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.
Assembly passes universal health care bill
By Dan Goldberg
Capital New York, May 27, 2015
The state Assembly on Wednesday voted for a single-payer health bill, the first time in more than two decades the chamber has taken up the measure.
The vote was 89-47, an overwhelming but largely symbolic step toward universal health insurance. The bill now heads to the Republican-controlled Senate where it is not expected to pass.
Assemblyman Richard Gottfried, chair of the health committee, gave an impassioned speech on the floor in support of the New York Health Act, arguing that it was long past time for New Yorkers to rid themselves of the intrusive insurance companies whose goal is to deny claims rather than provide care.
The plan’s benefits, Gottfried said, would be more generous than any plan on the current market, and there would be no co-pays or deductibles.
One problem, pointed out by Republicans, is that the offering, while generous, is the opposite of what public health officials are pushing, including those in the Cuomo administration, who have professed that insurance systems, and high deductibles and co-pays help ensure people use the health system judiciously instead of opting for more, often unnecessary, care.
“There is a role for insurance companies,” state health commissioner Dr. Howard Zucker said Wednesday before the debate.
The passing of the Affordable Care Act, which subsidizes private insurance for people below a certain income level, was a valid effort, Gottfried said, but ultimately served to highlight why the system needs to be entirely scrapped.
“I think the A.C.A. has made it clear to people … there are profound problems in our health care system that cannot be addressed by incremental change in that system,” Gottfried said.
Although there remains considerable political resistance to the concept of a universal public health insurance program, the fact that Richard Gottfried’s New York Health Act passed the Assembly by such a wide margin, 89-47, shows that there is very strong support for single payer reform amongst many politicians and the voters who support them.
The policies incorporated in a publicly-administered and publicly-financed single payer model of health care financing are vastly more efficient and effective than a fragmented, multi-payer model such as that perpetuated by the Affordable Care Act. But better policy alone does not equate with an improved understanding of the models. That is why coalitions, education, and grassroots support is so important. These activities in New York undoubtedly contributed to moving the bill through the Assembly.
In an email message, Mark Dunlea, co-founder of Single Payer New York, listed coalition members supporting the New York Health Act:
“New York Health has been endorsed by the NYS Academy of Family Physicians, NYS American Academy of Pediatrics, NYS Nurses Association, Committee of Interns and Residents, Doctors Council SEIU, NY chapter of Physicians for a National Health Program, SEIU 1199, NYS AFL-CIO, Communications Workers of America, Amalgamated Transit Union Local 1056 and 1179, United Auto Workers 9 & 9A, UFCW Local 1500, Capital District Area Labor Federation, Local 32BJ SEIU, NYSUT, United Federation of Teachers, Working Families Party, Green Party, Citizen Action, StateWide Senior Action Council, NYPIRG, League of Women Voters, and others.”
Those of us at Physicians for a National Health Program are particularly proud of the contribution of the New York Metro chapter of PNHP.
The lesson is clear. The health policies enacted through the Affordable Care Act, though of some limited benefit, are grossly inadequate when considering the need that exists. When people understand that there is a far better option, they will support it. Obviously we have much more work to do, so it is imperative that we step up our efforts in educating the public and in mobilizing grassroots efforts through coalition activities.
Doctor burnout is a rising problem in Minnesota
By Jeremy Olson
Minneapolis Star Tribune, May 24, 2015
Physician burnout is on the rise in Minnesota and across the country, as the traditional strains of a medical practice — long hours and draining cases — are compounded by new challenges, such as computerized records and payment reforms that judge doctors by their patients’ health. A series of influential studies by Minnesota researchers suggest that burnout could aggravate the state’s shortage of primary care doctors by driving some into early retirement and undermine the quality of patient care by eroding doctors’ compassion and attention to detail.
“There is an epidemic going on with respect to stressed and burned-out physicians,” said Mitchell Best, executive director of Vital WorkLife, a St. Louis Park-based employee assistance program. In a national survey released this month, it found the share of physicians reporting severe stress increased from 38 percent in 2011 to 46 percent last year.
Paperwork was the most common work-related stressor for the 2,005 doctors who completed the Vital WorkLife survey, while the share complaining about electronic medical records increased from 15 percent in 2011 to 25 percent last year.
“Medicine has become factory work,” one doctor wrote.
Physician burnout is finally drawing the attention of the mainstream media. But the media is failing to connect the problem to the takeover of medicine by large corporations and the usurpation of physician and patient decision-making authority by the managers of those corporations. The media is connecting the burnout problem to “paperwork” and the growing pressure on doctors to spend time entering data into computers. That’s a true and useful connection to make. But that analysis is incomplete. A thorough diagnosis of the rapidly rising rate of physician burnout must begin with the most fundamental cause: The deliberate transfer of authority from individual doctors and patients to the managers of large corporations.
A front-page article published in the Minneapolis Star Tribune over the Memorial Day weekend illustrates the problem. The headline was, “Doctor burnout is rising in Minnesota.” Above the headline in even larger font was the pull quote, “Medicine has become factory work.”
To its great credit, the article did not mince words about the severity of the problem. It cited research indicating that the physician burnout rate had grown substantially since 2011 and quoted an expert saying the problem had reached “epidemic” proportions. It stated that the most significant cause of the crisis was the increasing amount of time doctors must devote to typing data into electronic medical records (EMRs), and that the doctors most vulnerable to burnout are in primary care.
But the article did not ask why doctors are being forced to spend so much time entering data. It did not examine the larger issue: Physician-patient authority is being transferred to large corporations.
The media’s treatment of the burnout crisis reflects its treatment by the peer-reviewed literature. Medical journals only began to pay attention to this issue in the 1990s (two decades after the managed care revolution began), and health policy journals pay the issue almost no attention at all. Moreover, the papers that do appear in medical journals have yet to get beyond documenting the fact that EMRs are playing a significant role in physician burnout.
The most influential paper published to date is probably a paper published in 2012 in the Annals of Internal Medicine. That paper was the first to attempt to determine a national rate of burnout among doctors. It reported that 46 percent of American doctors suffered from at least one symptom of burnout and that this ”alarming” rate was above the rate for the general population. But the paper was not designed to determine the cause of the problem, and the authors did not attempt to link the burnout crisis to the spread of assembly-line medicine.
You can do some quick and dirty research on your own to confirm what I just said. When I plugged “physician burnout” into the PubMed search box on May 26, I found 148 papers published in 2014 versus just 11 in 1990. I also found that nearly all of the research appears in medical or occupational health journals. Of the first 200 articles PubMed’s search engine returned to me (ranked in reverse order of publication), 195 appeared in medical or occupational health journals.
