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.
Working Framework of SGR Package
House Committees on Energy & Commerce and Ways & Means, March 20, 2015
Repeal and Replace Medicare Physician Payment System. The legislation repeals the flawed SGR formula and replaces it with HR 1470, SGR Repeal and Medicare Provider Payment Modernization Act (replaces SGR with MIPS, the Merit-based Incentive Payment System)
Children’s Health Insurance Program (CHIP). This provision preserves and extends CHIP, fully funding the program through September 30, 2017.
Medicare, Medicaid, and Other Health Extenders. The legislation extends all of the extenders included in the Protecting Access to Medicare Act of 2014 (PAMA, the most recent SGR patch) in addition to funding for Community Health Centers through 2017.
Other Medicare Reforms.1) Medicare DMEPOS Competitive Bidding Improvement Act (HR 284). (2) The Protecting Integrity in Medicare Act (HR 1021).
(1) Income-related Premium Adjustment. Starting in 2018, this policy would increase the percentage that beneficiaries pay toward their Part B and D premiums in two income brackets (roughly 2 percent of beneficiaries): for individuals with income between $133.5-160K ($267-$320K for a couple), the percent of premium paid increases from 50 percent to 65 percent. For those with income between $160-214K ($320- $428K for a couple), the percent increases from 65 percent to 75 percent.
(2) Medigap Reform. The proposal limits first dollar coverage on certain Medigap plans by prohibiting plans from covering the Part B deductible. Change applies only for future retirees starting in 2020.
(3) Increase Levy Authority on Payments to Medicare Providers with Delinquent Tax Debt.
(4) Hospital Update. Under current law, hospitals will receive a 3.2 percentage point adjustment in addition to their base payment rate in FY18. This policy would phase-in this update incrementally.
(5) Additional Medicaid DSH Savings.
(6) 1 Percent Market Basket Update for Post-Acute Providers
What Measures Should Be Used to Evaluate Health Care?
By Melinda Beck
The Wall Street Journal, March 22, 2015
There’s little agreement among patients, providers and insurers
Primum Non Nocere: Congress’s Inadequate Medicare Physician Payment Fix
By Jeff Goldsmith
Health Affairs Blog, January 24, 2014
With this legislation, Congress is preparing yet again to enshrine in statute another payment strategy that is both unproven and highly controversial.
The proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place. The cure is actually worse, and potentially more expensive, than the disease we have now.
If we’re not sure new advanced payment schemes actually work, if we haven’t actually gotten them right, then we have no business compelling or incenting 680 thousand practicing physicians to use them. We’re not going to get clinical practice where we want it to go with an elaborate, individualized operant conditioning schedule with four domains and sixty eight “core measures”, and billions more spent on the IT systems and clerical support to document them. We need to reward teamwork, not box-checking.
It isn’t just physicians that should be guided by Hippocrates’ maxim, “First Do No Harm,” but our policymakers as well.
We’re there. The SGR extension expires March 31, and Congress is leaving for a two week recess this Friday, March 27. Not only is there strong bipartisan Congressional support for HR 1470, the SGR repeal and replacement act, but there is also overwhelming support from the AMA and other physician societies and from other influential interest groups such as Families USA. The bill will pass this week.
The last two Quote of the Day messages have discussed some serious defects in this legislation, especially the problems with the Merit-based Incentive Payment System (MIPS). But that part of the bill is a given. What is new today is the one page summary of the intended amendments that will be added before enactment of the bill (see “Working Framework of SGR Package,” above).
Two items in these proposed amendments are of particular concern: 1) Means-testing of Medicare Part B and Part D premiums, and 2) Prohibiting Medigap plans from covering the Part D deductible.
Under means-tested premiums, higher-income individuals will be required to pay larger premiums, undermining the support of this influential group for the traditional Medicare program. Since they will be paying higher premiums, many likely would prefer to select their own coverage from a market of private Medicare plans – a goal of those supporting privatization of Medicare through the premium-support model of reform. Thus this provision would be a significant incremental step towards privatization.
Prohibiting Medigap plans from covering Medicare Part B deductibles expands the implementation of consumer-directed approaches to financing health care. It advances the conservative agenda of requiring more personal responsibility on the part of patients, often expressed by the repulsive “skin in the game” rhetoric. Much has been written about the potential adverse consequences of deductibles, but the more ominous portent of this measure is that it establishes the principle that all health care must conform with the consumer-directed model. As we have seen, the use of ever higher deductibles is rapidly expanding in employer-sponsored plans, and this opens the door for the same rapid increase in cost sharing to occur with Medicare.
But back to the basic bill – using the MIPS to replace the SGR. In the last two Quote of the Day messages it was pointed out what an administrative nightmare MIPS would bring us. What should be particularly alarming is that these new required administrative procedures have not been shown to either significantly decrease the volume of medical services, or improve quality – supposedly the two goals of payment reform.
As Jeff Goldsmith states about last year’s version of the same policies, “The proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place. The cure is actually worse, and potentially more expensive, than the disease we have now.”
Tune in to C-Span this week for the latest chapter in their epic fiction series: Democracy in America.
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.
Summary of “SGR Repeal and Medicare Provider Payment Modernization Act”
House Committees on Energy & Commerce and Ways & Means, March 19, 2015
Yesterday’s Quote of the Day: http://www.pnhp.org/news/2015/march/emergency-the-mips-stake-is-plunging…
Yesterday’s Quote of the Day message sounded the alarm on legislation that would replace the flawed Sustainable Growth Rate formula (SGR) for updating Medicare payments with a new Merit-based Incentive Payment System (MIPS) – legislation with strong bipartisan support that will be taken up in Congress this week and is expected to pass.
