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.
Income checks throw Californians off health plans
KCRA.com/AP,September 9, 2014
Some Californians who purchased individual health coverage through the state’s insurance exchange are suddenly being dropped or transferred to Medi-Cal, the program for the poor that fewer doctors and providers accept.
The changes are occurring as incomes are checked to verify the policyholders can purchase insurance through the exchange.
Officials at Covered California acknowledged that a number of people are being shifted around during income checks and eligibility updates.
“It will happen continually,” spokesman Dana Howard said.
This year, he said, the exchange adjusted its income eligibility scale when the federal government updated the poverty scale. As a result, Howard said, people near the thresholds are sometimes moved between private health plans and Medi-Cal. The checks might also determine that some people make too much money to receive a subsidy.
Evette Tsang, a Sacramento insurance agent, said some of her clients unexpectedly received Medi-Cal cards even though they were content with the plan they purchased through the exchange.
“There’s a lot of people who have never been on Medi-Cal, and they don’t want to. You hear the service is not as good, providers are not easy to find,” Tsang said.
A California solution for a Medicaid quirk
Editorial, Los Angeles Times, September 9, 2014
The 2010 federal healthcare reform law required virtually all adult Americans to carry insurance, starting this year. And to help make policies affordable, it offered subsidies to lower-income households while expanding the Medicaid insurance program to more of the poorest residents. But there’s a key difference between those two groups: Only those in the Medicaid program may find their estates billed after they die to pay back some of the aid.
Most troubling, the new requirement to obtain coverage is prompting millions of Californians to sign up for Medi-Cal, where they are put in Medi-Cal’s version of an HMO. Only after they enrolled are they told that, if they are 55 or older, the state will seek to recover the value of the coverage from their estates. They could be in perfect health, receiving no medical care at all, but still be running up a bill that their estate will have to pay.
The California Legislature responded by passing a bill (SB 1124) that would stop Medi-Cal, the state’s version of Medicaid, from trying to collect repayment for routine medical care and insurance premiums. The measure now awaits action by Gov. Jerry Brown, whose Department of Finance opposes the bill because it would cost Medi-Cal an estimated $30 million a year.
What can be done about Covered California’s doctor gap?
Editorial, Los Angeles Times, September 8, 2014
A separate study of three rural counties by the California Health Report found that more than half of the doctors listed by Medi-Cal in those counties either were turning away new patients or couldn’t be reached by phone.
A related issue is whether the networks offered by health plans can actually deliver the coverage the plans promise.
Insurers say they’re taking the problem seriously, which should help both those who shop for individual policies and the growing ranks enrolled in managed-care plans through Medi-Cal.
At the beginning of the health care reform process, we complained that the various factors in the proposed multi-payer model that would determine what health care coverage a person would have would be highly variable and would result in instability of health care coverage. The current experience in California provides an inkling of the extent of this problem.
Some who purchased plans through California’s ACA insurance exchange – Covered California – are losing that coverage when auditing demonstrates that income levels were not confirmed, income levels changed, or income eligibility levels changed because of updates in the federal poverty thresholds. Regardless, people were losing the coverage which they had selected, and became uninsured or moved to other private plans, or, in some cases, were involuntarily enrolled in Medi-Cal – California’s Medicaid program.
The latter is a particular problem. First, many of these people pride themselves on their self-sufficiency, even though they need to accept government subsidies so that they could afford the exchange plans. They understand that these subsidies are necessary, not for their own personal failings but simply because health care has become so expensive that the average worker can no longer bear the full costs. For these people, being forced into a welfare program – Medi-Cal – can be humiliating.
But what is even worse, the Medi-Cal ticket doesn’t automatically grant them admission to the health care system. Although there was already a shortage of physicians who would accept Medi-Cal patients, the lists of providers currently contain names of many physicians who are now turning away new Medi-Cal patients. Also, most of the newly eligible are being enrolled in Medi-Cal managed care plans when preliminary reports indicate that these plans do not have the capacity to carry the load.
Just to add further insult, those moved into Medi-Cal may have their estates billed to recover Medi-Cal costs, when there is no recovery process for subsidies provided for the Covered California exchange plans.
There are thousands of other reasons that coverage is unstable under the Affordable Care Act. In contrast, a single payer system provides the same comprehensive national health program for life. You can’t get much better stability than that.
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.
Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances
Federal Reserve Bulletin, September 2014
The Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. The 2013 SCF reveals substantial disparities in the evolution of income and net worth since the previous time the survey was conducted, in 2010.
- Between 2010 and 2013, mean (overall average) family income rose 4 percent in real terms, but median income fell 5 percent, consistent with increasing income concentration during this period.
- Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys.
- Families in the middle to upper-middle parts (between the 40th and 90th percentiles) of the income distribution saw little change in average real incomes between 2010 and 2013 and thus have failed to recover the losses experienced between 2007 and 2010.
- Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013.
- The differentials in average income growth between 2010 and 2013 are also observed for other family groupings in which large differences in income levels are observed, notably across education groups, by race and ethnicity, homeownership status, and levels of net worth.
- Consistent with income trends and differential holdings of housing and corporate equities, families at the bottom of the income distribution saw continued substantial declines in real net worth between 2010 and 2013, while those in the top half saw, on average, modest gains.
- Ownership rates of housing and businesses fell substantially between 2010 and 2013.
- Retirement plan participation in 2013 continued on the downward trajectory observed between the 2007 and 2010 surveys for families in the bottom half of the income distribution.
- The decrease in stock ownership rates was most pronounced for the bottom half of the income distribution.
The recovery of the economy has left behind everyone except the wealthy. Most individuals and families are less able to afford housing, education, retirement, vacations, college expenses, and, of especial concern to us, health care. Many economists believe that this may represent the new normal.