Only five of the 200 were published in health policy journals (all of these were among the lesser known health policy journals), and of the five, two dealt with physicians in other countries, one addressed patient satisfaction with physician interview skills rather than burnout, and one reported on a fluffy survey that confirmed this platitude: “feeling engaged was very important to physicians’ job satisfaction.” Only one of the five articles addressed burnout in American physicians in a rigorous fashion, and that one found that the VA’s medical home project is causing “participant burnout,” in part because it is not adequately staffed. This article appeared in Health Care Management Review.
When I plugged in “physician burnout electronic medical records,” I got a grand total of six papers, all published in 2013 or 2014, which is to say long after EMR advocates had persuaded Congress to punish clinics and hospitals that did not fork over thousands of dollars to buy an EMR. One of these six papers (published in 2014) summed up the health policy community’s paltry research on the connection between EMRs and burnout as follows: “Little has been written about physician stress that may be associated with electronic medical records.”
The failure of the lay and professional media to connect the burnout problem to the conversion of medicine to “factory work” is astonishing because that outcome has been predictable since the dawn of the managed care movement in the early 1970s. From the earliest days of the managed care revolution to the present, managed care advocates have promoted horizontal and vertical consolidation of the entire health care industry into giant systems that would use their power to exert greater control over doctors.
Beginning in 1970, when Dr. Paul Ellwood invented the misnomer “health maintenance organization,” up to the present time when people like Atul Gawande celebrate the Cheesecake Factory as the model for our health care system, managed care advocates have promoted the usurpation of physician authority by the managers of gigantic corporations. They promoted this vision without expressing any concern about the effect their vision of “reform” would have on physician morale.
Here are four examples of the behavior I’m talking about, two from the dawn of the managed care era and two from more recent times:
• In its January 1970 edition, Fortune magazine published two articles and an editorial lamenting the health care crisis and celebrating corporate supervision of doctors. The editorial ended with this chilling comment: “[T]he management of medicine has become too important to leave to doctors.” (“It’s time to operate,” Fortune, January 1970, 79). One of the articles quoted Ellwood recommending the consolidation of clinics and hospitals into “health systems” controlled by large corporations such as Kaiser Permanente, Metropolitan Life, and “industrial and merchandising corporations … such as IBM or Sears, Roebuck.” (“Better care at less cost without miracles,” 80, 127.) The editorial and the articles offered no information on how doctors might feel about being “managed” by insurance companies and “industrial and merchandising corporations.”
• One year later, Ellwood and several colleagues published their influential paper in Medical Care recommending competition between HMOs as the solution to the health care crisis. They closed with the observation that their proposal “would have some of the classical aspects of the industrial revolution – conversion to larger units of production, … division of labor, … and profitability as a mandatory condition of survival.” (“Health maintenance strategy,” 1971;9:291-298, 298.) Ellwood et al. said not a word about the possibility that such radical “reform” – shifting control of medicine from doctors to corporations driven by a quest for profits – could harm physician morale.
• In a 2003 paper published in Health Affairs, Donald Berwick and fourteen other bona fide members of the health policy elite (including Ellwood) opined that “payment for performance should become a top national priority” and urged Medicare to lead the way. This paper, utterly devoid of footnotes, said nothing about whether subjecting doctors to Skinnerian behavior-control tactics would damage physician morale.
• In 2012, Atul Gawande, who first came to our attention advising Hillary Clinton on her husband’s managed competition plan for the nation, published an article in The New Yorker entitled “Big med” in which he lavished praise on the Cheesecake Factory, a national restaurant chain, and urged readers to join him in celebrating “large-scale, production-line medicine.” Gawande did not bother to report any information on physician and nurse burnout caused by the assembly-line medicine he is so enthusiastic about. His only suggestion for health care professionals is to get used to it. As he put it, “Nurses and doctors will have to get used to delivering care in which our own convenience counts for less and the patients’ experience counts for more.”
The incuriosity about the connection between managed care fads and physician morale revealed by Ellwood and his intellectual heirs is consistent with the physician stereotyping they routinely engage in. The health policy literature brims over with undocumented claims that state or imply that doctors are greedy, authoritarian, ignorant, incurious about their patients, defensive, and irrationally hostile to information technology (see, for example, Gawande’s statement above to the effect that nurses and doctors care more about their “own convenience” than their patients). When we view any segment of society this negatively, we tend not to care what “those people” think.
However, not every institution and health policy analyst has caved in to the pressure to stereotype doctors and ignore the effect of assembly-line medicine on physician job satisfaction. The VA, for example, is studying the effect of its “medical home” project on physician morale. Within the medical community influential organizations, including the Mayo Clinic and the AMA, are supporting research on physician burnout. And some of the nation’s largest news organizations, including the New York Times and the Wall Street Journal, have begun to report on this issue. We have reason to hope, therefore, that even if managed care proponents continue to ignore the burnout problem their theology is causing, the rest of society will eventually make the connection between the burnout crisis and managed care.
Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
The Post-Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs
By David Himmelstein and Steffie Woolhandler
Health Affairs Blog, May 27, 2015
Last year we, and many others, drew attention to the chaotic and costly roll out of the Affordable Care Act’s (ACA) exchanges. The chaos is mostly over (unless King prevails over Burwell), but the costs will linger on. The roughly $6 billion in exchange start-up costs pale in comparison to the ongoing insurance overhead that the ACA has added to our health care system — more than a quarter of a trillion dollars though 2022.
Bloated Administrative Costs
Between 2014 and 2022, CMS projects $2.757 trillion in spending for private insurance overhead and administering government health programs (mostly Medicare and Medicaid), including $273.6 billion in new administrative costs attributable to the ACA. Nearly two-thirds of this new overhead — $172.2 billion — will go for increased private insurance overhead.
Most of this soaring private insurance overhead is attributable to rising enrollment in private plans which carry high costs for administration and profits. The rest reflects the costs of running the exchanges, which serve as brokers for the new private coverage and will be funded (after initial startup costs) by surcharges on exchange plans’ premiums.
Government programs — primarily Medicaid — account for the remaining $101.4 billion increase in overhead. But even the added dollars to administer Medicaid will flow mostly to private Medicaid HMOs, which will account for 59 percent of total Medicaid administrative costs in 2022. (The subcontracting of Medicaid coverage to private HMOs has nearly doubled Medicaid’s administrative overhead, which has risen from 5.1 percent of total Medicaid expenditure in 1980 to 9.2 percent this year).
The $273.6 billion in added insurance overhead under the ACA averages out to $1,375 per newly insured person per year, or 22.5 percent of the total federal government expenditures for the program.
Insuring 25 million additional Americans, as the CBO projects the ACA will do, is surely worthwhile. But the administrative cost of doing so seem awfully steep, particularly when much cheaper alternatives are available.
