costs. So what we need is “consumer-driven” health care, in which insurers no longer pay for routine expenses like visits to the doctor’s office, and in which everyone shops around for the best deals.
The usual response has been that this involves going where the money isn’t — that because health costs are dominated by big expenses that must be paid by insurers, there just isn’t much potential savings from increased deductibles, co-pays, etc..
But what if even the underlying premise, that individual choice will hold down costs, is all wrong?
As it turns out, many fewer people have dental insurance than have general medical insurance; even where there is insurance, it typically leaves a lot of skin in the game. But dental costs have risen just as fast as overall health spending, and it may be that the reduced role of insurers actually raises those costs. According to the post,
“In the rest of medicine, insurers have an important function in limiting costs and promoting quality. The market power of Medicare and major national insurance companies allows them to insist on better rates for their customers when they negotiate with doctors and hospitals.
“‘There’s been less presence from all kinds of insurance payers in the dental sector,’ explained Andy Snyder, who is in charge of oral health at the nonpartisan National Academy for State Health Policy. ‘Medicare does not cover routine dental services, and private dental coverage is far less common than private medical coverage. So, the dental industry has faced less of the cost containment and quality improvement pressures that the rest of the health care sector’s experienced over the last couple of decades.’”
So more skin in the game is not just useless but actually counterproductive.
Why dentists are so darn rich
By Max Ehrenfreund
The Washington Post, July 29, 2015
Dentists in some places are so well compensated that they earn more than the average doctor. According to a 2012 report in The Journal of the American Medical Association, the average hourly wage of a dentist in America is $69.60 vs. $67.30 for a physician. As recently as 1996, dentists were making less than doctors. Meanwhile, the average general dental practitioner took in $181,000 in 2013, according to the dental association, compared to $175,000 for a family doctor, according to WebMD Medscape’s annual compensation report.
(Also see excerpt in Paul Krugman’s article, above.)
High deductibles and other cost sharing – “having more skin in the game” – make patients better health care shoppers the advocates of consumer-directed health plans tell us. Let’s see what insight comparing dentists to physicians can provide on this concept.
Free market advocates tell us that when patients are uninsured and spending their own money they will shop for lower priced care that is of higher quality. This supposedly also applies to patients with high-deductible health plans who are seeking care below the deductible limit.
Take the case of dentists. Patients are basically oblivious to the quality of the care so they are really interacting with the prices, but in what way? Patients have very little influence over the prices so their decision is whether to accept or reject the dentist’s recommendation for care. Unmet dental needs are ubiquitous in the United States. People are not getting the care that they need because they cannot afford it. Dental insurance has not begun to fill this need.
Revenues are dependent on price and quantity, and with the great unmet need, dentists are assured of an adequate quantity of patients without having to yield on their prices. Thus “skin in the game” for dental patients does not a bearing on more favorable prices but rather determines whether or not care will be received.
What about care from physicians that is expected to cost less than the deductible? There may be some price shopping at the periphery where the patient has options, such as diagnostic imaging, Lasik, or cosmetic surgery. But, by and large, patients are not negotiating prices in advance with their physicians, laboratories, emergency departments and other providers (though later on they may attempt to negotiate bills they can’t pay). Generally they are offered services at a given price and their decision is to either accept it or go without. Once again, “skin in the game” does not have much influence on prices but rather greatly influences whether or not the patient will forgo the recommended care.
Most of our nation’s health care spending is for patients with major problems who have exceeded their deductibles, thus “skin in the game” does not apply to them. So, as a policy to reduce total spending, high deductibles are quite feeble.
The incomes of dentists have improved such that they are now comparable to primary care physicians, with higher incomes for specialists in both fields. Empowering patients as shoppers certainly has not driven prices down. What it has done is to further entrench the suffering and injustices of grossly impaired oral health.
And in medicine, we are now expanding consumer-directed policies, especially high deductibles, that can only increase the scourge of unmet health needs – an especially tragic policy track since it will have little effect on prices but will reduce the quantity of beneficial health care services.
Paul Krugman quite appropriately labels this “skin in the game” approach to controlling spending as counterproductive.
In contrast, single payer is a much more powerful method of containing costs but does so in a system designed to get patients the care that they need. Shouldn’t that be our goal instead? Seriously.