The public policies that we need to bring us all back on a solid footing are straightforward. But politics has resulted in the erection of almost impenetrable barriers. Just today the Senate reconfirmed the fact that billionaires are still free to buy our elections (and the billionaires have fared very well as the rest of us have been left behind).
If we could improve just the financing of health care so that it is affordable for everyone, we would have taken one major step towards implementing the public policies that we need to more equitably share the gains in our economy. The Affordable Care Act falls far too short of the level of equitable health care financing that we need. The progressive financing that characterizes a single payer system would move us more dramatically in the right direction. Not only would everyone have health care, but we would be improving family incomes and net worth as well.
Policy is easy. But we really have to work on the politics. The billionaires can buy the souls of the politicians for only so long. Start sharpening your pitchforks (Hanauer).
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.
Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees
By Jonathan Gruber, Robin McKnight
The National Bureau of Economic Research, NBER Working Paper No. 20462, September 2014
Recent years have seen enormous growth in limited network plans that restrict patient choice of provider, particularly through state exchanges under the ACA. Opposition to such plans is based on concerns that restrictions on provider choice will harm patient care. We explore this issue in the context of the Massachusetts GIC, the insurance plan for state employees, which recently introduced a major financial incentive to choose limited network plans for one group of enrollees and not another. We use a quasi-experimental analysis based on the universe of claims data over a three-year period for GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state’s three month “premium holiday” for limited network plans leading 10% of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care; spending fell by almost 40% for the marginal complier. This reflects both reductions in quantity of services used and prices paid per service. But spending on primary care actually rose for switchers; the reduction in spending came entirely from spending on specialists and on hospital care, including emergency rooms. We find that distance traveled falls for primary care and rises for tertiary care, although there is no evidence of a decrease in the quality of hospitals used by patients. The basic results hold even for the sickest patients, suggesting that limited network plans are saving money by directing care towards primary care and away from downstream spending. We find such savings only for those whose primary care physicians are included in limited network plans, however, suggesting that networks that are particularly restrictive on primary care access may fare less well than those that impose only stronger downstream restrictions.
Full paper available at this link: http://www.nber.org/papers/w20462
Narrow Health Networks: Maybe They’re Not So Bad
By Margot Sanger-Katz
The New York Times, September 9, 2014
Lots of people shopping in the new health care marketplaces this year picked health plans that limited their choice of doctors and hospitals. The plans were popular because they tended to cost less than more conventional plans that covered nearly every health care provider in a region.
The proliferation of these more limited plans, called narrow networks, has worried consumer advocates and insurance regulators. The concern is that people will struggle to find the care they need if their choices are limited.
Maybe we don’t have to worry so much. A new study suggests that, done right, a narrow network can succeed in saving money and helping certain patients get appropriate health care. The study, published as a working paper with the National Bureau of Economic Research, looked at a program that used financial incentives to steer workers into narrow plans. Those that chose the plans saved their employer money, saw their primary care doctors more and used the emergency room less.
Mr. Gruber says this study should not be the final word on narrow networks, but he said he hoped it would change the tenor of the debate about them. Instead of automatically seeing a narrow network as a sinister plan feature, he said, he hopes market watchers will now see them as a tool that can, in some cases, help save money without hurting patients.
“Nobody is talking about forcing people into these plans,” he said. “We’re talking about offering people a choice with price incentives.”
NYT Reader Comments:
San Juan Capistrano, CA
Quoting from the Gruber and McKnight paper:
“We first find that patients are very price sensitive in their decisions to switch to limited network plans…”
“…those who are most healthy are the most price sensitive.”
“for the chronically ill… we find a strong shift in spending from specialists to primary care physicians…”
“…we conclude that the real savings from limited network plans arises from restrictions downstream from the primary care provider.”
Healthy individuals buy the cheapest plans not worrying about the choices in specialized care that they believe they will not need anyway. But for chronically ill patients who are responsible for most of our health care spending, they are losing specialized services when they are enrolled in these narrow network plans.
This study was too short to be able to measure adverse outcomes due to lack of specialized services. Shouldn’t we find that out before most of us are shoved into narrow networks?
Or better, shouldn’t we take a closer look at proven systems that use public policies to control spending without restricting patient choice – models such as single payer or a national health service?
One thing that really concerns me about this is people with rare or complex conditions that need specialty care. Waits, for example, for endocrinology in my city are a minimum of 3 months for new patients and diabetes is one of the nations’ biggest health problems. It is also very difficult now for new patients to find a new primary care MD depending their insurance. Narrow networks prevent people from accessing care. I am a nurse case manager, so arranging transitional care is what I do for a living. I’m surprised to see this article. It’s a little myopic.
Let’s be honest. Narrow networks are fine for people who are not sick now and are willing to take the chance that they will not get sick in the coming year. If you are already ill or worry that you may become ill, narrow networks are not good. Don’t lie to us…
The most important finding in this study is that enrollment of chronically ill patients in narrow networks results in a strong shift in care from specialists to primary care physicians. That reduces costs, but does it change outcomes? According to the authors, “we are unable to demonstrate health effects with any certainty.”
The work of Barbara Starfield and others has previously demonstrated that a strong primary care infrastructure does provide greater value in health care. But people with serious chronic disorders – where a disproportionate share of our health care spending is directed – may very well benefit from specialized care.
This study shows that narrow networks are used to block access to that specialized care, simply by excluding coverage of much of the specialized services offered within the community. As this study shows, the care defaults to the generalist regardless of the patient’s specific needs.
A well functioning system would provide liberal access to primary care services, which would then provide a portal to an appropriate level of specialized services. A singe payer national health program would do precisely that – primary care not serving as a gatekeeper but rather serving as a resource to improve integration of health care services.
Narrow networks are a tool of private insurers used to reduce spending by impairing access to care no matter how appropriate it might be. Jonathan Gruber indirectly acknowledges the concerns people have about narrow networks when he states, “Nobody is talking about forcing people into these plans.” But patients are backing into these plans simply because they cannot afford other plans with more comprehensive networks.