Traditional Medicare runs for 2 percent overhead, somewhat higher than insurance overhead in universal single payer systems like Taiwan’s or Canada’s. Yet traditional Medicare is a bargain compared to the ACA strategy of filtering most of the new dollars through private insurers and private HMOs that subcontract for much of the new Medicaid coverage. Indeed, dropping the overhead figure from 22.5 percent to traditional Medicare’s 2 percent would save $249.3 billion by 2022.
The ACA isn’t the first time we’ve seen bloated administrative costs from a federal program that subcontracts for coverage through private insurers. Medicare Advantage plans’ overhead averaged 13.7 percent in 2011, about $1,355 per enrollee. But rather than learn from that mistake, both Democrats and Republicans seem intent on tossing more federal dollars to private insurers. Indeed, the House Republicans’ initial budget would have voucherized Medicare, eventually diverting almost the entire Medicare budget to private insurers (the measure passed by the House on April 30 dropped the “premium support” voucher scheme).
In contrast, a universal single payer system would pare down both insurers’ and providers’ overhead, yielding huge administrative savings — $375 billion in 2012 according to one recent estimate.
In health care, public insurance gives much more bang for each buck.
Although there are innumerable major problems with having used the Affordable Care Act to reform health care, one of the more significant deficiencies that we pointed out well in advance was that the design would add significantly to the excessive administrative burden that already characterized the U.S. health care system. This study quantifies that additional burden.
These additional administrative costs amount to $1,375 per newly insured person per year, an astonishing 22.5 percent of the total federal government expenditures for the program. Between 2014 and 2022, $273.6 billion in new administrative costs will be attributable to ACA.
The two primary goals of those involved in reforming health care were to expand coverage to everyone (well, almost everyone) and to control health care spending. Because of design defects, tens of millions will be left uninsured, and tens of millions more will be have inadequate coverage, leaving them vulnerable to health care costs — certainly falling short of what should have been our goals in expanding coverage.
Regarding controlling spending, the experimental innovations to date have had little impact in reducing wasteful spending but rather seem to have slowed health care costs by erecting financial barriers to beneficial health care services. Not only did the designers fail to use this opportunity to reduce the profound administrative waste unique to the U.S. health care financing system, they added significantly to this waste, as this study demonstrates.
Single payer would fix these problems. Administrative waste would be dramatically reduced and the savings would be used to expand coverage to absolutely everyone while eliminating financial barriers to care. We simply need the political resolve to do it.
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.
Health, Medicine and Justice: Designing a Fair and Equitable Healthcare System
By Joshua Freeman, M.D.
I hope that this book complements the others (by Donohoe, Geyman, Young, and others), offering a perspective that combines a physician’s knowledge of medical care and how it is delivered, a scholar’s understanding of the organization of the health system, social determinants of of health and health disparities, a caring person’s commitment to justice and equity, and an activists’s desire to change the world. I hope it is of some value.
Chapter 1: Why Do We Have a Healthcare System?
Chapter 2: The U.S. Healthcare System: Best in the World?
Chapter 3: The Social Determinants of Health and Health Inequities
Chapter 4: Impact of the U.S. Health System on the Health of the Public
Chapter 5: Primary Care: The Essential Basis for an Effective Healthcare System
Chapter 6: The Role of Medical Education in Perpetuating the Health System
Chapter 7: Graduate Medical Education
Chapter 8: Assessing Appropriate Healthcare: Sometimes the Best Thing to Do Is Nothing
Chapter 9: The Role of Profit in U.S. Health Care
Chapter 10: Solutions and Projected Outcomes
Health, Medicine and Justice, by Joshua Freeman: http://www.amazon.com/Medicine-Justice-Designing-Equitable-Healthcare/dp…
Josh Freeman’s Blog: Medicine and Social Justice:http://www.medicinesocialjustice.blogspot.com
Many books have been written about the problems and potential solutions for our health care system. This one stands out because it represents the informed views of a noted physician educator who is also a health and social justice activist. He hopes the book is “of some value,” and it assuredly is.
Joshua Freeman is a leader in primary care, both as a practitioner and as an academic, being the Chair of the Department of Family Medicine at the University of Kansas Medical Center. He has an excellent understanding of our disorganized health care system and of the social determinants of health and health inequities. He has studied extensively medicine and social justice, and shares his views through his blog. This book brings to print the basis of his passionate activism in support of equitable health care for all.
As the nation meanders on with implementation of the well-meaning but intolerably deficient policies of the Affordable Care Act, this book can give us renewal in our efforts to educate the nation on the policies that actually would work to bring affordable and equitable health care to all.
Overkill: An avalanche of unnecessary medical care is harming patients physically and financially. What can we do about it?
By Atul Gawande
The New Yorker, May 11, 2015
Could pointless medical care really be that widespread? Six years ago, I wrote an article for this magazine, titled “The Cost Conundrum,” which explored the problem of unnecessary care in McAllen, Texas, a community with some of the highest per-capita costs for Medicare in the nation. But was McAllen an anomaly or did it represent an emerging norm? In 2010, the Institute of Medicine issued a report stating that waste accounted for thirty per cent of health-care spending, or some seven hundred and fifty billion dollars a year, which was more than our nation’s entire budget for K-12 education. The report found that higher prices, administrative expenses, and fraud accounted for almost half of this waste. Bigger than any of those, however, was the amount spent on unnecessary health-care services. Now a far more detailed study confirmed that such waste was pervasive.
I decided to do a crude check. I am a general surgeon with a specialty in tumors of the thyroid and other endocrine organs. In my clinic that afternoon, I saw eight new patients with records complete enough that I could review their past medical history in detail. One saw me about a hernia, one about a fatty lump growing in her arm, one about a hormone-secreting mass in her chest, and five about thyroid cancer. To my surprise, it appeared that seven of those eight had received unnecessary care.
Virtually every family in the country, the research indicates, has been subject to overtesting and overtreatment in one form or another.
Another powerful force toward unnecessary care…: the phenomenon of overtesting, which is a by-product of all the new technologies we have for peering into the human body.
Overtesting has also created a new, unanticipated problem: overdiagnosis. This isn’t misdiagnosis—the erroneous diagnosis of a disease. This is the correct diagnosis of a disease that is never going to bother you in your lifetime.
