Most uninsured will be exempt from penalties

Posted by on Friday, Aug 8, 2014

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.

Fewer Uninsured Face Fines as Health Law’s Exemptions Swell

By Stephanie Armour
The Wall Street Journal, August 6, 2014

Almost 90% of the nation’s 30 million uninsured won’t pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement.

The architects of the health law wanted most Americans to carry insurance or pay a penalty. But an analysis by the Congressional Budget Office and the Joint Committee on Taxation said most of the uninsured will qualify for one or more exemptions.

The Obama administration has provided 14 ways people can avoid the fine based on hardships, including suffering domestic violence, experiencing substantial property damage from a fire or flood, and having a canceled insurance plan. Those come on top of exemptions carved out under the 2010 law for groups including illegal immigrants, members of Native American tribes and certain religious sects.

Factoring in the new exemptions, the congressional report in June lowered the number of people it expects to pay the fine in 2016 to four million, from its previous projection of six million.

http://online.wsj.com/articles/fewer-uninsured-face-fines-as-health-laws…

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Payments of Penalties for Being Uninsured Under the Affordable Care Act: 2014 Update

Congressional Budget Office, June 5, 2014

Under the Affordable Care Act, most legal residents of the United States are required to obtain health insurance or pay a penalty.

CBO and JCT have estimated that about 30 million nonelderly residents will be uninsured in 2016 but that the majority of them will be exempt from the penalty. Those who are exempt include:

  • Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
  • People with income low enough that they are not required to file an income tax return;
  • People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
  • People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and
  • People who are incarcerated or are members of Indian tribes.

CBO and JCT estimate that 23 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or for other reasons.

All told, CBO and JCT estimate that about 4 million people will pay a penalty because they are uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf).

http://www.cbo.gov/publication/45397

The Affordable Care Act was designed with incentives for almost everyone to obtain insurance. A financial penalty was to be assessed against any individual who remained uninsured, but now almost 90 percent of the uninsured will be exempt from the penalty. Larger employers were to be penalized if their employees remained uninsured, but now there is bipartisan support to eliminate the employer mandate. The expansion of Medicaid was to occur in all states but it has now been declined by about half of the states. Even with legislative patches, this fragmented system can never ensure that everyone has adequate health care coverage.

Compare this to a single payer system in which absolutely everyone would have been automatically enrolled in a better plan than any of those currently available, including Medicare. Why is there no clamoring for change?

Government evidence of Medicare Advantage cheating

Posted by on Thursday, Aug 7, 2014

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.

How Medicare Advantage plans code for cash

By Fred Schulte
The Center for Public Integrity, August 7, 2014

A new federal study shows that many Medicare Advantage health plans routinely overbill the government for treating elderly patients — and have gotten away with doing it for years.

Analyzing government data never before made public, Department of Health and Human Services researchers found that many plans exaggerate how sick their patients are and how much they cost to treat. Medicare expects to pay the privately run plans — an alternative to traditional Medicare — some $160 billion this year.

The HHS study does not directly accuse any insurers of wrongdoing or name specific plans that were scrutinized. But the researchers offer the most comprehensive evidence to date that suspect billing practices have been common across much of the Medicare Advantage industry and are likely to get worse unless officials crack down.

Medicare pays the Advantage health plans higher rates for sicker patients and less for healthy people using a complex formula called a “risk score.” But the HHS study spells out several ways health plans have inflated those scores, from reporting implausibly high levels of medical conditions such as alcohol or drug dependence to billing for an inordinately high number of patients with complications of diabetes.

Despite its broad implications for Medicare spending, the study by HHS researchers Richard Kronick and W. Pete Welch has attracted scant notice in Washington. It was quietly posted late last month on an online research site run by the Centers for Medicare and Medicaid Services, part of HHS.