Under single payer, the network is the entire health care delivery system. That’s the network that we need – for all of us.
A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far
By David U. Himmelstein, Miraya Jun, Reinhard Busse, Karine Chevreul, Alexander Geissler, Patrick Jeurissen, Sarah Thomson, Marie-Amelie Vinet and Steffie Woolhandler
Health Affairs, September 2014
A few studies have noted the outsize administrative costs of US hospitals, but no research has compared these costs across multiple nations with various types of health care systems. We assembled a team of international health policy experts to conduct just such a challenging analysis of hospital administrative costs across eight nations: Canada, England, Scotland, Wales, France, Germany, the Netherlands, and the United States. We found that administrative costs accounted for 25.3 percent of total US hospital expenditures—a percentage that is increasing. Next highest were the Netherlands (19.8 percent) and England (15.5 percent), both of which are transitioning to market-oriented payment systems. Scotland and Canada, whose single-payer systems pay hospitals global operating budgets, with separate grants for capital, had the lowest administrative costs. Costs were intermediate in France and Germany (which bill per patient but pay separately for capital projects) and in Wales. Reducing US per capita spending for hospital administration to Scottish or Canadian levels would have saved more than $150 billion in 2011. This study suggests that the reduction of US administrative costs would best be accomplished through the use of a simpler and less market-oriented payment scheme.
From the Discussion
Hospitals’ administrative overhead varied more than twofold across the nations we studied as a share of total hospital costs and more than fourfold in absolute terms. These costs were far higher in the United States than elsewhere.
In all nations, hospital administrators must procure and coordinate the facilities, supplies, and personnel needed for good care. In nations where administrators have few responsibilities beyond these logistical matters, administration seems to require about 12 percent of hospital expenditures.
Modes of hospital payment can increase the complexity and costs associated with two additional management tasks: garnering operating funds and securing capital funds for modernization and expansion.
Garnering operating funds requires little administrative work in nations such as Canada, Scotland, and Wales, where hospitals receive global, lump-sum budgets. In contrast, per patient billing (for example, using DRGs) requires additional clerical and management personnel and special-purpose IT systems. This is true even in countries—such as France and Germany—where payment rates, documentation, and billing procedures are uniform.
Billing is even more complex in nations where each hospital must bargain over payment rates with multiple payers, whose documentation requirements and billing procedures often vary, as is the case in the United States and the Netherlands.
Differences in how hospitals obtain capital funds also appear to affect administrative costs. The combination of direct government grants for capital with separate global operating budgets—as in Scotland and Canada—was associated with the lowest administrative costs. (Wales has recently transitioned to such a system, reversing previous market reforms.) Hospitals in France and Germany, where direct government grants account for a substantial share of hospital capital funding, have relatively low administrative costs despite per patient, DRG-based billing.
Administration is costliest in nations where surpluses from day-to-day operations are the main source of hospital capital funds: the United States and, increasingly, the Netherlands and England. In such health care systems, the need to accumulate capital funds for modernization and expansion stimulates administrators to undertake the additional work that is needed to identify and pursue profit opportunities.
Bureaucracy consumes one-quarter of US hospitals’ budgets, twice as much as in other nations: Health Affairs study
PNHP Press Release, September 8, 2014
A study of hospital administrative costs in eight nations published today in the September issue of Health Affairs finds that hospital bureaucracy consumed 25.3 percent of hospital budgets in the U.S. in 2011, far more than in other nations.
Administrative costs were lowest (about 12 percent) in Scotland and Canada, whose single-payer systems fund hospitals through global, lump-sum budgets, much as a fire department is funded in the U.S.
The article attributes the high administrative costs in the U.S. to two factors: (1) the complexity of billing a multiplicity of insurers with varying payment rates, rules and documentation requirements; and (2) the entrepreneurial imperative for hospitals to amass profits (or, for nonprofit hospitals, surpluses) in order to fund the modernization and upgrades essential to survival.
“We’re squandering $150 billion each year on hospital bureaucracy,” said lead author Dr. David Himmelstein, a professor at the CUNY/Hunter College School of Public Health and lecturer at Harvard Medical School. “And $300 billion more is wasted each year on insurance companies’ overhead and the paperwork they inflict on doctors.”
He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Instead, we’re layering on more bureaucracy in insurance exchanges and ‘accountable care organizations.’”
This international comparison of hospital administrative costs further documents the profound administrative waste that characterizes U.S. health care financing. This study is particularly important because it clarifies the two major factors resulting in this waste: 1) the administrative complexity of interacting with a multitude of insurers, and 2) “the entrepreneurial imperative for hospitals to amass profits or surpluses” in a system with market-driven pricing.
Although all other nations waste less than we do on administration, they do so in varying degrees. Thus we can learn lessons from them, especially the two lessons above. Extrapolating from this Health Affairs article, the solution for hospital financing is obvious: switch to single payer and use global budgets for hospitals and separate budgeting for capital improvements. But don’t stop there. Apply single payer principles to the financing of our entire health care delivery system. That would free up perhaps $400 billion or more that could be used to ensure appropriate health care for everyone.