Modernizing Medicare’s Benefit Design and Low-Income Subsidies to Ensure Access and Affordability
By Cathy Schoen, Karen Davis, Christine Buttorff, and Martin Andersen
The Commonwealth Fund, July 8, 2015
Insurance coverage through the traditional Medicare program is complex, fragmented, and incomplete. Beneficiaries must purchase supplemental private insurance to fill in the gaps. While impoverished beneficiaries may receive supplemental coverage through Medicaid and subsidies for prescription drugs, help is limited for people with incomes above the poverty level. This patchwork quilt leads to confusion for beneficiaries and high administrative costs, while also undermining coverage and care coordination. Most important, Medicare’s benefits fail to limit out-of-pocket costs or ensure adequate financial protection, especially for beneficiaries with low incomes and serious health problems.
There is a pressing need for reform. An estimated 20 million of Medicare’s 52 million beneficiaries live on incomes below 200 percent of the federal poverty level. Nine million beneficiaries have complex care needs with serious functional limitations that hinder their ability to carry out daily activities. Although the poorest are eligible for Medicaid to supplement Medicare, under current policies beneficiaries with low or modest incomes are eligible for only limited help with paying for premiums or medical care expenses.
The absence of a ceiling on out-of-pocket costs can undermine the financial security and exhaust the resources of even higher-income beneficiaries. That’s why most beneficiaries supplement Medicare’s core benefits with coverage sold by private insurers, often purchasing multiple plans. This fragmented coverage is inefficient, generates high administrative costs, and undermines efforts to improve coordination of patient care and prevent avoidable hospitalizations.
Current Medicare Benefits and Low-Income Provisions
Medicare has separate deductibles and cost-sharing provisions for Part A hospital, skilled nursing facility, and home health services and for Part B physician, lab, and diagnostic benefits, with no limit on annual out-of-pocket spending for covered services. Part A includes a $1,216 deductible per hospital episode and substantial cost-sharing for longer-term hospitalization or skilled nursing stays after a hospitalization. Part B has a $104.90 monthly premium ($1,259 per year per person), a separate $147 annual deductible, and open-ended coinsurance of 20 percent for physician services (including surgeons and other hospital inpatient physicians), therapy, durable medical equipment, and outpatient services with no limit on out-of-pocket spending.
For prescription drug coverage, beneficiaries must buy a Part D plan with a separate premium that averages around $440 a year plus a deductible and cost-sharing that varies across private plans. The Affordable Care Act (ACA) is phasing out Medicare’s gap in drug coverage—the “doughnut hole”—but beneficiaries requiring specialty drugs or multiple medications can still face substantial costs.
Supplemental private coverage to fill in Medicare’s deductibles and cost-sharing is costly, with Medigap premiums adding over $2,000 a year, depending on geographic area. It is also inefficient, with 20 percent of the premium, on average, going toward administrative costs.
Some low-income beneficiaries are eligible for assistance paying their Parts A and B cost-sharing and Part B premiums. Medicaid covers Medicare cost-sharing up to 100 percent of the poverty level and provides subsidies for Part B premiums up to 135 percent of poverty for those meeting income and asset tests.6 Personal asset limits for beneficiaries seeking extra help with Medicare premiums or cost-sharing are $7,160 for an individual and $10,750 for a couple (in 2014).
In contrast to Medicare, the ACA eliminates asset tests and provides substantial premium and cost-sharing subsidies up to 200 percent of poverty for the under-65 population and expands Medicaid to 138 percent of poverty for participating states.7 ACA provisions exclude Medicare beneficiaries. As a result, lower-income older adults who age into Medicare will face increased financial burdens for coverage and care.
Underprotected and Underinsured Medicare Beneficiaries
Facing gaps in benefits and premium costs, an estimated 25 percent of all beneficiaries and 40 percent with incomes below twice the poverty level spent 20 percent or more of their income for premiums plus medical care costs in 2014.
An estimated one of five beneficiaries—11 million people—spent at least 10 percent of their income on medical care alone in 2014, not including premiums. Despite having Medicare, they were underinsured, spending a high share of their income on medical care. The risk of being underinsured was highest for low-income beneficiaries: an estimated one-third of those with incomes up to 150 percent of poverty, and 30 percent of those with incomes between 150 percent and 200 percent of poverty were underinsured.