Yesterday I sent out a link to the actual legislation (minus crucial amendments, likely detrimental, that have not yet been advanced). Since few have the time to plow through the legislative language and make sense of it, I am now providing a link to the eight page summary (above).
Why this concern?
The SGR formula is considered to be flawed primarily because economic factors considered in the formula would result in inappropriate payment reductions in many of the yearly adjustments. Thus there is consensus that the formula should be repealed. However, it did provide an administratively simple process for trying to keep Medicare rates from increasing well beyond the growth in the economy. That is, there was no administrative burden placed on the providers; they merely had to accept adjustments in their payments.
The concern is over its replacement: MIPS. On reading the summary of the “SGR Repeal and Medicare Provider Payment Modernization Act,” you will see that MIPS places a tremendous administrative burden on health care professionals in a health care system that is already overwhelmingly overburdened with administrative excesses. The only way to escape this additional burden is to participate in Alternative Payment Models (APMs) which, in themselves, create further significant administrative burdens (ACOs, PCMHs, etc.). MIPS is an administrative nightmare.
Some might consider the administrative excesses of MIPS to be worth it if it were to result in fair adjustments to Medicare payment rates. But you need to read the “MIPS Payment Adjustment” section of the summary.
Under the MIPS payment system, eligible professionals with higher scores will receive positive payment adjustments (and may be eligible for an additional incentive payment). We have observed repeatedly how such systems are gamed in order to receive these extra payments. The problem is that those who do not game the system, and especially those with practice situations and patient populations that make it very difficult to score higher points, will almost automatically receive performance scores below the threshold since their performances will be compared with the gamers. This will result in negative payment adjustments – reducing payments by up to nine percent. If you think SGR is unfair, MIPS robs from these hard-working professionals who are just trying to make the system work for their patients, and gives the spoils to those who likely have consultants to show them how to game the system. (Consultants? See Sec. 6 that authorizes “qualified entities” to suck more money out of our health care system by selling analyses and claims data to assist providers in their quality improvement activities., i.e., professional gamesters.)
This is serious. And it is being steamrolled through Congress right now! I consider myself an information resource, but I am not an organizer. Those who care about the future of Medicare and who do have organizational skills must immediately inform themselves on what is happening here. Then act. You cannot wait to watch the Congressional vote tally on C-Span, perhaps as early as this week. By then it will be a done deal.
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.
H.R. 1470: “SGR Repeal and Medicare Provider Payment Modernization Act of 2015”
To amend title XVIII of the Social Security Act to repeal the Medicare sustainable growth rate and improve Medicare payments for physicians and other professionals, and for other purposes.
TABLE OF CONTENTS.—The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Repealing the sustainable growth rate (SGR) and improving Medicare payment for physicians’ services.
Sec. 3. Priorities and funding for measure development.
Sec. 4. Encouraging care management for individuals with chronic care needs.
Sec. 5. Empowering beneficiary choices through continued access to information on physicians’ services.
Sec. 6. Expanding availability of Medicare data.
Sec. 7. Reducing administrative burden and other provisions.
Sec. 2 (c) MERIT-BASED INCENTIVE PAYMENT SYSTEM.
(1) IN GENERAL.—Section 1848 of the Social Security Act (42 U.S.C. 1395w–4) is amended by adding at the end the following new subsection:
“(q) MERIT-BASED INCENTIVE PAYMENT SYSTEM.—
“(A) IN GENERAL.—Subject to the succeeding provisions of this subsection, the Secretary shall establish an eligible professional Merit-based Incentive Payment System (in this subsection referred to as the ‘MIPS’) under which the Secretary shall—
“(i) develop a methodology for assessing the total performance of each MIPS eligible professional according to performance standards under paragraph (3) for a performance period (as established under paragraph (4)) for a year;
“(ii) using such methodology, provide for a composite performance score in accordance with paragraph (5) for each such professional for each performance period; and
“(iii) use such composite performance score of the MIPS eligible professional for a performance period for a year to determine and apply a MIPS adjustment factor (and, as applicable, an additional MIPS adjustment factor) under paragraph (6) to the professional for the year.
“(2) MEASURES AND ACTIVITIES UNDER PERFORMANCE CATEGORIES.—
“(A) PERFORMANCE CATEGORIES.—Under the MIPS, the Secretary shall use the following performance categories (each of which is referred to in this subsection as a performance category) in determining the composite performance score under paragraph (5):
“(ii) Resource use.
“(iii) Clinical practice improvement activities.
“(iv) Meaningful use of certified EHR technology
“(B) MEASURES AND ACTIVITIES SPECIFIED FOR EACH CATEGORY.—For purposes of paragraph (3)(A) and subject to subparagraph (C), measures and activities specified for a performance period (as established under paragraph (4)) for a year are as follows:
“(i) QUALITY.—For the performance category described in subparagraph (A)(i), the quality measures included in the final measures list published under subparagraph (D)(i) for such year and the list of quality measures described in subparagraph (D)(vi) used by qualified clinical data registries under subsection (m)(3)(E).
“(ii) RESOURCE USE.—For the performance category described in subparagraph (A)(ii), the measurement of resource use for such period under subsection (p)(3), using the methodology under subsection (r) as appropriate, and, as feasible and applicable, accounting for the cost of drugs under part D.