My last patient in clinic that day, Mrs. E., a woman in her fifties, had been found to have a thyroid lump. A surgeon removed it, and a biopsy was done. The lump was benign. But, under the microscope, the pathologist found a pinpoint “microcarcinoma” next to it, just five millimetres in size. Anything with the term “carcinoma” in it is bound to be alarming—“carcinoma” means cancer, however “micro” it might be. So when the surgeon told Mrs. E. that a cancer had been found in her thyroid, which was not exactly wrong, she believed he’d saved her life, which was not exactly right. More than a third of the population turns out to have these tiny cancers in their thyroid, but fewer than one in a hundred thousand people die from thyroid cancer a year. Only the rare microcarcinoma develops the capacity to behave like a dangerous, invasive cancer. (Indeed, some experts argue that we should stop calling them “cancers” at all.) That’s why expert guidelines recommend no further treatment when microcarcinomas are found.
Nonetheless, it’s difficult to do nothing. The patient’s surgeon ordered a series of ultrasounds, every few months, to monitor the remainder of her thyroid. When the imaging revealed another five-millimetre nodule, he recommended removing the rest of her thyroid, out of an abundance of caution. The patient was seeing me only because the surgeon had to cancel her operation, owing to his own medical issues. She simply wanted me to fill in for the job—but it was a job, I advised her, that didn’t need doing in the first place. The surgery posed a greater risk of causing harm than any microcarcinoma we might find, I explained. There was a risk of vocal-cord paralysis and life-threatening bleeding. Removing the thyroid would require that she take a daily hormone-replacement pill for the rest of her life. We were better off just checking her nodules in a year and acting only if there was significant enlargement.
H. Gilbert Welch, a Dartmouth Medical School professor, is an expert on overdiagnosis, and in his excellent new book, “Less Medicine, More Health,” he explains the phenomenon this way: we’ve assumed, he says, that cancers are all like rabbits that you want to catch before they escape the barnyard pen. But some are more like birds—the most aggressive cancers have already taken flight before you can discover them, which is why some people still die from cancer, despite early detection. And lots are more like turtles. They aren’t going anywhere. Removing them won’t make any difference.
We’ve learned these lessons the hard way. Over the past two decades, we’ve tripled the number of thyroid cancers we detect and remove in the United States, but we haven’t reduced the death rate at all. In South Korea, widespread ultrasound screening has led to a fifteen-fold increase in detection of small thyroid cancers. Thyroid cancer is now the No. 1 cancer diagnosed and treated in that country. But, as Welch points out, the death rate hasn’t dropped one iota there, either. (Meanwhile, the number of people with permanent complications from thyroid surgery has skyrocketed.) It’s all over-diagnosis. We’re just catching turtles.
What if I recommend not operating on a tiny tumor, saying that it is just a turtle, and it turns out to be a rabbit that bounds out of control?
Mrs. E., my patient with a five-millimetre thyroid nodule that I recommended leaving alone, feared doing too little. So one morning I took her to the operating room, opened her neck, and, in the course of an hour, removed her thyroid gland from its delicate nest of arteries and veins and critical nerves. Given that the surgery posed a greater likelihood of harm than of benefit, some people would argue that I shouldn’t have done it. I took her thyroid out because the idea of tracking a cancer over time filled her with dread, as it does many people. A decade from now, that may change. The idea that we are overdiagnosing and overtreating many diseases, including cancer, will surely become less contentious. That will make it easier to calm people’s worries. But the worries cannot be dismissed. Right now, even doctors are still coming to terms with the evidence.
Two hours after the surgery, Mrs. E.’s nurse called me urgently to see her in the recovery room. Her neck was swelling rapidly; she was bleeding. We rushed her back to the operating room and reopened her neck before accumulating blood cut off her airway. A small pumping artery had opened up in a thin band of muscle I’d cauterized. I tied the vessel off, washed the blood away, and took her back to the recovery room.
I saw her in my office a few weeks later, and was relieved to see she’d suffered no permanent harm. The black and blue of her neck was fading. Her voice was normal. And she hadn’t needed the pain medication I’d prescribed. I arranged for a blood test to check the level of her thyroid hormone, which she now had to take by pill for the rest of her life. Then I showed her the pathology report. She did have a thyroid cancer, a microcarcinoma about the size of this “O,” with no signs of unusual invasion or spread. I wished we had a better word for this than “cancer”—because what she had was not a danger to her life, and would almost certainly never have bothered her if it had not been caught on a scan.
Yesterday’s Quote of the Day discussed the harm done by our health care reform agenda that overemphasizes attacking overutilization while neglecting more compelling goals of reform. Atul Gawande has been one of the more credible and outspoken voices in raising the alarm on overutilization, especially with his widely referenced 2009 New Yorker article on the excessive use of health care services in McAllen, Texas. But where does Dr. Gawande stand when he is faced with health care utilization questions regarding his own patients?
In his current New Yorker article, “Overkill,” he describes the overtesting and overdiagnosis of thyroid carcinoma, which, in turn, results in overtreatment – all manifestations of overutilization of health care. For his own patient with a very small thyroid nodule, he recommended leaving it alone – a recommendation that is well supported in the medical literature.
Yet, apparently because the patient wanted something done, he elected to remove her thyroid gland. She did turn out to have a microcarcinoma, but he reports that it “was not a danger to her life, and would almost certainly never have bothered her.” She manifested two common problems of overutilization: 1) a post-operative complication (hemorrhage requiring a second operation), and 2) significant costs that were unnecessary but added to the very high costs of health care paid by all of us through taxes or insurance premiums.
Thus Dr. Gawande is himself an overutilizer while preaching the evils of overutilization. Our current policy priorities are to combat overutilization. What should be done in Dr. Gawande’s case? Should he and the hospital be denied payment for the thyroidectomy? Should he be assigned low quality scores that will reduce future payments for his health care services? Should he be disciplined by the appropriate medical staff committee? Was his violation serious enough to report him to the state medical licensing board for consideration of disciplinary action?
No to all of these. He is a highly respected, ethical surgeon who certainly tries to do the right thing. He did make a clinical decision that could be challenged, especially in today’s environment where overutilization is the primary target in health care reform.
Most cases of supposed overutilization as reported in many studies, such as those from Dartmouth, represent similar judgmental decisions in which opinion as to the optimal way to proceed would vary amongst the best of authorities, and Dr. Gawande’s judgement in this case falls within the realm of acceptable medical practices (she did have cancer!).
We do not have and likely never will have processes through which we can identify, with certainty, medical care that should be aborted in advance because it clearly would constitute overutilization. Complex clinical settings defy clarity in health care utilization. (There are exceptions in which clear guidelines can be established, and those guidelines certainly should be enforced.)
As mentioned yesterday, designing health policy based on overutilization has been detrimental because it results in concepts such as patient-driven health care, especially high deductibles, that have impaired patient access to beneficial medical care and have exposed patients to financial hardship. It also has generated concepts such as accountable care organizations that, to this date, have not accomplished much more than to increase the profound administrative waste that permeates the U.S. system.