Such high financial burdens undermine access to care, deplete incomes, and drain resources. Notably, a recent study found that the elderly in the United States are far more likely to go without care because of the cost and face problems paying medical bills than their counterparts in 10 other high-income countries. Beneficiaries with complex care needs are particularly at risk.
Policy Options to Modernize Benefits and Improve Low-Income Protections
To modernize Medicare’s core benefits and update policies related to low-income beneficiaries, the brief discusses two complementary options. The first would offer a new Medicare-sponsored plan choice. Available for an extra premium, it would provide an integrated design with prescription coverage, more-affordable cost-sharing, and a limit on out-of-pocket costs—making supplemental coverage unnecessary. The second option would expand subsidies for Medicare’s premiums and reduce cost-sharing for beneficiaries with incomes up to 200 percent of the federal poverty level in ways that align with the Affordable Care Act’s policies for the under-65 population.
At the 50th anniversary of Medicare we can be thankful for the assistance it has provided to our seniors and those with long term disabilities in improving access to care and in making health care more affordable for them. However, Medicare does have significant deficiencies and this is a good time to look at them and see what we can do to improve the program.
Probably the most glaring defect is that the coverage is inadequate, especially for those with modest incomes. Premiums for Parts B and D, deductibles for Parts A, B and D, 20% coinsurance for Part B, other forms of cost sharing, and the lack of a ceiling on out-of-pocket costs all combined can create severe financial hardships for far too many. Medicare should be structured to ensure health security without threatening exposure to financial insecurity.
To cover these high out-of-pocket costs, some purchase Medigap plans. But these plans are overpriced, partly because they consume 20% of the premiums for administration. Plus they add administrative complexity for the providers because of having to interact with two payers – Medicare plus the Medigap plan. Employer-sponsored retiree health plans may provide wraparound coverage for Medicare, but this is administratively inefficient as well. More comprehensive coverage by Medicare would relieve employers of their responsibilities for their retiree health plans for the Medicare-eligible population, plus it would free up funds that could be added to retiree pensions. Very low income individuals may qualify for Medicaid coverage, though these dual-eligible individuals, to their dismay, are now often being forced into managed care plans designed for the welfare population. Others select private Medicare Advantage plans, but the government unfairly pays the private plans more – two-thirds of which is kept by the insurers instead of going toward patient benefits. Although Medicare Advantage plans reduce spending for the beneficiaries, they do so by wasting an inordinate amount of taxpayer dollars on non-medical administrative excesses and insurer profits.
The authors of this brief do recommend creating a new Medicare option – “Medicare Essential” – available for an extra premium, which would integrate more benefits and place a ceiling on out-of-pocket costs, obviating the need for supplemental coverage. They would also protect low-income individuals by adding premium subsidies and cost sharing reductions, based on income, much like the subsidies for the plans in the ACA exchanges. These changes would certainly reduce the financial burden that Medicare beneficiaries face, but their analysis of the impact of these two policies shows that 15 percent of Medicare beneficiaries would still be paying over 20 percent of their income on care and premiums.
A better solution would be to go ahead and roll the benefits of these various supplemental or complementary programs into the traditional Medicare program so that it could be administered as one single program, but to also achieve greater efficiency by eliminating all of the premiums, deductibles, coinsurance and other cost sharing, and instead funding all care through a single, equitably-funded Medicare risk pool. Carrying that one step further, the maximum efficiency would be attained by expanding that risk pool to cover absolutely everyone so that we would all have prepaid health care whenever we needed it.
After 50 years, it is clear that Medicare needs improvement, though it still has strong support of the public. The time is ripe for not only improving it, but also expanding it to cover everyone. Let us hope that we do not have to wait another 50 years to get it right.
Statement Introducing the State-Based Universal Health Care Act of 2015
Rep. Jim McDermott, U.S. House of Representatives, July 28, 2015
Mr. Speaker, I rise today to introduce legislation that will give states the tools they need to guarantee the health security of their citizens. The State-Based Universal Health Care Act of 2015 establishes a new procedure through which states may apply for a waiver of federal law in order to design and implement single-payer health care systems. This will allow states to achieve universal coverage and control costs by removing greed and inefficiency from the system.