“(iii) CLINICAL PRACTICE IMPROVEMENT ACTIVITIES.—For the performance category described in subparagraph (A)(iii), clinical practice improvement activities (as defined in subparagraph (C)(v)(III)) under subcategories specified by the Secretary for such period, which shall include at least the following:
“(I) The subcategory of expanded practice access, such as same day appointments for urgent needs and after hours access to clinician advice.
“(II) The subcategory of population management, such as monitoring health conditions of individuals to provide timely health care interventions or participation in a qualified clinical data registry.
“(III) The subcategory of care coordination, such as timely communication of test results, timely exchange of clinical information to patients and other providers, and use of remote monitoring or telehealth.
“(IV) The subcategory of beneficiary engagement, such as the establishment of care plans for individuals with complex care needs, beneficiary self-management assessment and training, and using shared decision-making mechanisms.
“(V) The subcategory of patient safety and practice assessment, such as through use of clinical or surgical checklists and practice assessments related to maintaining certification.
“(VI) The subcategory of participation in an alternative payment model (as defined in section 1833(z)(3)(C)).
In establishing activities under this clause, the Secretary shall give consideration to the circumstances of small practices (consisting of 15 or fewer professionals) and practices located in rural areas and in health professional shortage areas (as designated under section 332(a)(1)(A) of the Public Health Service Act).
“(iv) MEANINGFUL EHR USE.—For the performance category described in sub-paragraph (A)(iv), the requirements established for such period under subsection (o)(2) for determining whether an eligible professional is a meaningful EHR user.
Sec. 2(e)(6) INTEGRATING MEDICARE ADVANTAGE ALTERNATIVE PAYMENT MODELS.—Not later than July 1, 2016, the Secretary of Health and Human Services shall submit to Congress a study that examines the feasibility of integrating alternative payment models in the Medicare Advantage payment system. The study shall include the feasibility of including a value-based modifier and whether such modifier should be budget neutral.
GPO pdf of H.R. 1470: https://www.congress.gov/114/bills/hr1470/BILLS-114hr1470ih.pdf
It is URGENT that everyone who cares about the future of Medicare understands what is happening here.
H.R. 1470, the “SGR Repeal and Medicare Provider Payment Modernization Act of 2015,” was formally introduced in the House of Representatives only yesterday (3/19/15), with strong bipartisan support. The 158 pages (GPO pdf) introduced so far provide a mechanism for replacing the Medicare Sustainable Growth Rate (SGR) for determining Medicare payments, with a new Merit-based Incentive Payment System (MIPS).
Next week it is anticipated that the House will act on amendments that allegedly will help offset the cost of canceling payment reductions that would have taken place under the SGR system. Today’s message is limited to the new MIPS, but everyone should be alarmed about the amendments that are to be considered next week. Just two of them – greater means testing of Part B premiums, and requiring Medigap enrollees to start paying deductibles – will be very damaging to the egalitarian nature of our Medicare program.
The excerpts from H.R. 1470, above, reveal how the government intends to fulfill its goal of supposedly converting Medicare from a system that pays based on volume to a system that is based on value. Since the excerpts represent only a small sampling of this bill, it would be wise to download the full bill. You can gain a better understanding of the bill by skimming through the 158 pages, reading only the lines in full capital letters, while reading in full any section that piques your interest. It takes just a few minutes. That’s too much? Remember, this bill is about to become law and we will have to live with it perhaps for decades (the scorned SGR has been with us for 18 years).
One ominous clause in the bill is Sec. 2(e)(6) on page 101 of the GPO version. It calls for a study of “the feasibility of integrating alternative payment models in the Medicare Advantage payment system.” That is code language to clarify that these onerous requirements of MIPS apply only to the traditional Medicare program and not to the private Medicare Advantage plans. Why is that important?
The House budget introduced this week once again calls for the end of the traditional Medicare program and replacing it with a market of private plans. Although this has been a Republican goal, many Democrats now agree to this MIPS legislation that moves in that direction, and it has the strong support of the AMA and other physician organizations. While loudly proclaiming that we finally have a “doc fix” for the SGR, they are moving forward with changes that will lead us much closer to Medicare privatization, using the excuse that compromise is the way the legislative process works.
Physicians will be mortified by the new requirements and administrative burdens of MIPS. They will be looking for a way out. For those not able to retire, there may be a mass exodus of physicians from the traditional Medicare program into the Medicare Advantage plans. Included in H.R. 1460 is even a ruling change that simplifies the requirements for a physician totally opting out of Medicare indefinitely.
This process is being steamrolled. The bill will pass this month, unless Congress is deafened by a roaring protest.
Are you just going to sit there?
Unions, retirees blast Jerry Brown’s state worker medical plan
By Jon Ortiz
The Sacramento Bee, March 18, 2015
Unions lined up Wednesday to oppose Gov. Jerry Brown’s proposal to offer high-deductible medical coverage to state employees, suggesting it could hurt workers’ health instead of improving it.
“We think that high-deductible plans are a very bad thing,” SEIU Local 1000 President Yvonne Walker said during a Senate subcommittee hearing into Brown’s plan.
Meanwhile, state experts said it’s not clear whether a plan with high-monthly premiums and a tax-advantaged health savings account would save money in the long run. The most comprehensive studies take in only three years, not nearly long enough to establish a reliable trend.
Brown wants to add at least one health plan to the state’s menu that would give subscribers lower monthly premiums and a tax-advantaged health-savings account in exchange for higher co-pays for visits to doctor significantly larger deductibles for treatments, hospitalization and drugs.