Our efforts should not be directed to trying to ferret out reputable physicians such as Dr. Gawande, accuse them of overutilization, and chase them out of the profession. That could be all of us, and who then would be left to care for patients? (This is not to say that we shouldn’t rein in blatant abusers.)
Instead we should turn our attention to policies that would would make health care truly universal, comprehensive, equitable, accessible, and priced appropriately, while increasing efficiencies through policies that would actually be effective in recovering waste – the prime example being the replacement of our expensive, fragmented system of financing care with an efficient single payer national health program.
By Deborah Levine and Jessica Mulligan
Journal of Health Politics, Policy and Law, April 2015
Overutilization is commonly blamed for escalating costs, compromising quality, and limiting access to the US health care system. Recent estimates suggest that nearly one-third of health care spending in the United States is a result of unnecessary care. Despite the surge of exposés that purport to uncover this “new” problem, narratives about overutilization have been circulating in health policy debates since the beginnings of the health insurance industry. This article traces how the term overutilization has spread in popularity from a relatively small community of mid-twentieth-century insurance experts to economists, physicians, epidemiologists, and eventually the news media of the early twenty-first century. A quick glimpse at the history of the term reveals that there has been constant disagreement and debate over the meaning and impact of overutilization. Moreover, the term has been put to very different uses, from keeping socialism at bay to preserving the fiscal integrity of Medicare to protecting the health of patients. The overutilization narrative, seductive in its promise of cutting costs without sacrificing access to quality care, too often drowns out other difficult conversations about social welfare, health equity, prices, and universal coverage.
Conclusion: Overutilization Has Overreached
For sixty years, overutilization has been a key term in health policy debates. The term emerged in literature about the potential demise of voluntary insurance and then spread to new domains: first with inpatient hospital stays and then eventually with almost every other form of care. The audience for this narrative expanded as well: from industry insiders to economists, physicians, public health researchers, the media, and finally, patients.
Utilization review and other techniques for curbing overutilization like requiring prior authorization, capitated payments, and increasing patient cost sharing have now been employed by insurers and providers for decades. Yet the overall impact on health care costs appears negligible; costs continue to rise. Moreover, some analysts point out that the United States may be underutilizing a host of important services relative to other countries, especially primary care.
Overutilization of certain services probably is one of the many problems in our health care system. But there are grave consequences to considering overutilization the central problem. For one, the increased patient cost sharing that is supposed to rein in overutilization has contributed to a situation in which 31.7 million people with insurance are considered underinsured because they dedicate such a high proportion of their household income to medical bills. And as to the sizable uninsured population, the prospect of expanding coverage has too often been cast as a menace to the system rather than a laudable and socially responsible achievement.
There is a need for a more critical conversation about who wins and loses thanks to the present system setup. Some work is already happening in this regard, but it has yet to reach the wide popular audiences and become “common sense” in the way that overuse has. Academic researchers have called attention to how much we pay for services and pointed out that our high prices are largely to blame for runaway health care costs. Others have argued that risk-pooling techniques need to be resocialized by turning away from the highly segmented, experience-rated pools that currently dominate insurance marketplaces. But it is too difficult for these counternarratives to be heard above the seductive din about overutilization and the attendant need for individual consumer restraint that continues to dominate discussions of health care costs in the United States.
Overutilization is a management neologism that has become an economistic health policy fairy tale where costs can be cut, services denied, and hospital days reduced with no harm — financial, physical, or otherwise — to patients, providers, or payers. Curbing overutilization alone will not redeem our health care system. And real people stand to lose when reducing utilization and increasing efficiency is seen as the primary goal of health policies.
Yesterday’s Quote of the Day message on the prevalence of underinsurance and its consequences, largely caused by the increased use of high deductibles designed to decrease utilization of health care, is a prime example of the pervasiveness of the misguided concept that “overutilization” needs to be the primary target of reform.
Hopefully this article, “Overutilization, Overutilized,” will become a landmark paper in the chronology of health care reform. The concept of overutilization of health care has driven much of the political and policy decisions in our reform efforts. This is tragic because it “too often drowns out other difficult conversations about social welfare, health equity, prices, and universal coverage,” according to the authors.
The policies designed to correct alleged overutilization have not only been relatively ineffective in reducing spending to a meaningful degree, often they have also been harmful, impairing access to health care and frequently creating financial hardships for those with health care needs.
This is particularly shameful when there remains disagreement on which particular applications of health care are clearly excessive, and whether they are truly as pervasive as is often claimed. Further, if this waste is as common as is often claimed, most of it is not recoverable because of the difficulty of establishing precise guidelines that can be applied reliably to complex clinical settings.
We have a much greater problem with health care underutilization and its adverse consequences which are compounded by policies designed to curtail utilization.
The Abstract and Conclusion above describe the general theme of the article, but the details are important if we are to turn the reform process into one that aims to provide health care for everyone, and away from our current processes that are blunt instruments designed to reduce utilization while ignoring harm to the patient.
For those who do not have access to the current issue of the Journal of Health Politics, Policy and Law, this article can be downloaded at the link above for a fee of $15. It is unfortunate that this article is behind a paywall, because it does need to be distributed widely.
We need to do all that we can to change the dialogue on reform. Instead of imperiling our health care system with misguided policies to haphazardly reduce utilization, we need to advance policies that would make health care truly universal, comprehensive, equitable, accessible, and priced appropriately, while increasing efficiencies through policies that would actually be effective in recovering waste – the prime example being the replacement of our expensive, fragmented system of financing care with an efficient single payer national health program.
Let’s change the narrative.
The Problem of Underinsurance and How Rising Deductibles Will Make It Worse
By Sara R. Collins, Petra W. Rasmussen, Sophie Beutel, Michelle M. Doty
The Commonwealth Fund, May 20, 2015
New estimates from the Commonwealth Fund Biennial Health Insurance Survey, 2014, indicate that 23 percent of 19-to-64-year-old adults who were insured all year — or 31 million people — had such high out-of-pocket costs or deductibles relative to their incomes that they were underinsured. These estimates are statistically unchanged from 2010 and 2012, but nearly double those found in 2003 when the measure was first introduced in the survey. The share of continuously insured adults with high deductibles has tripled, rising from 3 percent in 2003 to 11 percent in 2014. Half (51%) of underinsured adults reported problems with medical bills or debt and more than two of five (44%) reported not getting needed care because of cost. Among adults who were paying off medical bills, half of underinsured adults and 41 percent of privately insured adults with high deductibles had debt loads of $4,000 or more.