One of the many achievements of the Affordable Care Act is its provisions that grant states the authority to innovate in their health care systems. Under Section 1332 of the law, a state may apply for a State Innovation Waiver that will provide it with control of federal dollars that otherwise would have been spent on premium tax credits and cost-sharing reductions for its residents. Through this waiver, a state may design a system to cover its residents, so long as benefits are at least as comprehensive and affordable as those offered by Qualified Health Plans available on the Exchanges.
However, even with this flexibility, numerous barriers limit states’ ability to design true single-payer systems. Existing waivers are narrow in scope, requiring states to seek out imperfect and convoluted solutions to circumvent federal limitations. A sweeping preemption provision in the Employee Retirement Income Security Act (ERISA) denies states authority to regulate employer-sponsored health plans. And, due to the complexities of our existing federal health programs, it is essentially impossible for a state to design a single benefit package that can be administered simply and efficiently on behalf of all of its residents.
The State-Based Universal Health Care Act removes these barriers. It builds upon the ACA’s State Innovation Waiver by offering states new tools that will allow them to truly innovate in health care. Under this legislation, a state may apply for a Universal Health Care Waiver that will grant it authority over federal health care dollars that otherwise would have been spent on the state’s residents. To the extent necessary to design a universal system, a state may waive provisions of federal law relating to the following:
- The rules governing premium tax credits and cost-sharing reductions, as provided for in existing waiver authority under Section 1332 of the ACA.
- Provisions necessary for states to pool funds that otherwise would be spent on behalf of residents enrolled in Medicare, Medicaid, CHIP, TRICARE, and the Federal Employee Health Benefits Program.
- ERISA’s preemption clause, which currently forbids states from enacting legislation relating to employee health benefit programs.
Any state seeking a Universal Health Care Waiver must design a system that covers substantially all of its residents. The benefits that each citizen receives must be at least as comprehensive and no less affordable than what would have been provided under any federal health programs for which its residents otherwise would have been eligible. Once enacted, the state plan must be publicly administered, and it may not add to the federal deficit.
The Affordable Care Act was a landmark achievement and a strong first step toward achieving health security in this country. However, we still have a tremendous amount of work left to do. The United States spends by far the most per capita on health care, yet we fail to achieve superior outcomes or even guarantee coverage as a basic human right. Insurance companies are a powerful force in our economy, enjoying billions in profits and growing power in the marketplace. Meanwhile, hospitals are consolidating at an astonishing rate, raising new questions about the quality of patient care and the future of medicine. What’s more, we have failed to make meaningful efforts to combat the skyrocketing costs of prescription drugs, threatening patient access to treatments and the financial sustainability of the entire system.
As we explore ways to build upon the successes of the ACA, it is critical that we look for creative solutions to the challenges that still exist. Granting states tools to design single-payer systems will help spur necessary innovation, achieve universal coverage, and control costs. It is time to take this next step as we continue to move forward in our historic effort to guarantee the health security of every American.
H.R.3241: State-Based Universal Health Care Act of 2015:https://www.congress.gov/bill/114th-congress/house-bill/3241
State efforts to establish single payer systems have had difficulties because the existing waiver processes for use of federal funds have been quite limited in their scope, and ERISA restrains state regulation of employer-sponsored health plans. The workarounds have been difficult and are a major reason that several states with promising proposals have backed off on their efforts.
Rep. Jim McDermott has now introduced H.R.3241, the State-Based Universal Health Care Act of 2015, which would allow states to include in a universal health insurance risk pool all funds that are currently used for federal health programs, including Medicare, Medicaid, CHIP, TRICARE, FEHBP, and the subsidies for plans in the ACA exchanges, plus, by eliminating ERISA restrictions, states could establish a more equitable method of financing in replacing funds currently paid into employer-sponsored plans. Those crafting state single payer legislation would have a field day if H.R.3241 were to become law, though they would face many other technical issues which will not be addressed here.
What could be wrong with this proposal? Conservatives are dreaming of the day that they can receive Medicaid funds as block grants to the states. It does not take much imagination to think what they would do with those block grants, especially when you look at their current behavior. The Medicaid waivers they are requesting both privatize the program and shift more costs to the patients, and some governors are even refusing federal funds, calling instead for block grants over which they would have much greater control. Under H.R.3241, essentially all federal health program funds would granted to the states in what would be, in essence, block grants. Although the Act calls for universality, comprehensiveness, affordability, and public administration, clearly the conservatives would game the system, much to the detriment of patients.