High-deductible plans and health-savings accounts have become common in the private sector as a way for employers to shift more health care cost to their employees. This year the state will pay about $3 billion for employee medical benefits.
CalPERS, which is dominated by union members and politicians with labor ties, has stayed away from offering the kind of low-premium high-deductible health plan Brown has proposed, said Ann Boynton, who is responsible for the fund’s health plan contracting.
For reference, she noted that the lowest-premium plan CalPERS offers members now, PERS Select, has just 17,000 subscribers, fewest of any of its preferred-provider organization plans.
Member surveys show those subscribers are the most dissatisfied with their coverage, Boynton said, due to the steep co-pays and how hospitals in the preferred networks price services.
Retirees Could Lose their ‘Guaranteed’ Health-Care Benefits
By Allison Schrager
Bloomberg Business, March 18, 2015
California’s struggling to pay for health care for retired state employees, with an estimated $72 billion in medical costs coming in the next 30 years. Governor Jerry Brown’s solution: Make workers start contributing money to pay for the health care they’ll need after retiring.
Until recently, the courts had regularly said that health-care benefits must be honored. In January, that changed: The Supreme Court unanimously decided that retiree health benefits are not necessarily guaranteed.
Since 1992, private companies have had to list health-care obligations as a liability on their balance sheets. Being forced to disclose health-care costs led many employers to ditch retiree health care. A Kaiser Foundation report speculates that the remaining plans may soon be eliminated, too.
The Supreme Court’s ruling may finally signal the end of private-sector retirement health benefits. What it means for public-sector retirees is still an open question, although some lawyers say the same ruling will apply. If that’s the case, the consequences may be more far-reaching. Employer health coverage among public-sector retirees is still common. From 2006 to 2010, health plans covered two-thirds of Medicare eligible and three-quarters of early retirees.
Private employers have taken the initiative in slowing the cost increases in their health benefit programs. They have been reducing or terminating their retiree health plans. They have also greatly expanded the use of high-deductible health plans which shift costs of care to their employees. Public employees have been relatively insulated from these reductions, largely due to more favorable plans negotiated by their unions. California’s Governor Jerry Brown is now attempting address the state’s budget issues by reducing the state’s contribution to these plans.
These were not free benefits that the unions negotiated. They were paid for by forgoing wage increases. To reduce these benefits without compensatory wage increases amounts to significant pay cuts for the government employees. That is not right.
Also, high-deductible health plans clearly reduce access to appropriate health care primarily because health care becomes less affordable when the patient is faced with greater out-of-pocket costs. CalPERS has confirmed what was already well known about the high-deductible plans: subscribers to these plans are the most dissatisfied. Today’s payers, whether the government or the private sector, are taking it out on their employees through these undesirable reductions in benefits that create potential financial hardships for their employees.
It would be far better to remove the employer, public or private, from the role of being keeper of the health benefits, and to restore, in full, the wage and salary increases that have been forgone to pay for these programs.
With a publicly-financed and publicly-administered single payer program – an improved Medicare for all – there would be no need for employer-sponsored plans for either active or retired employees. Also, the public program would be designed for the benefit of patients needing care, rather than being used inappropriately as a tool to balance public or private budgets.
With billions in the bank, Blue Shield of California loses its state tax-exempt status
By Chad Terhune
Los Angeles Times, March 18, 2015
Authorities have revoked the tax-exempt status of nonprofit Blue Shield of California, potentially putting it on the hook for tens of millions of dollars in state taxes each year.
The move by the California Franchise Tax Board comes as the state’s third-largest health insurer faces fresh criticism over its rate hikes, executive pay and $4.2 billion in financial reserves.
The highly unusual action comes after a lengthy state audit that looked at the justification for Blue Shield’s taxpayer subsidy.
Now, a company insider has sided with critics. Michael Johnson, who resigned as public policy director last week after 12 years at the company, said the insurer has been “shortchanging the public” for years by shirking its responsibility to Californians and operating too much like its for-profit competitors.
On Wednesday, Johnson plans to launch a public campaign calling on executives to convert the insurer into a for-profit company and return billions of dollars to the public that could be used to bolster the state’s healthcare safety net. He estimates the company could be worth as much as $10 billion.
In 1996, a similar conversion of Blue Cross of California — now part of Anthem — generated $3 billion to establish the California Endowment and the California HealthCare Foundation.
The company defends its work on behalf of Californians. It cites its long-standing support of health reform and numerous efforts to make coverage more affordable.
“Blue Shield as a company and management team firmly believes it is fulfilling its not-for-profit mission and commitment to the community,” said company spokesman Steve Shivinsky.
In 2011, amid a backlash over rate increases, the insurer capped its profits at 2% of annual revenue and gave back about $560 million to customers and community groups from 2010 to 2012. Blue Shield has also contributed more than $325 million over the last decade to its own charitable foundation.
But some consumer advocates and health-policy experts say those gestures are lacking in light of the company’s stockpile of cash.
Blue Shield’s surplus of $4.2 billion at the end of 2014 is four times as much as the Blue Cross and Blue Shield Assn. requires its member insurers to hold to cover future claims.
Critics also note the company hasn’t served the state’s poorest residents on Medi-Cal and it has frequently run afoul of state regulators. The 2011 disclosure of a nearly $5-million salary for its former chief executive drew protests.
Some consumer groups have also questioned whether certain Blue Shield spending is out of line with its nonprofit mission.