Exhibit 2. Underinsured rates among adults ages 19-64 who were insured all year, by source of coverage at the time of the 2014 survey
20% – Employer-provided coverage
37% – Individual coverage
22% – Medicaid
42% – Medicare (under age 65, disabled)
The rate of growth in medical costs and insurance premiums has slowed in recent years. However, millions of consumers continue to be saddled with high out-of-pocket health care costs. While the number of underinsured people in the United States held constant in 2014, the steady growth in the proliferation and size of deductibles threatens to increase underinsurance in the years ahead.
The Affordable Care Act’s coverage expansions and protections have greatly improved the quality of insurance coverage available to people who lack job-based health benefits. In addition, cost-sharing subsidies significantly reduce deductibles for people with low incomes who buy plans in the marketplaces. But those subsidies phase out quickly, leaving families with deductibles that may be high relative to their incomes. In addition, the law has only limited ability to improve the cost protection of employer plans, which is the source of most American’s health insurance.
Reforms and new approaches are needed to improve the cost protection of health plans. These could include innovations in benefit design that slow growth in deductibles and emphasize incentives that encourage people to utilize, rather than delay, timely health care. In addition, policymakers should identify and address holes in health plans — like out-of-network physicians in in-network hospitals — which are surprising many families with unexpected costs. Finally, systemwide efforts to lower the underlying rate of medical cost growth and share those savings with consumers will be critical.
This update of The Commonwealth Fund’s continuing study of the rate of underinsurance confirms that the problem persists, and the trend of increasing deductibles may well make it worse.
It is alarming that, since 2003, the category with the most comprehensive coverage – employer-provided coverage – has doubled the rate of underinsurance increasing from 10% to 20%. The greatest contributing factor has been the increase in the use of high deductibles.
Because this study was of individuals insured for a full year, and it was completed before the end of 2014 – the first year of the ACA exchanges – the underinsurance rate of enrollees in the exchanges could not be separated out, and they were included in the category of individual coverage. In total, 37% of those with individual coverage were underinsured. This is no surprise since high deductibles have been used in the individual market in an attempt to prevent premiums from becoming even less affordable, but this has been at the cost of more than doubling the rate of underinsurance.
Although we do not have the data yet, we can make some assumptions, based on plan design, for the trends in underinsurance for those enrolled in the exchanges. Because of the subsidies for out-of-pocket expenses for those with the lowest incomes that qualify for the exchange plans, it is possible that the rate of underinsurance is slightly reduced for this group. However, for those with moderate incomes, especially for those who do not qualify for cost-sharing subsidies, the relatively low actuarial values (percent of costs that the plans cover) that most exchange enrollees select will likely perpetuate and perhaps even expand the prevalence of underinsurance. So middle-income Americans do not escape the risk of being underinsured.
Although Medicaid provides more comprehensive benefits with fewer out-of-pocket expenses, the very low incomes of Medicaid beneficiaries leave many of them underinsured since the modest cost sharing that they do have consumes an excessive percentage of their incomes.
Patients under 65 who receive Medicare do so because of major long-term disabilities. Since most of them have very limited incomes and other expenses, and Medicare’s comprehensiveness is limited, this group has the highest rates of underinsurance – 42%. Obviously, when we speak of Medicare for all, it is imperative that we clarify that we mean an improved Medicare that has much more comprehensive coverage.
Can this trend be reversed? Can we put in place policies that will result in reducing or even eliminating the deductibles?
If the plans were to maintain the same actuarial values to keep the premiums the same while reducing deductibles, the out-of-pocket costs would shift to those with greater health care needs who already have enough financial problems. That would defeat one of the most important functions of health insurance – preventing financial hardship in the face of medical need.
Another possibility would be to reduce the deductibles and shift the actuarial values upward, but that would result in sharp increases in insurance premiums. That would not be acceptable to employers, nor would it be acceptable to politicians who would have to find revenue sources to increase the premium subsidies for the exchange plans. It is easy to cut spending for employers and for the budget hawks in Congress, but it is almost impossible to reverse the cuts and restore or even expand that spending.
Suppose we leave the higher deductibles in place, but provide enough subsidies to eliminate underinsurance for everyone. The administrative complexity alone would make this a very foolish idea. Also when you look at who is underinsured, you would have to increase the amounts of the subsidies and expand eligibility to cover many more of the moderate income individuals in the exchanges, and you would also have to provide subsidies for those enrolled in employer-provided plans to cover the increase in deductibles and other cost sharing in those plans. This would further compound the wasteful administrative excesses that already characterize our health care financing system.
Do we really need to say it again? A well designed single payer system would fix this.
Health Plans Poised to Ask for Higher Premiums for 2016, Blue Cross Executive Warns
By Sara Hansard
Bloomberg BNA, Health Care Blog, May 14, 2015
Look for health plans to request higher rates for 2016, a Blue Cross and Blue Shield Association (BCBSA) executive warned May 13.
Costs for health plans in 2014 were higher than expected due to fewer young enrollees signing up for Affordable Care Act plans during the first year that the major provisions of the law took effect requiring people to have coverage or pay a fine, Kim Holland, BCBSA director for state affairs, said at a conference on ACA health insurance exchanges.
That left health plans sold on the ACA exchanges with a high portion of enrollees who had previously unmet medical needs, such as costly transplants, Holland said. “Those plan costs were higher and those are expected to play out in higher rates,” she said. “We’re starting to see that now as plan filings are becoming public, and that is likely to continue.”
Moreover, she added, it’s unlikely that plans will receive much of the money they had expected from the ACA’s risk corridors program, which was intended to help cover insurers’ losses in the event they ended up with a sicker-than-average population. Too many plans had to cover high medical bills, leaving too few plans to pay into the fund for the program, she said.
Holland also warned that there are “unrealistic pressures” on insurers to keep premiums down. “You cannot have every doctor in your network, very low copays, broad benefits and lower costs. It just can’t work that way,” she said.
Health Insurance Exchange Summit, May 11-13 2015, Washington, DC, Health Plan Strategic Response Roundtable, with Kim Holland (Video, fee $59.95):http://www.healthinsuranceexchangesummitportal.com/view_media.php?mid=122
Affordable Care Act is wrong framework to fix adverse selection
Quote of the Day, August 25, 2010
Any health care financing system that divides health care funds into separate risk pools inevitably experiences adverse selection. In fact, private insurers do all that they can to see that their own risk pools contain low-cost healthier individuals while shifting higher-cost individuals into other public or private risk pools.
Adverse selection was not simply an inconvenient policy problem that the legislators had to fiddle with merely because they rejected the concept of a single universal risk pool that eliminates the problem of adverse selection. Far worse, it was a deliberate policy decision supported by the leadership of the private insurance industry.