We really do need a national single-payer health program, and that is why we cannot allow ourselves to be diverted from supporting legislation such as H.R.676, the Expanded & Improved Medicare for All Act, introduced by Rep. John Conyers, now with 51 cosponsors. Whatever else we do, our advocacy for a national program must be steadfast.
As we work on trying to change the politics on the national scene, it certainly would be reasonable for state reform advocates to continue their efforts. Some in the trenches hope that conservatives would be attracted to shifting more control to the states through legislation such as this. But keep in mind the risk of this as we watch the suffering of low-income individuals and families in those states that already refuse to collaborate with Medicaid, in spite of the gift of federal funds.
Another risk is that if H.R.3241 gains traction, single payer supporters may abandon national efforts, just as they abandoned single payer support when the “public option” was under consideration. Abandoning a national effort in deference to your own state increases the risk that our brothers and sisters in other states would be left out.
Everybody in, nobody out.
Obamacare works in California. Here’s why.
By Peter V. Lee, James C. Robinson
Los Angeles Times, July 27, 2015
Early reports that 2016 health insurance premiums would increase in double digits brought out the usual cadre of critics to claim — once again — that Obamacare is not financially sustainable.
We now have the full picture in California, where we are proving that health insurance exchanges can keep prices in check. Residents who enroll through Covered California, our statewide exchange, will see only modest 4% increases in 2016. Those selecting the lowest-priced plans actually will save 4.5%.
These low premiums were made possible because California law gave Covered California the power to actively negotiate on behalf of its 1.3 million consumers. The board and staff of Covered California have used this authority. That’s helping the Affordable Care Act work as intended — using market forces to hold down costs.
So how exactly is California getting such good results? First, Covered California selects which plans can be sold through the exchange. This gives it leverage with the insurers, which want to reach this source of new customers. Those insurers then are able to negotiate better deals from hospitals and doctors. In contrast, the federal health insurance marketplace and other state exchanges take all comers and do not force insurers to improve plans to get their products onto the exchanges.
In 2014 and 2015, Covered California turned away several plans because of serious concerns about high prices, inadequate physician networks or weak administrative capabilities.
Covered California also negotiates directly with health insurers on prices. We pressure carriers to keep premiums as low as possible and offer robust networks of doctors and hospitals. Passive insurance exchanges, including the 37 states that are part of the federal marketplace, allow insurers to charge whichever rates pass regulatory muster and cover however many doctors they want.
Equally important, Covered California standardizes the deductibles and other characteristics of plans offered. That empowers consumers, who can make apples-to-apples comparisons. Standardization also allays fears that low-premium plans might be complicated or rife with coverage exclusions. Californians can rest assured that their coverage means they can get the treatment they need without first paying a deductible that can be thousands of dollars.
Moreover, the benefit of standard plans and negotiated prices accrue to anyone who buys individual health insurance. Again, because of how California law implemented the ACA, the rates Covered California negotiates must also apply to policies those plans sell outside the exchange.
Covered California is using its heft to improve patient care and outcomes too. Contracts with insurers require that they participate in quality improvement programs, reduce ethnic and geographic disparities in access to care, and provide patients with access to doctors and hospitals that meet their needs.
Taken together, this process generates a better set of insurance options than do the federal and state insurance exchanges that adopt a passive market approach.
Free market forces can be a powerful tool to contain health costs. But for that tool to work, consumers need the support of an active purchaser that can go toe-to-toe with the insurers. Other states and the federal exchange would be wise to look at what’s working in California.
Peter V. Lee is the executive director of Covered California. James C. Robinson is a professor of health economics at UC Berkeley.
Covered California’s good news on premium hikes comes with trade-offs
By The Editorial Board
Los Angeles Times, July 28, 2015
The 2010 federal healthcare reform law made it easier for millions of Americans to obtain insurance coverage, but it didn’t stop the cost of that coverage from rising considerably faster than inflation. So it was a welcome surprise Monday when officials at Covered California, the state’s health insurance exchange, announced that the average premiums for individual policies in 2016 would be only about 4% higher than they are this year, and only about 2% higher in Los Angeles County. Mixed in with the good news for consumers, though, were some trade-offs that won’t make everyone happy. The announcement offers lessons for consumers and policymakers, not all of which are easy to stomach.