For instance, the company contributed about $10 million to defeat a ballot measure last year seeking rate regulation. It spent $2.5 million for a luxury box at the new professional football stadium in Santa Clara, Calif.
Critics have also long complained about Blue Shield’s lack of disclosure.
Blue Shield was founded by the California Medical Assn. as part of a national movement by hospitals and doctors to form prepaid health plans.
The company is a “mutual benefit” nonprofit — “dedicated to charitable, religious or public purposes,” according to California corporation law.
Many of us in California were very upset when Blue Cross of California converted to a for-profit (WellPoint, then Anthem) and immediately changed its behavior to fulfill its responsibilities to its shareholders as a profit-making business. We immediately saw “insurance innovations” that redirected its business goals from taking care of patients to taking care of shareholders.
It was particularly disappointing to see non-profit Blue Shield of California adopt similar insurance innovations in order to remain competitive in the California insurance market. From the perspective of health care “consumers,” Blue Shield and Blue Cross remained virtually indistinguishable.
Blue Shield of California has annihilated the dream of those who believed that the United States could adopt a universal system of private, non-profit insurance companies like they have in Switzerland. There are many serious problems with the Swiss model, but some believed that a market of well-regulated, non-profit insurers would make optimal patient care a priority. Blue Shield of California has now demonstrated to us that this pipe dream would only become another nightmare in the saga of private insurance markets in the U.S.
We need to banish them and establish our own public program – an improved Medicare for all.
A Boehner-Pelosi prescription for Medicare doc fixes
By Jennifer Haberkorn and David Rogers
Politico, March 15, 2015
In a rare display of bipartisanship, House leaders are actively pursuing a deal to permanently change the way Medicare pays doctors and to extend a children’s health program for two years.
While details are still being ironed out, the basic contours are clear: The plan would permanently eliminate the Sustainable Growth Rate, the outdated formula that calls for frequent and deep cuts to Medicare providers, and replace it with a new payment system. This is a priority for both parties to end the need for frequent “doc fixes.”
The replacement policy agreed to by the House Energy and Commerce and Ways and Means committees and the Senate Finance Committee would move away from volume-based payments, in which physicians are paid based on the number of tests or procedures ordered, into a value-based system. That would reward them with higher payments when they meet performance thresholds on improved care and quality.
This new system would set up a series of quality measures that physicians will have to meet and would incentivize care coordination, particularly for patients with chronic care needs in which multiple doctors are involved.
The replacement policy is widely supported by medical organizations. But some critics argue the bill is too vague and that its reporting requirements could be ruinous to small practices.
“Aspirationally, it is correct, but we don’t know enough about how to measure value,” said Robert Berenson, the former vice chairman of the Medicare Payment Advisory Commission. “This could mean the end of small general practices for all practical purposes.”
The rhetoric sounds great. We are moving away from paying for the volume of health care provided, and we are going to pay for value instead.
In reality, volume will always be an important factor in determining health care costs. Maybe there are marginal expenses that can be reduced, but most services are clinically appropriate and do have relatively fixed costs involved. Reducing volume has really been code language for using various schemes such as accountable care organizations and bundling of payments to reduce prices. These schemes have an almost negligible impact on reducing volume.
What is this increased value that the industry envisions? Usually they are referring to quality measures. Yet those measurements are very primitive. As Robert Berenson says, “we don’t know enough about how to measure value.” Yet reducing payments for volume and giving rewards for Mickey Mouse quality scores increases administrative complexity – increasing busy work without increasing value.
Do we really want to do this? Again, quoting Robert Berenson, “This could mean the end of small general practices for all practical purposes.” My personal primary care physician is a solo practitioner. I should have to give him up simply because some policy people believe that we should continue down this path when there is very little support that these measures will either reduce costs or increase quality?
What the policy people do know is that an improved Medicare that covered everyone for the same amount that we are spending today is the most effective way to improve value. We should go where the action is. Once there, we can tweak the system for quality and volume.
Having looked in the last two posts at access and affordable costs of care five years after the passage of the Affordable Care Act (ACA), we now examine its impact on quality of care, the third leg of the stool that defines the structure and performance of a health care system.
The ACA took several initiatives to improve quality of care, most importantly by expanding access to care through subsidizing insurance through the exchanges and expanding Medicaid in those states that participated. Other initiatives include providing preventive services without cost-sharing, pay-for-performance (P4P) changes, accountable care organizations, expanded use of electronic health records, and establishing the Patient-Centered Outcomes Research Institute (PCORI). Let’s look at what each has accomplished.
Expanded Access to Care
While expansion of insurance coverage helps many people, we saw in our recent post on access how many restrictions are placed on that coverage, including high deductibles, narrowed networks, high co-payments, and excluded benefits. Expansion of Medicaid is generally good for those newly covered, but here again, that is no panacea. To be “covered” does not mean that you have access to care. Only 34 percent of health care providers are willing to accept new Medicaid patients, largely due to low reimbursement (61 percent of what Medicare pays for the same service, which in turn is 80 percent of what private insurers pay). (1). For-profit chains of urgent care centers are expanding rapidly, but most do not accept Medicaid patients. (2) A 2014 study found that an estimated 7,115 to 17, 104 people will die among 8 million left out of coverage in the states that opted out of Medicaid expansion. (3)
There was a good rationale for providing such screening procedures as mammography and colonoscopy without cost-sharing, since many patients forego them because of costs. But this has encouraged expanded advertising by for-profit companies providing many inappropriate and unapproved procedures of asymptomatic people. Life Line Screenings, for example, has screened some 8 million people at churches, community centers, fitness centers, shopping malls, and other locations, with 90 percent of screenings normal; the 10 percent that are “positive” typically lead to unnecessary, expensive and potentially harmful follow-up procedures in participating hospitals. (4)
Changes in Payment Systems.