Kronick directs the HHS Agency for Healthcare Research and Quality, whose mission is to improve health care delivery. Welch works for the HHS Office of the Assistant Secretary for Planning and Evaluation.

http://www.publicintegrity.org/2014/08/07/15216/how-medicare-advantage-p…

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Measuring Coding Intensity in the Medicare Advantage Program

By Richard Kronick and W. Pete Welch
Medicare and Medicaid Research Review (MMRR), A publication of the Centers for Medicare & Medicaid Services, 2014: Volume 4, Number 2

In 2004, Medicare implemented a system of paying Medicare Advantage (MA) plans that gave them greater incentive than fee-for-service (FFS) providers to report diagnoses.

The increase in relative MA scores appears to largely reflect changes in diagnostic coding, not real increases in the morbidity of MA enrollees.

Concerns about overpayment as a result of favorable risk selection have confronted the Medicare program throughout the history of Medicare contracting with health maintenance organizations and other private plans. In the late 1980s, Medicare paid health plans using a system that adjusted for demographic factors such as age and gender, but plan enrollees were healthier than fee-for-service beneficiaries with the same demographic characteristics, and, as a result, health plans were estimated to be overpaid by approximately 11%.

In order to reward health plans for attracting sicker-than-average enrollees, and to discourage plans from constructing business models designed to avoid risk, Medicare and other payers have increasingly turned to diagnosis-based risk- adjusted payment systems in which health plans are paid more for enrollees expected to need more care. While mitigating the incentive to enroll only healthy people, diagnosis-based risk adjustment creates another set of incentives: to find and report as many diagnoses as possible.

The MA payment system uses diagnostic information to assign a risk score to each beneficiary.

This payment system creates incentives for MA plans to find and report as many diagnoses as can be supported by the medical record.

In addition to the incentives to report more completely, the method of collecting diagnostic information also provides MA plans additional opportunities to increase risk scores. FFS diagnoses are drawn only from health care claims submitted for payment. MA plans may also review medical records and can report all diagnoses that are supported in the record, including those that were not reported by physicians on any health care claim or encounter record. MA plans can also employ nurses to visit enrollees in their homes to conduct health assessments and report diagnoses that are found.

From the Discussion

It appears that most of the reason that MA risk scores increased more quickly than FFS scores is due to increases in relative coding intensity—measured as increases in risk scores for stayers—with little of it accounted for by changes in enrollment mix. There is little sign of coding intensity slowing; in fact, Exhibit 2 shows that it may be increasing.

CMS and the Congress have responded to the increase in risk scores over time in several ways. First, starting in 2010, CMS lowered payment by 3.41% by applying an across-the-board coding adjustment. The coding intensity adjustment will increase to 4.91% in 2014 and to at least 5.91% in 2018. Second, starting in 2013, CMS set the four most severe diabetes HCCs (Hierarchical Condition Category) to have the same payment coefficient (Department of Health and Human Services, 2012). As a result, recording diagnoses that move enrollees from HCC18 (diabetes with ophthalmologic or unspecified manifestation) into HCC15 (diabetes with renal or peripheral circulatory manifestation) will no longer increase revenue for MA plans. Third, CMS made further changes to the model in 2014, removing some of the HCCs that were the subject of MA efforts at increasing coding intensity.

Relative MA risk scores have been increasing at least 1% per year and are likely to continue to do so, even though MCBS-based risk scores have been roughly constant.8

Footnote 8:  Some would expect that MA plans will react to the 2013 and 2014 model changes by finding other HCCs on which to focus their efforts, and the success of coding intensity efforts may well increase in the future.

http://www.cms.gov/mmrr/Downloads/MMRR2014_004_02_a06.pdf

We have discussed before the ways in which the private Medicare Advantage (MA) plans have been cheating the taxpayers, including cheating the beneficiaries in the traditional Medicare program who are paying higher premiums to support these private MA plans. Today’s message is especially significant since it cites a detailed 19 page report from the director of AHRQ and his colleague – a report which further confirms the private insurers’ distortion of Hierarchical Condition Categories (HCC) to receive extra risk adjustment payments based on upcoding that reports their patients as being more ill than they actually are (i.e., they pad the diagnoses).