QuickTake: Nonelderly Workers with ESI Are Satisfied with Nonfinancial Aspects of Their Coverage but Less Satisfied with Financial Aspects
By Adele Shartzer and Sharon K. Long
Urban Institute, September 4, 2014
The Urban Institute’s Health Reform Monitoring Survey has been tracking health insurance coverage, including employer-sponsored insurance coverage (ESI), since the first quarter of 2013. This QuickTake reports on nonelderly (ages 18–64) workers’ ESI in June 2014. In June 2014, most workers (88.6 percent) were insured and, among those who were insured, most (80.7 percent) had ESI (data not shown). When asked to assess their ESI, workers were generally satisfied with their ESI in terms of available health care services, choice of doctors and other providers, and the quality of the care available under the plan; less than 5 percent of nonelderly workers with ESI coverage report being dissatisfied with any of these factors. However, satisfaction levels are much lower for the financial aspects of coverage, with workers more concerned about premiums, co-payments, and their potential financial risk from high medical bills. Nearly one in four nonelderly workers with ESI (23.4 percent) is dissatisfied with the premium they pay for coverage, and 27.2 percent are dissatisfied with the deductibles they pay when receiving care. The protection that ESI provides against high medical bills may be particularly limited for low-income nonelderly workers (those with family income at or below 138 percent of FPL): 32.1 percent of low-income workers with full-year ESI report having problems paying medical bills in the past 12 months. Overall, 14.2 percent of nonelderly workers with full-year ESI report having problems paying medical bills over the past 12 months.
How People Feel About Their Employer-Sponsored Health Plans
By Margot Sanger-Katz
The New York Times, September 4, 2014
There are new results from the Urban Institute’s Health Reform Monitoring Survey, which asked people with employer-based coverage how they liked what they had.
For people earning between 138 percent and 400 percent of the federal poverty limit, or between $33,000 to $95,000 — the income range of people who are most likely to buy insurance on the public marketplaces — more than 23 percent of workers with employer coverage reported having problems paying their medical bills in the last year.
Sharon Long, a senior fellow at Urban, said that the results suggested that consumers might not be prepared for what happened when they combined a high-deductible insurance plan with big medical bills.
“What we’ve heard anecdotally from people with health plans is more people are signing up for high-deductible health plans and then being surprised that they have to pay the deductible,” she said. That’s a concern on the new health insurance marketplaces, too. Early evidence suggests that people tended to opt for cheaper plans, many of which came with high deductibles — meaning that the newly insured may face some of the same financial strain if they become seriously ill.
Deductibles and co-payments have been rising, as a growing number of employers embrace the idea that giving workers more of a financial stake in their medical care will help reduce overuse. “It’s been going up over the past few years,” said Gary Claxton, a director of the Health Care Marketplace Project at the Kaiser Family Foundation, which runs a comprehensive annual survey of the employer insurance market. And no one likes paying high insurance premiums or out-of-pocket costs
Over all, Ms. Long said, the rising costs of health care are likely to remain a concern for consumers, wherever they get their insurance. “I expect what we’ll see over time, unless we are able to get costs under control, is that all the cost questions are going to be an issue,” she said.
Worried about health insurance? That’s common
By Jay MacDonald
Bankrate.com, September 4, 2014
Bankrate’s Health Insurance Pulse survey was conducted Aug. 21-24 by Princeton Survey Research Associates International.
Tom Baker, a professor of insurance law at the University of Pennsylvania Law School, points out that a majority of working adults receive their health insurance through their employer and thus have largely been spared a direct impact from the Obama health care law. But the survey’s concerned majority may partially reflect uneasiness about employer-based plans.
“There is research being done on liquidity, or ‘financial fragility,’ where they asked people if they could come up with $2,000 to pay for a major medical bill in the next month,” he says. “I think 40 percent of respondents said they either couldn’t or it would be very difficult. That suggests that people are financially fragile.”
David Cusano, a senior research fellow at Georgetown University’s Health Policy Institute in Washington, D.C., suspects some of the fear over health costs may stem from growing first-hand experience with how health insurance works.
“With the Affordable Care Act, anybody who now wants insurance can get it,” Cusano says. “The question now becomes: ‘Can I afford to use it?’ When you think about people confronting out-of-pocket maximums at around $7,000 or deductibles of $5,000 for a family, that’s a lot of money. You throw prescription drug copays into the mix, and I can see where you would be worried.”
These two surveys are of people who have employer-sponsored health insurance – the very large market of health plans that was protected by the Affordable Care Act (“you can keep the insurance you have”). The most significant change in employer-sponsored plans is in the increased use of high deductibles as a means of slowing premium growth for the employers.
The trade off is that employees and their families are exposed to greater out-of-pocket costs whenever they access health care. These surveys demonstrate that this exposure is not merely theoretical but is actually creating significant financial insecurity for the insured.
But isn’t the primary purpose of insurance to relieve you of financial hardship should you have health care needs? Instead, these newer insurance product designs are increasing the risk of financial hardship, both in the employer-sponsored market, and especially, by design, in the plans offered by the ACA insurance exchanges. That is why they selected a lower actuarial value plan as the benchmark plan in the exchanges.
Reform should have been about fixing the problems with our health care financing, not making them worse. A far better system would simply provide access to health care when needed, without linking that care to specific financial transactions controlled by a third party insurance intermediary. We don’t need private insurance programs. We would do far better with prepaid health care, financed equitably through progressive tax policies.
It’s in our name. PNHP is Physicians for a National Health Program, not physicians for private health insurance.
National Health Expenditure Projections, 2013–23: Faster Growth Expected With Expanded Coverage And Improving Economy
By Andrea M. Sisko, Sean P. Keehan, Gigi A. Cuckler, Andrew J. Madison, Sheila D. Smith, Christian J. Wolfe, Devin A. Stone, Joseph M. Lizonitz and John A. Poisal (all affiliated with CMS Office of the Actuary)
Health Affairs, September 2014
In 2013 health spending growth is expected to have remained slow, at 3.6 percent, as a result of the sluggish economic recovery, the effects of sequestration, and continued increases in private health insurance cost-sharing requirements. The combined effects of the Affordable Care Act’s coverage expansions, faster economic growth, and population aging are expected to fuel health spending growth this year and thereafter (5.6 percent in 2014 and 6.0 percent per year for 2015–23). However, the average rate of increase through 2023 is projected to be slower than the 7.2 percent average growth experienced during 1990–2008. Because health spending is projected to grow 1.1 percentage points faster than the average economic growth during 2013–23, the health share of the gross domestic product is expected to rise from 17.2 percent in 2012 to 19.3 percent in 2023.