It is well known that the present fee-for-service (FFS) payment system encourages provision of unnecessary and inappropriate services that bring added revenues to their providers. The ACA brought forward new “value-based” initiatives that theoretically could address this problem, such as P4P report cards for physicians, accountable care organizations (ACOs) (organizations of hospitals and physicians accepting care of at least 5,000 patients for a contracted amount) and bundling of payments (whereby providers agree to accept one overall payment for an episode of care, such as for a cardiac bypass procedure).
But these were untested and unproven ideas, and the five-year experience is hardly promising. Most physicians believe that quality measures currently in use are inaccurate. Risk adjustment measures are still rudimentary, and do not adjust for socio-economic factors, leaving physicians and hospitals caring for high-risk populations, such as in poor urban areas, at risk for lower quality scores. A recent study found that of the 220 ACOs in the Medicare Shared Savings Program (MSSP), 115 did not accrue savings and in fact spent more than projected on ACO patients; only 53 earned shared savings. (5). A 2014 Rand report concluded that:
Although the past decade has witnessed a fair amount of experimentation with performance-based payment models, primarily P4P programs, we still know very little about how best to design and implement value-based payment programs to achieve stated goals and what constitutes a successful program. (6)
Electronic Health Records (EHRs)
In an effort to improve efficiency and coordination of care, the ACA has used financial incentives to move physicians and other providers away from paper records to EHRs. As a result, the health information technology (HIT) industry has boomed, putting out many competing systems that often do not talk to each other. Not only are these systems expensive, they have not been shown to reduce unnecessary diagnostic tests, add new efficiencies, improve quality of care, or save money. A 2014 study found that almost one-half of physicians felt that patient care was worse after shifting over to EHRs. (7) They have also changed the dynamic of the physician-patient interaction, often reducing eye contact and communication as the physician focuses more on the computer screen than the patient. Another unfortunate outcome is the increase in cyber crime as hackers target the health care sector, as recently illustrated by a cyber attack on Anthem, the nation’s second-largest health insurer, affecting 80 million insured. (8)
The Patient-Centered Outcomes Research Institute (PCORI)
This was an excellent component of the ACA, intended to set guidelines for urgently needed comparative effectiveness research. There is a real need to bring more rigor to the evaluation of the efficacy and cost-effectiveness of health care services. Up to one-third of all health care services provided in our market-based system are either inappropriate or unnecessary, with some potentially harmful. About 90 percent of all new drugs approved by the FDA over the last 30 years are little or no more effective than existing drugs (9), while the FDA approval process for medical devices is still too loose (recalls of defective medical devices nearly doubled from 2003 to 2012). (10) Unfortunately, however, PCORI was hobbled from the start by the ACA’s specific bans on its authority to dictate coverage and reimbursement policies, or to set clinical guidelines for federal health programs.
To sum up, these supposed “fixes” to improve quality in our market-based system , quite predictably, fail to result in acceptable levels of quality. The U. S. continues to fare poorly in quality, access, efficiency, affordability, and equity of care compared to other advanced countries around the world. The ACA built on a flawed financing system, which will be unsustainable for patients, families and taxpayers. There is an alternative—single payer national health insurance, improved Medicare for all, coupled with a private delivery system, the principles of which were laid out more than 20 years ago. (11)
1. Coleman, K. Medicaid acceptance by healthcare providers drops to 1-out-of-3. Health Pocket, February 26, 2015.
2. Creswell, J. Race is on to profit from rise in urgent care. New York Times, July 9, 2014.
3. Dickman, S, Himmelstein, DU, McCormick, D et al. Opting out of Medicaid expansion: the health and financial impacts. Health Affairs blog, January, 2014.
4. Gold, J. Prevention for profit: questions raised about some health screenings. Kaiser Health News, October 28, 2013.
5. Heiser, S, Colla, C, Fisher, E. Unpacking the Medicare Shared Savings proposed rule: geography and policy. Health Affairs blog, January 22, 2015.
6. Damberg, CL, Sorbero, ME, Lovejoy, SL et al. Measuring success in health care value-based purchasing programs. Rand Corporation, March 4, 2014.
7. Verdon, DR. Physician outcry on HER functionality, cost will shake the health information technology sector. Medical Economics, February 10, 2014.
8. Peterson, A. Why hackers are targeting the medical sector. Washington Post, February 5, 2015.
9. Light, DW. Risky drugs: why the FDA cannot be trusted. The Lab @ Edmond J. Safra Center for Ethics, Harvard University
10. Burton, TM. Recalls doubled of medical devices. Wall Street Journal, March 21, 2014: B4.
11. Schiff, GD, Bindman, AB, Brennan, TA et al. A better outcome alternative: single-payer national health system reform. JAMA 272: 803-808, 1994.
Adapted in part from my new book, How Obamacare Is Unsustainable: Why We Need a Single Payer Solution for All Americans.