The history of Medicare Advantage is that of a steady string of abuses. The program began with overpayments of about 14 percent over the cost of caring for Medicare patients in the traditional program. That overpayment was a deliberate ploy of Congress to give the private plans a competitive market advantage in an effort to privatize Medicare. The plans then selectively enrolled healthier, less expensive patients through deceptive marketing practices. When an effort to correct this favorable selection was made through risk adjustment using Hierarchical Condition Categories, the insurers then padded the diagnoses, as mentioned above. Further, since the Affordable Care Act included adjustments to correct the overpayments, the insurance industry heavily lobbied Congress and the Obama Administration to use three years of accounting gimmicks to reduce the impact of these adjustments. Cheat, cheat, cheat.

What can we expect now? Richard Kronick and W. Pete Welch are reserved in their language when they state, in a footnote, “Some would expect that MA plans will react to the 2013 and 2014 model changes by finding other HCCs on which to focus their efforts, and the success of coding intensity efforts may well increase in the future.”

I’ll be more frank. These crooks will continue to cheat the American taxpayers. They will surely use other HCCs to upcode their patients, until that door is finally slammed shut. What then? The private insurers continually tout to their shareholders the importance of “innovation” in health care coverage. They will always be able to find new and more effective ways to cheat us.

One of the more important improvements in an Improved Medicare for All would be to get rid of these crooks once and for all. The sooner the better.

Free Medicaid? Gotcha!

Posted by on Wednesday, Aug 6, 2014

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.

You Qualify for Medicaid: Don’t Sign Up

By Christopher Flavelle
Bloomberg View, August 4, 2014

The debate over Obamacare’s Medicaid expansion divides states into two broad categories — those that expand their program and those that don’t. New research suggests we should talk more about a third group: States that agree to expand Medicaid, then impose premiums whose only purpose seems to be keeping people out of the program.

A paper released today in the journal Health Affairs, written by researchers from the federal government’s Agency for Healthcare Research and Quality, seeks to quantify the effect of premium increases on children’s enrollment in Medicaid or its sister plan, the Children’s Health Insurance Program. They found that even small premiums lead to big drops in sign-ups.

Using data from 1999-2010, the researchers — Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Selden — found that for children in families making from 101 percent to 150 percent of the federal poverty line, a $10 increase in monthly premiums was associated with a 6.7 percent reduction in enrollment. For the subset of families not eligible for health coverage through their jobs, that grew to 7.3 percent.

The authors of the Health Affairs study don’t examine the effect of premium increases on adults. But Laura Dague, a professor at Texas A&M University, has. In an article published in the Journal of Health Economics in May, Dague looked at three years of data from the Wisconsin BadgerCare Plus program, which offers subsidized health coverage to families with low incomes. She found that moving from $0 to $10 a month reduced enrollment among children and adults by 12 percent to 15 percent.

What struck Dague about those results was that it’s not just the magnitude of the premium that matters, but the existence of a premium.

“The biggest effects in my data were at the margin where folks start having to pay premiums at all,” she told me by phone last week. She wasn’t sure why that was — perhaps the difficulty of paying another monthly bill or the psychology of having to pay in the first place.

What makes these papers relevant is that at least four states — Indiana, Iowa, Michigan and Pennsylvania — have expanded or are trying to expand Medicaid access in a way that imposes premiums on those making from 101 percent to 138 percent of poverty. Those premiums aren’t high: $25 a month in Indiana, $10 in Iowa, $25 in Pennsylvania ($35 for a household) and 2 percent of income in Michigan. But these new studies show that even those small amounts can significantly reduce the number of people who sign up.

That seems to be the point. After all, Medicaid spending per beneficiary will reach almost $6,400 in 2014, against which $120 in premiums each year generates additional revenue that’s barely significant. And as Dague notes, imposing a premium at all means spending money to obtain and process those payments.