Analysis Finds No Nationwide Increase in Health Insurance Marketplace Premiums
The Commonwealth Fund Blog, December 22, 2014
A new analysis of the Affordable Care Act’s health insurance marketplace costs finds that, nationwide, marketplace premiums did not increase at all from 2014 to 2015, though there were substantial average premium increases in some states and declines in others.
While average premiums nationwide did not change from 2014 to 2015, there were wide differences across states.
The risk stabilization programs, which include risk adjustment, risk corridors, and reinsurance, diminish insurers’ risk of financial losses and allow them to price their plans more aggressively.
An outstanding question, however, is the long-term sustainability of current trends in premiums.
Supporters of the Affordable Care Act (ACA) tout the fact that premiums for plans offered in the ACA exchanges did not increase in the second year, showing that ACA has been effective in slowing the cost of health care. Yet Kim Holland, Blue Cross Blue Shield Association director for state affairs, warns that private insurers will be requesting higher rates for 2016. How can we explain this?
We warned long ago that ACA would not eliminate adverse selection – the concentration into insurance risk pools of patients with more expensive medical problems.
According to Kim Holland, “costs for health plans in 2014 were higher than expected due to fewer young enrollees signing up for Affordable Care Act plans,” and “that left health plans sold on the ACA exchanges with a high portion of enrollees who had previously unmet medical needs, such as costly transplants.” Although private insurers have been masters at gaming adverse selection, they have now become victims of it.
A couple things happened to cause this. First, although HHS claims that healthier, younger individuals did sign up in large numbers, the insurers’ numbers show that this enrollment was inadequate to dilute the ACA risk pools. Another factor is that there was a surge in enrollees who had major unmet medical needs requiring expensive procedures such as joint replacements or organ transplants. In addition, the risk corridor program set up to compensate for these greater losses appears to be inadequate since the the profits in the risk pools insuring healthier individuals were not large enough to offset the greater losses in the more expensive pools.
If this is the case, then why didn’t the premiums increase for 2015? That’s simple. The insurers had only a few months of experience with their first year enrollees when they had to submit their premium requests for 2015. So they had to rely primarily on claims experiences prior to 2014. Now they are in the process of submitting their requests for 2016, and they now have a full year’s experience demonstrating that costs actually were higher, at least partly due to adverse selection.
The Commonwealth Fund’s report showing that premium increases for 2015 were insignificant should not have been interpreted as showing that costs did not go up. Costs did go up, but the premiums were based primarily on the same data used to establish premiums for 2014.
Five years into ACA we now have the right to be in a “we told you so” mode. We were not prescient. Health policy science is advanced enough to predict quite accurately the consequences of these policy decisions. Just think of the multitude of other adverse consequences we have predicted, and we have not been wrong yet.
We have also predicted the benefits of a properly designed single payer national health program. We cannot see the results of such a program here in the United States since we don’t have a single payer system (and Medicare is not single payer because it is only one player in an administratively inefficient, fragmented system). But other nations do have single payer systems, and their beneficial results were fully predictable.
Ignore health policy science at your own risk, or maybe we should say at the nation’s risk.
Money matters: Billing and payment for a New Health Economy
PricewaterhouseCoopers (PwC), Health Research Institute, May 2015
At a glance
The nation’s healthcare billing and payment system is an artifact of an earlier age. Much can be done to improve the system in the short term, but in the long term, structural change is needed to compete in the New Health Economy
Key findings include:
- Patients and affluent consumers are most dissatisfied with the healthcare billing and payment system.
- Cost-conscious millennials are more likely than the general population to judge healthcare organizations based on their billing practices.
- Consumers and new entrants are beginning to circumvent the claims-based healthcare payment system, especially in primary care services and chronic disease management.
- Four in five adults with commercial insurance paid less than $1,000 in out-of-pocket expenses in a year, according to an HRI analysis.
What this means for your business
- Accelerate the move to digital.
- Embrace simplicity.
- Sidestep claims. The growth of high-deductible plans means more consumers will pay for care out-of-pocket. New entrants are reconsidering whether these cash payments require claims. Consumers are interested, even though receiving credit toward deductibles is more important than ever.
- Multiply payment options. Offering choices for payment, making payment easy and helping consumers plan for costs can reduce bad debt and days in accounts receivable.
Strategy: Sidestep claims
An HRI analysis of commercial claims for over 34 million Americans in 2012 found that 80% paid less than $1,000 in out-of-pocket expenses. That year, the average annual deductible for an individual was about $1,000. Nearly half of consumers with commercial insurance incurred less than $1,000 in medical bills in a year. These consumers are ripe for poaching by new entrants from the emerging claims-free healthcare economy.
Marcee Chmait, CEO of SpendWell, a new entrant direct-pay marketplace for healthcare services, said she foresees a future when “cash is king” in healthcare. Higher deductibles, real-time adjudication of claims and transparency will phase-out negotiated rates and discounts.
These changes create a true retail shopping experience between buyer and supplier (consumer and provider). When third party pricing arrangements are eliminated, pricing falls as suppliers costs fall as suppliers set their prices directly to their end buyers.
Even as companies targeting consumers with low annual medical expenses forge a direct-pay economy, the majority of medical costs are borne by a small percentage of people with serious and chronic illnesses. These costs require different fixes.
Conclusion: A roadmap
Many improvements can be made in the near-term, from offering consumers cost and payment information before they arrive for service to aggregating their medical bills on a simple online site. In the longer term, the system will need to be re-engineered to accommodate the millions of consumers paying cash for care. Here’s a roadmap for near-term pain relievers and longer-term fixes:
CURRENT STATE CLAIMS MODEL
- Eligibility verification
- Care delivery/charge capture
- Claim submission
- Claim adjudication
- Payment/advice delivery
NEW HEALTH ECONOMY
- Online shopping for care
- Cost estimates/discussion during scheduling
- Payment information capture upon scheduling
- Discussion of costs and choices
- Loyalty programs enrollment
- Enrollment in online bill management and payment tool
- Loyalty programs
- Subscriptions for primary care and chronic disease management
- Flat-fee services
- Flat-fee model
- Other models
- Loyalty program rewards
- Coverage verification through combined ID and payment card
- Estimates allow out-of-pocket collection
- Discussion of costs and choices
- Menu of prices
- Out-of-pocket payment due at service
Claim acquisition and submission
- Practice management software integrated with payments/claims network
- Capture and processing of claims data
- Eligibility for specific benefits verified prior to claims adjudication
- Determination of provider contract rules and fee schedules
- Capitation determination
- Accumulators updated automatically
- Real-time adjudication of claims
Consumer liability calculation
- Deductible and patient responsibility healthcare calculated at provider
Sophisticated patient payment options
- Consumer payment through multiple accounts
- Flexible payment plan options
- Financial counseling
- Amortization for some treatments
- Verification of funds availability
- Payment authorization
Payment information transmission
- Fund requests and payment transmission
- Payment of consumer liability (next day)
- Payment of plan deductible (1–5 days)
- Real time payment
- Integrated statements for all health related transactions
- Immediate updating of online accounts, web portal or app
To better understand what this PwC report is all about, think about the recent pervasive shift to high-deductible health plans and what that means for the way the majority of us pay our health care bills, or at least the way that many in the policy community believe that we should be paying our bills.