Consumer Assets and Patient Cost Sharing
By Gary Claxton, Matthew Rae, and Nirmita Panchal
Kaiser Family Foundation, March 11, 2015
While concerns about cost sharing are not new, the recent coverage expansions under the ACA put a new focus on what it means for coverage to be affordable. The goal of the law was to cover more of the uninsured, many of whom have limited means. The law requires most people to have health insurance, if they can afford to pay the premium, or to pay a penalty. The issue for some families, however, is that the policies with affordable premiums may have cost sharing requirements that would be difficult for them to meet when they access services. Many of the policies in the state and federal marketplaces have significant cost sharing, as do many policies provided to people at work. The ACA provides cost-sharing assistance to some, primarily to those with incomes below 200 percent of poverty purchasing through a state or the federal marketplace. Others potentially face much higher out-of-pocket expenses.
Overall, three in five (63%) households have enough liquid financial assets to meet the lower deductible amounts ($1,200 single/$2,400 family) while one-half (51%) can meet the higher deductible amounts ($2,500 single/$5,000 family). These percentages are similar for single-member and multi-member households, but vary significantly by family income. Only 32% of households with incomes between 100% and 250% of poverty can meet the lower deductible amounts, while one-in-five can meet the higher deductible amounts. In contrast, 88% of households with incomes over 400% of poverty can meet the lower deductible amounts and three-in-four (79%) can meet the higher amounts.
Out-of-pocket limits are higher than deductibles and meeting them is more difficult for many families. Forty-eight percent of households have enough liquid financial assets to meet the lower out-of-pocket limits ($3,000 single/$6,000 family) and 37% can meet the higher limits ($6,000 single/$12,000 family). The percentages are quite low for households with incomes between 100% and 250% of poverty, with 18% having enough liquid financial assets to meet the lower out-of-pocket limits and 11% being able to meet the higher limits. Among households with incomes over 400% of poverty, 75% have enough liquid financial assets to meet the lower out-of-pocket limits while just 62% can meet the higher limits.
Many non-elderly, non-poor households lack the resources to meet the deductibles and out-of-pocket limits that they may encounter in the private insurance market. Many households have insufficient liquid financial assets to meet the specified cost sharing measures, and the situation for net financial assets is no better. Not surprisingly, the difficulties are greater in households with lower incomes and with someone who lacked health insurance.
While the ACA provides for reduced cost sharing for some people with incomes below 250% of poverty that purchase coverage in a state or the federal marketplace, there is no assistance with cost sharing for those with higher incomes or for those obtaining coverage through a job. Substantial shares of households with incomes between 250% and 400% of poverty would be unable to meet even the lower out-of-pocket limits with their current resources, and meaningful shares of households with incomes over 400% of poverty would have problems as well.
This important study demonstrates one of the most serious deficiencies in our dysfunctional system of health care financing: the mismatch between the personal financial assets that most Americans have and the cost sharing in the form of deductibles and out-of-pocket limits required by their insurance plans. Far too many individuals, should they have significant medical needs, do not have adequate liquid assets to cover the level of cost sharing required by most plans today.
Look at the most favorable example above: 25% of higher-income families (families with incomes over 400% of poverty) do not have enough liquid financial assets to pay lower out-of-pocket limits of $3,000 single/$6,000 family. Worse, 38% of these higher-income families do not have enough liquid assets to pay higher out-of-pocket limits of $6,000 single/$12,000 family (the 2015 out-of-pocket limits for plans in the ACA exchanges are even higher: $6,600 individual/$13,200 family). Further, net financial assets are usually lower than liquid financial assets because of family debt; families are even more broke than their cash on hand would indicate.
Except for those with the very highest incomes, our current flawed system of financing health care through private plans creates financial hardship for far too many of us who require significant amounts of health care. Today’s private insurance products are inadequate.
What is the source of support for this deficient coverage? Private insurers want to maintain access to markets by keeping their premiums competitive. They do this partly by shifting costs to patients’ pockets. Neoliberal and conservative politicians want to keep spending on government premium subsidies to a minimum, so they support cost sharing policies that reduce premiums. Libertarian and conservative ideologues want to place health care consumers in charge of spending their own money. If they don’t have enough funds, well, that’s too bad. They should have had enough personal responsibility to establish their own health savings accounts and fully fund them before medical needs arose. Sure.
Private insurers we can certainly do without. But what about the ideologues? Is there no place in this country for egalitarianism and social solidarity? I cringe when I think about current trends advancing income and wealth inequality as the social fiber continues to shred.
We desperately need a single-payer, improved Medicare for all, with first dollar coverage. Let’s harness the forces of social solidarity so we can achieve that goal.
The Affordable Care Act and Medical Loss Ratios: No Impact in First Three Years
By Benjamin Day, David U. Himmelstein, Michael Broder, and Steffie Woolhandler
International Journal of Health Services, Volume 45, Number 1
The Patient Protection and Affordable Care Act (ACA) set limits on insurers’ overhead, mandating a medical loss ratio (MLR) of at least 80 percent in the individual and small-group markets and 85 percent in the large-group market starting in 2011. In implementing the law, the Obama administration introduced new rules that changed (and inflated) how insurers calculate MLRs, distorting time trends. We used insurers’ filings with the U.S. Securities and Exchange Commission to calculate the largest insurers’ MLRs before and after the ACA regulations took effect, using a constant definition of MLR. MLRs averaged 83.04 percent in the three years before reform and 83.05 percent in the three years after reform. We conclude that the ACA had no impact on insurance industry overhead spending.
In sum, the ACA has not decreased private insurers’ overhead, which remains six-fold higher than traditional Medicare’s.