Model And Assumptions
These projections remain subject to substantial uncertainty and reflect the variable nature of future economic trends, as exemplified by the prolonged and comparatively sluggish nature of the recovery from the 2007–09 recession. In addition, the United States has experienced only the initial effects of the ACA’s coverage expansions. The impacts of reform on the behavior of consumers, insurers, employers, and providers will continue to unfold throughout the projection period and beyond. In particular, the supply-side effects of the ACA remain highly speculative and are not included in these estimates.
Since the end of the Great Recession in 2009, economic growth in the United States, as measured by GDP, has remained slow: just 3.9 percent per year, on average, which is well below the average rate experienced in the four years following the three previous recessions. The fact that recent health spending increases have not returned to their prerecession rates is consistent with the long-standing relationship between overall economic growth and health spending growth.
Growth rates for both the economy and health spending have been slow. However, the health share of GDP has remained relatively constant since 2009 and is expected to be 17.2 percent in 2013. Contributing to the stable share in 2013 are continued low use of medical care and provisions of both sequestration and health reform that constrain payments to Medicare providers.
The period in which health care has accounted for a stable share of economic output is projected to end in 2014, primarily because of the coverage expansions of the ACA. It is anticipated that by 2017, once the mostly one-time transition effects of expanded coverage have fully transpired, the health share of GDP will increase, albeit at a slower rate than its historical average, as an improving economy and the aging of the baby-boom generation lead to faster health spending growth.
When people ask how much the United States is spending on health care, it is the numbers from this report that are usually cited. So how much are we spending now, and what will that spending grow to a decade from now?
Projected spending for 2014:
Projected spending for 2023:
With the Affordable Care Act (ACA) the changes in spending represent not only the usual factors that the actuaries consider each year, they also include the changes in coverage due to the establishment of the insurance exchanges and the expansion of Medicaid, along with other direct and indirect results of implementing ACA. Considering all of the variables, the actuaries once again have done a commendable job in arriving at their estimates.
Although the authors do make it clear that there is substantial uncertainty in these predictions, especially due to the variable nature of economic trends, there is one aspect that should raise our concern. Their results depend on the prediction that there will be faster growth in disposable personal income. Yet when you read the work of Thomas Piketty, Emmanuel Saez, Joseph Stiglitz, Robert Reich and others, there is a very real concern that, though the economy may continue to reward the rentiers generously, personal incomes for workers may well remain stagnant. Many will have no discretionary income and may have to continue to cut into the portions of their budgets that pay for essential needs.
This will be of particular concern because of the increases in out-of-pocket spending that will be required as more people are shifted into lower actuarial value plans with higher cost sharing, especially higher deductibles. Many policy experts believe that a significant portion of the recent slowing in health care spending has been due to the high out-of-pocket costs for upfront health care, causing patients to decline care that they should have. This is not the way we should be trying to put a lid on health care spending. People will suffer and some will die simply because of their perception that health care is personally not affordable because of the high upfront costs.
Another important consideration is that predictions of future health care spending are dependent not only on expansion of health care coverage and on the other variables, but they also are dependent on the baseline costs of the existing health care financing system. As we all know, the administratively complex multi-payer system that we have in the United States is the most expensive model of financing health care with its tremendous built in waste. If we were to change to an efficient single payer system, not only would everyone have affordable access to health care, we would not be talking about a trend in national health expenditures that in a decade will consume almost one-fifth of our gross domestic product.
Implementing Health Reform: Tax Form Instructions
By Timothy Jost
Health Affairs Blog, August 29, 2014
On August 28, 2014, the Internal Revenue Service re-released the draft forms that will be used by employer, insurers, and exchanges for reporting Affordable Care Act tax information to individuals and to the IRS for 2014 and 2015, as well as the instructions for completing those forms. The IRS also released in the Federal Register requests for public comments on three of those forms – the 1094-B, the 1094-C, and the 1095-C – under the Paperwork Reduction Act. This post reports on these forms and instructions and on a guidance released by the Centers for Medicare and Medicaid Services.
The tax forms had been published earlier and are described in an earlier post. The instructions for the forms, however, had not been available and had been eagerly awaited by employers, insurers, exchanges, and tax professionals. Forms 1094-C and 1095-C will be used by large employers with more than 50 full-time or full-time-equivalent employees to determine whether the employer is responsible for penalties under the employer shared responsibility requirements of the ACA. They will also be used to determine whether employees have received an affordable and adequate offer of coverage, rendering them ineligible for premium tax credits. Employers are required to provide each full-time employee with a form 1095-C and to file each of these together with a transmittal form 1095-B form with the IRS.
The instructions for the 1094-C and 1095-C are by far the most complex of the instructions released on August 28, filling 13 pages with dense, two column, print. Most of the complexity derives from the options for complying with the employer mandate and the transition exceptions to that mandate that the administration has created…
Implementing Health Reform: Tax Form Instructions, by Timothy Jost:http://healthaffairs.org/blog/2014/08/29/implementing-health-reform-tax-…
IRS – 2014 Instructions for Forms 1094-C and 1095-C (Draft): http://www.irs.gov/pub/irs-dft/i109495c–dft.pdf
If you enjoy minutia, click on the links to the full blog post and the draft instructions and read away.
Although today’s message deals with only one minor provision of the Affordable Care Act – the instructions for tax forms used to report ACA tax information to individuals and to the IRS – the administrative detail required is mind-boggling. Extrapolate that to all aspects of ACA and it becomes obvious that, instead of gaining administrative simplicity, ACA greatly increased administrative complexity – on top of the most administratively complex health financing system in the world. What a waste!
Timothy Jost’s comment from yesterday’s message can be repeated again today: “We are doomed to continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.”
Can big data cure cancer?