Remember that about 20 percent of us have high health care expenses and use about 80 percent of our health care dollars. That means that the other 80 percent of us who are relatively healthy use only 20 percent of health care funds.
This report confirms what we already knew: 80 percent of individuals with commercial insurance paid less than $1000 out-of-pocket for medical expenses. That means that the insurance companies essentially are paying benefits for primarily the 20 percent with more serious medical problems. The rest of us are essentially on a cash basis, though with constraints such as provider networks and contracted provider rates.
If you read the full report, you will see that the medical-industrial complex is introducing innumerable innovations to try to capture this cash-and-carry business. Providers are attempting to circumvent contracted rates so they can collect their full charges. Third party money managers are coming out of the woodwork to sell us their various services – whether they be traditional insurers with new innovations in their products, or other third parties with innovative methods of managing cash accounts. Whatever innovations they introduce, they are clearly designed to capture as much of these cash payments as possible.
Now maybe you can make some sense out of this PwC report. Much of their report describes how unsatisfactory the current billing and payment system is, and especially the dissatisfaction of health care “consumers,” especially those who are wealthy or who are sick. So what do they suggest? We should abandon the current claims model and switch to a simplified, digital model that sidesteps the current claims process. They call their model the “New Health Economy.”
But look at the specifics of their recommendations. First they list the five simple steps of the current claims system, but label this “an artifact of an earlier age.” Then they show us their “New Health Economy” model. Are they kidding? Look at it! This is their “simplified” method of processing the cash segment of health care financing. What is ironic is that they convert the process of paying cash into expensive, complex digital processes, in the name of simplification!
As long as we continue on the path of consumer-directed health care, with its high deductibles and other cost sharing, we can anticipate many more such innovations that serve the industry well, but at a cost of shifting more of the burden onto patients. Look again at the “New Health Economy” and try to explain to yourself exactly how their scheme makes patients better health care shoppers.
Now think about how this would be handled through a single payer national health program, with first dollar coverage (a highly successful model used by several other nations). We would not need to shop for health care bargains since not only would our own public stewards have already obtained the best prices, but also we would not have to be involved in payment decisions at all since our stewards would make the payments directly through our single, equitably-funded, universal risk pool.
Really. Look again at the “New Health Economy.” Do we really want to proceed with this marketplace model of reform that works well for the industry? Or do we want a public program that works well for all of us?
2015 Employer-Sponsored Health Care: ACA’s Impact
International Foundation of Employee Benefit Plans
On March 26, 2015, the International Foundation of Employee Benefit Plans deployed its sixth survey in a series on how single employer plans are being affected by the Affordable Care Act (ACA).
From the Key Findings:
Health Insurance Exchanges
- Ninety-four percent of all surveyed organizations continue to provide health care coverage for all full-time employees in 2015 and, among that group, nearly all plan to continue coverage in 2016. Respondents overwhelmingly chose three reasons for maintaining coverage: to attract future talent, retain current employees and maintain/increase employee satisfaction and loyalty.
- Less than 5% of organizations provide coverage to full- or part-time employees through private health insurance exchanges. However, more than one in ten organizations that provide coverage to retirees aged 65 and older are doing so via private exchanges, and 17% more are considering doing so.
- More than one-third of organizations now have increased out-of-pocket limits, in-network deductibles and/or participants’ share of premium costs in response to ACA. More than one in five organizations have increased copayments or coinsurance for primary care, increased participants’ share of prescription drug costs and/or increased the employee proportion of dependent coverage cost.
- One in five organizations has adopted or expanded wellness initiatives because of ACA and another 17% plan to do so in the next 12 months.
- Fifteen percent of organizations have adjusted hours so fewer employees quality for full-time employee medical insurance.
- The excise tax on high-cost group health plans (a.k.a. Cadillac tax) is considered the top ACA cost driver beyond 2015. Since 2011, a steadily increasing percentage of organizations has taken action to avoid triggering the excise tax — a trend likely to continue. More than one in ten organizations already have adopted changes to prevent them from triggering the tax, 21% are working on changes and 28% plan to act sometime prior to 2018. Only one-quarter said changes were not necessary either because they have no high-cost plans (23%) or because they plan to pay the tax (2%).
- The most common action taken to avoid triggering the excise tax is moving to a consumer-driven health plan (CDHP). In particular, more than one-quarter of all responding organizations have increased emphasis or added a high-deductible health plan (HDHP) with a health savings account (HSA) because of ACA, and an additional 14% are considering doing so. Nearly one in ten organizations has adopted a full-replacement HDHP because of ACA.
- Two-thirds of organizations have conducted an analysis to determine how ACA will affect 2015 health care plan costs. Among all organizations, 82% expect the law will increase their organization’s health care costs this year, with most projecting a 1% to 6% increase. The median cost increase is 3% among organizations that know their exact 2015 cost change because of ACA. However, ACA-related costs are hitting smaller employers much harder than larger ones. General ACA administrative costs and costs associated with reporting, disclosure and notification requirements are the top ACA cost drivers for 2015.
This is yet one more highly credible report that indicates that the quintessence of health insurance coverage – employer-sponsored health plans – is deteriorating.
Most of the changes are responses to the very high costs of health care. Employers are shifting more of the costs to employees through much higher deductibles, higher copayments and coinsurance, higher premium contributions, higher shares of drug costs, and an increase in contributions for dependent coverage. This trend began before the Affordable Care Act (ACA) was implemented. ACA actually has very few provisions that lead to major cost increases, except that most employers complain of increased administrative costs associated with compliance with ACA.
Another exception where ACA does play a consequential role for employers is the excise tax that will be assessed on plans with higher premiums. The tax will be significant, and so employers are already taking action to keep insurance premiums below the threshold at which the tax will be assessed. The most common action being taken is to move employees into consumer-driven health plans – high deductible health plans with or without health savings accounts.
Innumerable studies have confirmed that high-deductible health plans both impair access and increase the risk of financial hardship, so they have a negative impact on both the health security and the financial security of the employees.
Some employers understand that an improved Medicare that covered everyone – a single payer national health program – would ensure accessible and affordable health care for all of their employees, while eliminating the headache of having to administer their health benefit programs. It is too bad they are not joining together to advocate for single payer. It just seems like the logical thing to do.
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