“The Affordable Care Act and Medical Loss Ratios: No Impact in First Three Years” http://org.salsalabs.com/o/307/images/JOH45_1_DayArticle(1).pdf
PNHP press release: “Health law hasn’t cut insurers’ rate of overhead spending: study” http://www.pnhp.org/news/2015/march/health-law-hasn’t-cut-insurers’-rate-of-overhead-spending-study
All policy experts agree that the profound administrative waste that is unique to the U.S. health care system needs to be reduced. The architects of the Affordable Care Act (ACA) rejected the solution that would have worked – a single payer national health program – and instead included in their legislation a requirement that private insurers are allowed to keep, for their own administrative costs and profits, no more than 80 percent (individual and small group insurance markets) or 85 percent (large group markets) of the premiums collected. Insurers refer to this percentage that they have to spend on patient care as the medical loss ratio, i.e., paying for health care is a loss to them. We complained that this meager requirement would be ineffective in reducing administrative waste. This study confirms that the medical loss ratio has not changed after three years of implementation of ACA.
Of course, much of the administrative waste in our system is due to the additional administrative burden that the insurers have placed on the health care professionals and institutions. ACA reduced none of this yet added another layer by establishing the health insurance exchanges, or Health Insurance Marketplaces as the Obama administration calls them. Waste, waste, waste.
The percentage of administrative costs for our traditional Medicare program are only one-sixth that of the private insurers. Further, if Medicare were our only payer, the administrative burden placed on our health care delivery system would be only a fraction of what it now is. Obviously, a single-payer, improved Medicare that covers everyone is precisely what we need. Then we could spend that money on patients instead of paperwork.
Economic Analysis of the New York Health Act
By Gerald Friedman, PhD
March 6, 2015
This report analyzes the economic effects of the New York Health Act (the “Act”), which would establish a comprehensive, universal health insurance program for all New Yorkers. The Act would replace the current multi-payer system of employer-based insurance, individually acquired insurance, and federally sponsored programs (e.g., Medicare and Medicaid) with a single billing pipeline funded by broad-based progressively graduated assessments collected by the State and based on income and ability to pay, thereby reducing administrative bloat and monopolistic pricing and dramatically reducing the cost of health care to New Yorkers even while extending and improving the provision of care.
The New York Health Act would finance medical care with substantial savings compared with the existing multi-payer system of public and private insurers. By reducing administrative and other waste and eliminating health insurance company profits and excessive prices for drugs and medical devices, the New York Health Act would increase real disposable income for the vast majority of residents. It would simultaneously increase employment by reducing the burden of health insurance on business. Some of these savings would be used to extend coverage to the 7% of New York residents still without insurance under the Affordable Care Act; other savings would be reinvested in the health-care system to improve coverage for the growing number with inadequate coverage. In addition to improving New Yorkers’ health by reducing barriers to access to health care, the Plan would eliminate the financial penalty associated with health problems. It would also reduce economic inequality by replacing the current regressive system of health insurance finance with contributions proportional to income and ability to pay.
Conclusion: Better Health Care, Found Money, and Fairness
The New York Health Act would produce substantial health and economic gains for New York. The new system would create such large economies in the administration of health care that all of those currently uninsured could be given access to health care with money left over. Furthermore, by financing health care with assessments based on ability to pay, the New York Health Act would produce large savings for the great majority of New York residents. Finally, by reducing business costs, it would also lead to expansion in employment.
Professor Friedman is Chair of the University of Massachusetts at Amherst Economics Department.
Economic Analysis – Gerald Friedman, PhD: http://www.dickgottfried.org/wp-content/uploads/2015/03/Friedman-Fiscal-…
Bill A5062-2015,Gottfried/S5062-2015,Perkins – Provides for establishment of the New York Health plan
Sponsor – Richard Gottfried, Assembly/Bill Perkins, Senate:http://open.nysenate.gov/legislation/bill/A5062-2015
Press Release – Economic Study Shows Benefits of Universal Healthcare Bill – 3/10/15:http://www.dickgottfried.org/press-release-economic-study-shows-benefits…
The New York Health Act, introduced by New York Assembly Health Chair Richard Gottfried and in the Senate by Sen. Bill Perkins, and supported by the economic analysis of Prof. Gerald Friedman, is important because it demonstrates how much health care reform can be accomplished on a state level, especially when we have a Congress that is dominated by obstructionists.
Is this a single payer bill? The study refers to a “single billing pipeline.” Rather than being limited by labels, states wishing to go ahead with reform now and not wait for a receptive Congress should support any and all beneficial policy measures possible, including whatever can be accomplished with existing waivers and through negotiations with the U.S. Department of Health and Human Services.
In this analysis, Prof. Friedman estimates that through this legislation, New York can achieve the goals of universality, comprehensiveness, equity, free choice of providers, and removal of cost-sharing barriers to care, while achieving a net savings of $45 billion in the first year alone – funds that could be used for much better purposes than administrative waste.
For any given state, the economic advantage would depend on the specifics of the state legislation and might vary based on the economic assumptions used in the analysis. The important point is not the specific details of this particular analysis but rather that introducing as many single payer policies as possible does result in major improvements of the functioning of the financing infrastructure while significantly reducing the profound waste inherent in our current dysfunctional system.
Our primary goal remains to bring health care justice to everyone in the nation by enactment of a federal single payer system – an improved Medicare for all. In our state efforts we cannot set aside this goal since it is our prime goal. But Richard Gottfried and his colleagues have demonstrated the types of policies that we can apply on a state level as a transition until we can enact reform for the entire nation.
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