By Miguel Helft
Fortune, August 11, 2014
The company they founded two years ago, Flatiron Health, is going after a rather audacious goal: shaking up the health care world. … [Nat]Turner and [Zach] Weinberg hope to collect and analyze mountains of clinical data to make inroads into one of medicine’s most … difficult fields: cancer care. Never mind that the pair, who studied economics and entrepreneurship at the Wharton School, didn’t have time for as much as a biology class.
Pioneering researcher Robert Weinberg (no relation to Zach) highlighted the checkered relationship between big data and cancer in a recent essay in the journal Cell. Weinberg, a founding member of MIT’s Whitehead Institute for Biomedical Research, noted that the explosion of data sets on everything from the interaction between proteins to the genetic mutations in a tumor has overwhelmed researchers’ ability to interpret it. “There are people who are enthralled with bioinformatics,” Weinberg told Fortune. … “The idea of aggregating data, and assuming that from that alone, one can get insights that are qualitative and that were not previously accessible, is not obvious to me.”
John Ioannidis, a professor of medicine and health research and policy at Stanford, … doubts that major advances could result from data collected outside highly controlled clinical trials. “It’s an open question as to how much we can learn from big compilations of data collected without experimental design,” he says.
In case you blinked, big data is the newest new thing in establishment health policy. The July 2014 edition of Health Affairs carries on its spine the title, “Using big data to transform care.” It was funded by IBM and the UnitedHealth Foundation, among others. Last year McKinsey & Company published a paper entitled “The big-data revolution in US health care” in which the authors predicted big data will cut American health care costs by 12 percent to 17 percent. A public-private group called Health Data Consortium, which includes the Institute of Medicine, Hewlett-Packard, and Emdeon, was formed in 2012 to promote the collection of all forms of health data.
The article quoted above from Fortune testifies to the power of the hype promoting big data. Although the article quotes two experts in biology who throw very cold water on the notion that big data can make substantial improvements in cancer care, the article also reports that two very smart 28-year-old guys with business degrees from the Wharton School of Business have raised $138 million, $100 million of it from Google Ventures, for a company that will attempt to divine new treatments for cancer from massive amounts of data about cancer patients. Someone is going to be proven wrong here. Who will it be? The info tech wizards and their wealthy backers, or the biology experts (one of whom discovered the first oncogene)?
I’m betting on the biology experts. I don’t have a degree in computer science, biology or medicine, but I have common sense that has not been warped by financial incentives, and I am familiar with the devil-may-care attitude toward evidence within the American health policy community and the effect that attitude has had on other segments of society. I view Flatiron’s founders and investors as examples of smart people who have been badly misled by the willingness of health policy experts to make unsubstantiated claims for managed care nostrums. The big data fad is the direct result of a quarter century of hype about electronic medical records (EMRs) promoted by the health policy elite with the encouragement and financial assistance of the computer industry.
From the earliest days of the EMR movement, its most prominent leaders confidently asserted EMRs would improve quality and lower costs despite the absence of empirical evidence supporting that claim. Two of the earliest pro-EMR documents by prominent health policy experts illustrate my criticism.
In 1988, Paul Ellwood (inventor of the misnomer “health maintenance organization”) published a paper in the New England Journal of Medicine entitled “Outcomes management: A technology of patient experience.” (318:1549-1556) “Outcomes management would … pool clinical and outcome data on a massive scale,” he wrote. “Millions” of computerized medical records would be funneled into “a massive, computerized data base.” By means Ellwood neglected to flesh out, this pooling of data would create information about medical care so accurate it would reveal “the relation between medical interventions and health outcomes, as well as the relation between health outcomes and money”(p. 1551).
As if this weren’t hype enough, Ellwood went on to say, “Outcomes management will help every doctor become a better doctor” (p. 1554), and if doctors didn’t accept his word for this and they let the “payers” take the lead in managing outcomes, payers will “know more about the impact of physicians’ work than they [physicians] do” and when that happens “payers will succeed in circumventing whatever exclusive legitimacy medicine claims to have as a profession” (p. 1555).
Of the 16 endnotes in Ellwood’s paper, not one of them documented his claims. The closest thing to an appropriate citation was Ellwood’s reference to the old Health Care Financing Administration’s annual report card on hospital mortality rates, a report Ellwood praised as evidence of HCFA’s “latent evaluative capacity.” But HCFA terminated that report in 1994 because it was so inaccurate. HCFA’s hospital “death lists,” as they were known, were so bad that Bruce Fried, HCFA’s director of its Office of Managed Care, later referred to the reports as the “hospital mortality report debacle” and as evidence that “the road to hell is certainly paved with good intentions.” (“HCFA to require HMO quality data,” Modern Healthcare, Sept. 16, 1996, p 6).
The Institute of Medicine (IOM) joined the chorus in 1991 with the publication of a book entitled “The Computer-based Patient Record: An Essential Technology for Health Care.” The book was financed by IBM and Hewlett-Packard, among others. Like Ellwood (who advised the IOM’s authors), the IOM confidently asserted that EMRs (the IOM called them computer-based patient records, or CPRs) would improve quality and lower costs. The IOM did this despite explicitly acknowledging it had no evidence to support that claim. “[D]ata on CPR system benefits are sparse,” they wrote. “Few recent studies have analyzed actual costs and benefits. … CPRs may reduce the cost of care enough to offset the expense of acquiring and operating CPR systems, although this remains to be proved” (p. 102).
But 30 pages later, the IOM succumbed to its urge to evangelize. CPRs “are essential for health care,” they wrote. “CPRs can play an important role in improving the quality of patient care and strengthening the scientific basis of clinical practice; they can also contribute to the … moderation of health care costs” (p. 132). Then came the preordained recommendation: “Health care professionals and organizations should adopt the computer based patient record (CPR) as the standard for medical and all other records related to patient care” (p. 133).