Monday’s announcement illustrates how competition among doctors and hospitals in Southern California is helping to hold down premiums. Consumers in remote or rural areas, and even in some parts of Northern California, who do not have such competitive marketplaces but are dominated by one or two hospital systems may face double-digit increases in their premiums in 2016. They can cut their costs significantly by switching insurers, but doing so may require them to find a new set of doctors — Covered California has encouraged insurers to compete by assembling different lineups of doctors and hospitals. That’s a potentially huge barrier to people with chronic conditions and those who don’t have the time or inclination to get into the details of their insurance plans.
Here’s another trade-off. Close to 90% of those insured through Covered California receive subsidies for their premiums, which makes premiums less of a problem for many than their policy’s out-of-pocket costs. To hold down those costs in 2016, the exchange is introducing a new standard “benefit design,” or common set of policy features. This design eliminates deductibles for more basic services and caps the costs of expensive prescription drugs. At the same time, though, it makes emergency services and hospitalizations more expensive, especially for those choosing the tier of coverage with the least expensive premiums. That should help many consumers, but not those in cheaper plans who are hit with a major illness or injury.
Unlike the exchanges in most states, Covered California actively negotiates with insurers over rates and plan designs. There’s a trade-off here too: Some insurers aren’t offering plans through the exchange to consumers in all or part of the state because they didn’t meet the exchange’s demands.
That’s not to give short shrift to what Covered California has been doing. It’s simply to acknowledge that the changes wrought by the 2010 law have yielded a market for individual policies that demands not just an active exchange but attentive consumers aware of the trade-offs implicit in their choices.
Peter Lee and James Robinson tell us that the Affordable Care Act (ACA) is working as intended – “using market forces to hold down costs,” and that California proves it by holding average premium increases down to 4% for the second consecutive year. But Covered California functions as an “active purchaser.” Does that mean it is functioning as an agent facilitating a free market between buyers and sellers of insurance, or is it functioning as a bureaucratic regulator dictating which insurers and which products are allowed in the exchange markets?
The last half century has confirmed that free markets in health insurance are highly dysfunctional. The reason that Covered California is working is that it is very highly regulated, dictating which insurers can participate, what benefits their plans must offer beyond those mandated by ACA, while aggressively negotiating with insurers on prices, rejecting those that are too high.
By requiring more rigid standardization of negotiated prices, benefits, and lower deductibles, plan selection for buyers is less difficult. Although this standardization defeats the free market principles wherein choice would be between plans with much greater variability in these parameters, it reduces the risk for the individual that a given selected plan would be grossly inadequate in the face of significant medical need.
Thus given the limitations of ACA, the strong arm tactics of these bureaucrats benefit patients compared to simply turning them loose in a free market of unregulated health plans.
But there are important trade-offs. Because the exchange plans are supposed to compete, they are requiring plans to have different compositions of provider networks so that patients would have a choice of which restricted list of providers they could use. That could be difficult for patients with chronic problems whose professionals were scattered amongst different networks. Also yearly premium adjustments can leave patients with a choice of paying a higher, less affordable premium or changing to another plan with a different provider network, disrupting continuity of care.
The administrators of Covered California have recognized the financial barriers created by the very high deductibles that have become commonplace today. They rightfully established a new standard benefit design that eliminates the deductibles for basic services. But to avoid the necessity of premium increases they have had to allow greater cost sharing for emergencies and hospitalizations – creating financial hardships for those with the greatest needs for adequate coverage.
Trying to do the best with what ACA allows, they have crafted plans that limit choices of providers, expose the most vulnerable patients to high out-of-pocket costs, while keeping insurance premiums only modestly above the level they were before ACA was enacted.
What is missing here? They have failed to recover the profound administrative waste inherent in our dysfunctional financing system – waste that goes away simply by changing to single payer financing. Also they could be more effective negotiators if they were a single public monopsony – a single-payer purchaser – instead of trying to negotiate with only a portion of the multiple players in our fragmented financing system. The efficiencies would free up enough funds to provide all essential services for everyone in a system with free choice of health care professionals that is affordable for all through equitable public funding.
The honorable administrators of Covered California have shown us what can be done under ACA. Their efforts are admirable, but their results fall tragically short of what we need simply because they were limited by the fundamental defects in our financing infrastructure. Just think of what they could do for us if we gave them an improved Medicare for all with which to work.
Priceless safety net reaches Golden Anniversary
Medicare’s impressive milestone is reason to celebrate the safety net and time for supporters to wake up to threat of increased privatization
By Wendell Potter
medicareresources.org, July 23, 2015r
Happy birthday, Medicare! Happy Golden Anniversary!
The fact that we have such a special milestone to celebrate means that the opposition of wealthy, entrenched special interests can be overcome. But, as we will see, an entirely different group of special interests is now profiting as a result of a very favorable financial arrangement with what has become an immense federal program. They are making such rapid inroads that the original Medicare program may all but cease to exist over the next decade if the program’s supporters don’t wake up to what is a real existential threat.
Public program increasingly becoming private
Republican lawmakers whose goal was to privatize the program succeeded in passing legislation to enable insurance companies to provide coverage to Medicare beneficiaries – on the government’s dime. To entice them to get in the game, the government agreed to pay them considerably more than what it would cost to provide benefits to Medicare-eligible folks if they stayed in the original program. This not only enabled the insurers to make a tidy profit, it also allowed what are now called Medicare Advantage plans to offer a drug benefit before the traditional program was authorized to do so and to cover all medical costs, not just 80 percent. In exchange, beneficiaries could only get care provided by doctors, hospitals and other facilities that were in their insurance company’s provider network.
Insurance companies have spent billions of dollars over the past few years on sales and marketing campaigns to persuade beneficiaries to enroll in or switch to their Medicare Advantage plans. They’ve been so successful that a third of Medicare beneficiaries – 16.6 million at last count – are now enrolled in Medicare Advantage plans, most of which are operated as HMOs and PPOs.
Medicare’s growing value to insurers
If Medicare Advantage enrollment trends continue – and there is no reason to believe they won’t – within a few years, possibly before the end of this decade, we will reach a tipping point in which more people will be enrolled in private plans than in the original program.
That very real possibility should be of great concern to health care reform advocates who think Americans would be much better off if all of us – not just senior citizens and the disabled – were enrolled in an improved, “Medicare for All” program.
The word “improved” in that last sentence is essential. As medical costs continue to go through the roof, the 20 percent coinsurance obligation in the traditional program will make the Medicare Advantage plans increasingly attractive. If I were leading the strategy for the “Medicare for All crowd,” I would focus a lot of attention on strengthening the traditional program to make it every bit as comprehensive and attractive as a Medicare Advantage plan.
If that doesn’t happen, Medicare’s next significant birthday will be celebrated most enthusiastically by the shareholders and executives of private insurance companies.
Mark Wendell Potter’s words. If we want an improved Medicare for all, we need to focus on strengthening the traditional program “to make it every bit as comprehensive and attractive as a Medicare Advantage plan.” Yes, but even more than that.
If benefits of the traditional Medicare program, especially the deductibles and coinsurance, were even better than the Medicare Advantage plans, then there would be no reason that Medicare beneficiaries would want the restrictions of the private plans, such as limiting their choices of physicians and hospitals to the networks selected by the private plans.
For those who say that we cannot afford to improve Medicare’s benefits, they will have to explain to us why it is then acceptable to give the private Medicare Advantage plans more taxpayer funds than are spent on comparable patients in the traditional program. Aren’t those in the traditional program worthy of the same level of spending? Then we need to explain to them how we could increase benefits without increasing total spending, by putting in place the substantial efficiencies of a single payer version of an improved Medicare for all.
With the release of the Medicare Trustees report, the conversation has returned to the need to control spending. The privatizers are out with their schemes to control government spending (but not total spending). Jeb Bush says that we need to “phase out” Medicare and “move to a new system” – presumably premium support vouchers which shift costs from the government to the beneficiaries.
We need to control total health care costs, not control only government spending while allowing total costs to escalate. So let’s change the conversation from that of cutting Medicare to that of improving Medicare while making it affordable – a feat which we can accomplish only if we convert it to a single payer system.
Q: If large insurers continue to merge, does that create a “de facto single-payer” health system?
Several pundits have suggested that the recently announced plans of Aetna to merge with Humana, and of Anthem to merge with Cigna, signify the emergence of a de facto private-insurance-based single payer.
Such speculation is unfounded for the reasons outlined below (and in the handy table here).
What’s the difference?