Because Ellwood and the IOM were already opinion-setters within the health policy and political worlds, their Pollyannish pronouncements received widespread coverage in the mainstream and professional media and were influential for years after their publication. Ellwood’s paper and the IOM’s book had a twofold effect: They accelerated the movement to force doctors and hospitals to buy EMRs, and they reinforced the norm within the health policy community that it’s OK to make costly, sweeping recommendations based on groupthink rather than evidence.
By the early 2000s, EMR groupthink within the health policy community had become conventional wisdom among politicians and much of the media. In his January 2004 State of the Union Address, President George Bush announced, “By computerizing medical records, we can avoid dangerous medical mistakes, reduce costs, and improve care.” To take another example, in August 2004 Senators Hillary Clinton and William Frist published an op-ed in the Washington Post in which they repeated as facts all the canards about EMRs. “[W]e both agree that in a new [health care] system, innovations stimulated by information technology will improve care, lower costs, improve quality and empower consumers,” they wrote. The groupthink about EMRs was canonized in 2009 when Congress enacted the Health Information Technology for Economic and Clinical Health (HITECH) Act, a law that created sticks and carrots to get providers to buy EMRs.
In this environment – in a world in which the nation’s most prominent health policy experts and most powerful politicians peddle groupthink as fact – it is easy to see how people with little knowledge of biology or health policy could be fooled into thinking there’s money to be made applying big data to cancer. Flatiron’s founders may make some money, but if they do it will be because other investors were fooled by a quarter-century of EMR hype into buying Flatiron’s stock at inflated prices. It will not be because Flatiron will substantially improve our ability to “see what therapies worked best,” determine “cost-effective therapies,” and identify “wasteful health care spending,” to quote the Fortune article.
In a decade or two it may turn out that Flatiron made modest contributions to cancer treatment by speeding up the rate at which researchers generate hypotheses, by identifying drugs and treatments that are causing serious side effects in some patients, and by speeding up recruitment of patients into clinical trials of new drugs. But in a decade or two we will not be saying, “Wow, big data reduced the cost of treating cancer and led directly to new treatments.”
All of us – citizens, policy-makers, but especially health policy experts – need to start following the money. We need to start paying attention to financial incentives that influence health policy experts. The health policy elite in this country incessantly bemoan the financial incentives that affect doctors and hospitals, but they have nothing to say about the role that financial incentives play in causing health policy experts to recommend health policies that don’t work and to refuse to say a kind word for health policies that do work, such as single-payer systems.
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.
Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency
By Avik Roy
Manhattan Institute for Policy Research, August 2014
The proposal contained herein — dubbed the Universal Exchange Plan (“the Plan”) — seeks to substantially repair both sets of health-policy problems: those caused by the ACA and those that predate it.
The Universal Exchange Plan would introduce major changes to the broad set of federal health care entitlements: Obamacare, Medicare, and Medicaid. The Plan uses a reformed version of the ACA’s health insurance exchanges as the basis for far-reaching entitlement reform.
The Plan would repeal many of the ACA’s cost-increasing insurance mandates, including the individual mandate. But it would preserve the ACA’s guarantee that every American can purchase coverage regardless of preexisting conditions. And it would utilize the concept of using federal premium support subsidies, on a means-tested basis, to defray the cost of private health coverage.
It would gradually migrate most Medicaid recipients, along with future retirees (N.B.: Medicare), onto these reformed exchanges.
The plan has its roots in real-world examples of market-oriented, cost-effective health reform. Notably, two wealthy nations — Switzerland and Singapore — spend a fraction of what the United States spends on health care subsidies; yet they have achieved universal coverage with high levels of access and quality.
Following is a posted response by Don McCanne to an August 13, 2014 Forbes article in which Avik Roy introduced his reform proposal:
“A 2011 OECD & WHO report of the Swiss health system revealed that it is highly inefficient with profound administrative waste. It is inequitably funded using regressive financing. It has excessive out-of-pocket costs that can create financial hardships. And it has an increasing prevalence of managed care intrusions through a private insurance industry that has learned how to game risk selection. The problems are severe enough that current polls indicate that a majority of the Swiss support their upcoming ballot measure (September 28) that would convert Swiss health care financing to a single payer system. Obviously the current failed Swiss system should not serve as a model for U.S. reform.”
Transcending Obamacare? Analyzing Avik Roy’s ACA Replacement Plan
By Timothy Jost
Health Affairs Blog, September 2, 2014
Avik Roy’s proposal, “Transcending Obamacare,” is the latest and most thoroughly developed conservative alternative for reforming the American health care system in the wake of the Affordable Care Act.
Roy’s proposal is a curious combination of conservative nostrums (limiting recoveries for victims of malpractice), progressive goals (eliminating health status underwriting, providing subsidies for low-income Americans), and common sense proposals (enacting a uniform annual deductible for Medicare).
Most importantly, however, Roy proposes that conservatives move on from a single-minded focus on repealing the ACA toward building upon the ACA to accomplish their policy goals. He supports repealing certain features of the ACA—including the individual and employer mandate—but would retain others, such as community rating and exchanges. As polling repeatedly shows that many Americans are not happy with the ACA, but that a strong majority would rather amend than repeal it, and as it is very possible that we will have a Congress next year less supportive of the ACA than the current one, Roy’s proposal is important.
Much of Roy’s proposal is taken up with traditional conservative talking points on health care reform. It is tempting to respond to these point by point. For example, Roy trots out the health systems of Switzerland and Singapore as models for the United States because they depend heavily on consumer-funded health financing. The bottom line, however, is that we are not Switzerland and we are certainly not Singapore, and we cannot have their health care systems.
Roy also has his own hobby horses. He claims that people are better off being uninsured than on Medicaid and trots out a long list of studies that he claims show negative effects from Medicaid coverage.
Roy’s Universal Exchange Plan
Rather than respond to Roy point by point, however, this review will focus on the heart of Roy’s proposal; his universal exchange plan. (To access Jost’s critique of Roy’s universal exchange plan, use the link below.)