Single Payer: Yes. Everyone is covered automatically at birth.
A few huge insurance companies: No. Tens of millions of people remain uninsured and underinsured.
Full Range of Benefits
Single Payer: Yes. Coverage for all medically necessary services.
A few huge insurance companies: No. There are thousands of different plans, with varying tiers of benefits and rising deductibles, co-pays, and co-insurance. Benefits depend on employer, income, marital status, and a host of other factors, not medical need.
Single Payer: Yes. Saves $400 billion on administrative costs annually, allowing for universal care with no net increase in health spending. Top administrator of Medicare and Medicaid (covering 120 million people) makes $200,000 a year.
A few huge insurance companies: No administrative savings. Nation’s largest insurer, UnitedHealth, has overhead of 19.1 percent compared to Medicare’s 2 percent. CEO of UnitedHealth, Stephen Hemsley, made $66 million in 2014.
Cost Control / Sustainability
Single Payer: Yes. Large-scale cost controls (negotiated fee schedule with physicians, bulk purchasing of drugs, hospital budgeting, capital planning, etc.) ensure that benefits are sustainable over the long term.
A few huge insurance companies: No. A 2012 study of a large merger in 1999 found that premiums increased by 7 percent as a result of the merger. Large insurers have the market power to increase premiums without increasing quality or benefits.
Choice of Doctor and Hospital
Single Payer: Yes. Patients are allowed free choice of doctor and hospital. Treatment decisions are made by doctor and patient.
A few huge insurance companies: No. Insurance companies restrict choice of doctor and require preauthorization for tests and treatment.
Single Payer: Yes. Premiums and out-of-pocket costs are replaced with progressive, equitable taxes, based on ability to pay. 95 percent of Americans pay less.
A few huge insurance companies: No. Health care costs are disproportionately paid by middle- and lower-income Americans and those families facing acute or chronic illness.
From a recent interview at Common Dreams:
Dr. David Himmelstein, co-founder of Physicians for a National Health Program, told Common Dreams that the merger wave “will leave us with a small handful of insurance giants that are essentially monopolies. Much of their revenue comes from the government that pays hundreds of billions annually in premiums for private ‘Medicare Advantage’ plans, Medicaid managed care plans, and much of the premiums for the private plans bought on [ACA] insurance exchanges. Much of this money is wasted; Anthem and Cigna have overhead that’s nearly tenfold higher than traditional Medicare.”
What’s more, Himmelstein continued, “These monopolies are lightly regulated, and have used their enormous financial and political clout to avoid real oversight. Just this month, the insurers’ lobbying group hired as their new CEO Marilyn Tavenner, who as head of Medicare and Medicaid was responsible for regulating them until this spring.”
Wrong Prescription? The failed promise of the Affordable Care Act
By Trudy Lieberman
Harper’s Magazine, July 2015
It’s bad enough that the A.C.A. is fattening up the health-care industry and hollowing out coverage for the middle class. Even worse, the law is accelerating what I call the Great Cost Shift, which transfers the growing price of medical care to patients themselves through high deductibles, coinsurance (the patient’s share of the cost for a specific service, calculated as a percentage), copayments (a set fee paid for a specific service), and limited provider networks (which sometimes offer so little choice that patients end up seeking out-of-network care and paying on their own). What was once good, comprehensive insurance for a sizable number of Americans is being reduced to coverage for only the most serious, and most expensive, of illnesses.
The A.C.A.’s greatest legacy may finally be the fulfillment of a conservative vision laid out three decades ago, which sought to transform American health care into a market-driven system. The idea was to turn patients into shoppers, who would naturally look for the best deal on care — while shifting much of the cost onto those very consumers.
“Wrong Prescription?”: http://harpers.org/archive/2015/07/wrong-prescription/
Harper’s Magazine has now moved Trudy Lieberman’s “Wrong Prescription?” out from behind the paywall, making it available for free.
It is an extraordinary article that explains the what, why and how we ended up with the wrong prescription for our sick health care financing system. Though a fairly long article, reading it and sharing it with others is an imperative.
The article does not dwell on what is the right prescription, but there are basically three options:
Take a moment this weekend to read this article and then share it with others. At the 50th anniversary of Medicare, this article is very timely. We have to fix this system once and for all, but that means that everyone must understand why ACA was the wrong prescription.
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