Projecting The Benefits And Costs Of Roy’s Proposal
In sum, higher cost-sharing should result in lower premiums for health plans — a 40 percent actuarial value plan should cost less than a 60 percent plan. Skinnier benefits could also reduce premiums. Reduced premiums should in turn draw more uninsured into the market and reduce federal subsidy costs. But higher cost-sharing would reduce access to care, decrease treatment adherence, and increase provider bad debt. The savings Roy touts come at a high cost.
The Stubborn Problem Of Complexity
Another important point about the Roy plan must be noted: It does not reduce the complexity of the ACA. Indeed, it might increase it.
The ACA has been woven inextricably into the fabric of our health care system, and even ignoring, if that were possible, the millions of Americans who are now covered under the ACA, it is simply not possible to return to status quo ante through repeal. Roy reasonably recognizes this and proposes instead to build on the ACA to move toward a system that he finds more sympathetic.
But “transcending Obamacare” will not be easy. One of the greatest defects of the ACA is its complexity. That complexity has required the Obama administration to exercise considerable creativity in implementing the law. But the law’s complexity simply follows from the fact that the drafters of the ACA attempted to build on, rather than to radically change, our current, impossibly complex, health care system.
Much of Roy’s proposal is still a broad conceptual framework. Even that framework is complicated, but were the proposal reduced to actual legislation, much less regulation, it would become far more convoluted and politically contested. We are doomed to continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.
Avik Roy presents his model of health care reform as a plan that does not require the repeal of the Affordable Care Act, but rather represents a reform of the ACA insurance exchanges along with the eventual elimination of Medicaid and Medicare. His proposed system is not yet fleshed out, but to achieve his stated ends, tremendous administrative complexity would have to be introduced.
There is much to criticize about Roy’s conservative, consumer-directed approach to health care financing – the worst flaw being the great financial burden that would be placed on those requiring health care. Should his proposal ever be seriously considered by Congress, a detailed response should be effective in countering it.
But for now, Timothy Jost summarizes the fatal flaw of his approach in two sentences:
“But the law’s complexity simply follows from the fact that the drafters of the ACA attempted to build on, rather than to radically change, our current, impossibly complex, health care system.”
“We are doomed to continue to struggle with this complexity as long as we stubbornly cling to a private health insurance-based health care financing system.”
Avik Roy has contributed to the cause by showing us a proposal that makes it ever more clear why we must change to a single payer national health program. And we can thank Timothy Jost for clarifying that for us.
Report: Health Law Ups Taxes On Insurers With Big Pay Packages
By Julie Appleby
Kaiser Health News, August 27, 2014
While average compensation for top health insurance executives hit $5.4 million each last year (up from $5.1 million in 2012), a little-noticed provision in the federal health law sharply reduced insurers’ ability to shield much of that pay from corporate taxes.
As a result, insurers owed at least $72 million more to the U.S. Treasury last year, said the Institute for Policy Studies, a liberal think tank in Washington D.C.
Researchers analyzed the compensation of 57 executives at the 10 largest publicly traded health plans, finding they earned a combined $300 million in 2013. Insurers were able to deduct 27 percent of that from their taxes as a business expense, estimates the report. Before the health law, 96 percent would have been deductible.
UnitedHealth Group, which paid CEO and President Stephen Hemsley about $28 million in pay and stock options in 2013, had the biggest tax bill among the 10 companies, the report found. Hemsley’s compensation accounted for nearly $6 million of the firm’s estimated $19 million in taxes that the report says it owed on pay packages for five executives under the health law.
“They’re paying more in taxes just to protect these pay packages,” said Sarah Anderson, global economy project director at the institute.
Under the 2010 law, insurers can deduct only the first $500,000 of annual compensation per employee from corporate taxes, down from $1 million allowed before the law’s passage. The law also requires insurers to include so-called “performance pay,” such as stock options, which often represent a hefty portion of an executive’s pay.
Covered California’s Peter Lee nets bonus, Obamacare site nets 1.2 million enrollees
By Chris Rauber
San Francisco Business Times, August 22, 2014
Covered California’s executive director, Peter Lee, has won a one-time $52,528 bonus for his role in launching the Obamacare exchange in the Golden State, which apparently netted 1.2 million enrollees all told during its first open enrollment period.
Lee’s one-time bonus is his first pay increase in three years… “excepting general state increases,” and represents a 20 percent “incentive award” based on his annual $262,644 salary.
There are a great many reasons that health care reform activists believe that private, investor-owned insurers should be eliminated from our health care financing, but one reason that is particularly offensive is the outrageous compensation packages for their executives. For that reason, the Affordable Care Act (ACA) included a provision prohibiting insurers from writing off for tax purposes more than $500,000 per executive, as a means to discourage the excessive executive pay.
Well, it didn’t work. Instead of taking those taxes out of the excessive salaries, executives were given pay increases averaging $300,000, raising their incomes to an average of $5.4 million. Although more corporate taxes were paid, those funds were recovered through higher premiums charged to the purchasers of health plans.
Compare the executive pay of the private insurers to that of Peter Lee, the head of California’s ACA insurance exchange – by far the largest and most successful ACA exchange in the nation. With his performance bonus, his income was only about one-twentieth of the average income of the executives of the largest publicly-traded health plans. In fact, Stephen Hemsley of UnitedHealth Group received almost 100 times as much as Lee.
These differences reflect the priorities of invested-owned corporations as opposed to quasi-public agencies. One is about making the most money possible, and the other is about serving the needs of the people.
Make no mistake. The ACA exchanges are still the wrong model because they contract with these same private insurers that perpetuate their abusive practices, such as overpaying their executives. Under a single payer system, administrators such as Peter Lee would be providing us with much greater value for their services since single payer systems eliminate much of the administrative waste while spending appropriate amounts for health care, and, yes, spending appropriate amounts for our public administrators.
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