“If the administrative costs of collecting premiums are high relative to revenue collected,” she wrote, “small premiums seem difficult to justify as anything other than a measure to discourage enrollment.”

If the states that have already imposed premiums were the outliers, then this would be a frustrating story but a limited one. However, 24 states still refuse to expand their Medicaid programs, and there’s a strong chance that some of those will change their minds on the condition that they can impose premiums, too. There’s an equally good chance that the Centers for Medicare and Medicaid Services, which faces pressure to bring those states into the fold, will go along with it.

Unquestionably, access to Medicaid for a small premium is better than no access at all. But this new research says we shouldn’t mince words about the point of those premiums. They’re designed to get fewer people to sign up.

http://www.bloombergview.com/articles/2014-08-04/you-qualify-for-medicai…

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Children’s Health Insurance Program Premiums Adversely Affect Enrollment, Especially Among Lower-Income Children

By Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Seedless
Health Affairs, August 2014

In this article we have examined the effects of public premiums on insurance coverage of children who were eligible for Medicaid or CHIP and whose family incomes were above 100 percent of the federal poverty level in 1999–2010. Higher public premiums are associated with lower public coverage and with increases in private coverage and uninsurance. The magnitudes of these premium effects vary considerably by poverty level and by parental coverage offers.

Among lower-income children, premium increases are associated with larger reductions in enrollment in public coverage, and a larger share of the decline in enrollment takes the form of increased uninsurance. The association between premiums and uninsurance is particularly strong among lower-income children who lack access to employer-sponsored insurance through parental offers.

http://content.healthaffairs.org/content/33/8/1353.abstract

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The effect of Medicaid premiums on enrollment: A regression discontinuity approach

By Laura Dague
Journal of Health Economics, September 2014

This paper estimates the effect that premiums in Medicaid have on the length of enrollment of program beneficiaries. Whether and how low income-families will participate in the exchanges and in states’ Medicaid programs depends crucially on the structure and amounts of the premiums they will face.

http://www.sciencedirect.com/science/article/pii/S0167629614000642

The obsession of the policy and political communities with requiring even low income families to experience consumer sensitivity to costs has crossed the bounds into blatant psychopathology, as these studies confirm.

The Medicaid and CHIP programs were specifically designed to provide health care coverage for low income families – a goal with which most caring individuals agree. The very modest Medicaid and CHIP premiums extracted from these families are so small that they have no impact on the overall financing of the programs. Yet they are enough that these families with no discretionary income find these programs to be unaffordable, and so they remain uninsured.

The screwball idea that these premiums somehow make these low income families better consumers is totally void of reason. These premiums merely defeat the purpose of the programs – getting these people the coverage that they need. The psychopathology rests with those who insist that cash payments, no matter how small, are absolutely essential for these families to appreciate the benefits of actively participating in markets rather than passively accepting a government handout. This is ideology gone mad!

Under a well designed single payer system, premiums and cost sharing are eliminated. People simply get the heath care they need when they need it. Paying for the system is totally removed from the delivery of care since it is financed through progressive taxes that everyone can afford.

Higher costs and lower quality in for-profit Medicare home health agencies

Posted by on Tuesday, Aug 5, 2014

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.

For-Profit Medicare Home Health Agencies’ Costs Appear Higher And Quality Appears Lower Compared To Nonprofit Agencies

By William Cabin, David U. Himmelstein, Michael L. Siman and Steffie Woolhandler
Health Affairs, August 2014

Abstract

For-profit, or proprietary, home health agencies were banned from Medicare until 1980 but now account for a majority of the agencies that provide such services. Medicare home health costs have grown rapidly since the implementation of a risk-based prospective payment system in 2000. We analyzed recent national cost and case-mix-adjusted quality outcomes to assess the performance of for-profit and nonprofit home health agencies. For-profit agencies scored slightly but significantly worse on overall quality indicators compared to nonprofits (77.18 percent and 78.71 percent, respectively). Notably, for-profit agencies scored lower than nonprofits on the clinically important outcome “avoidance of hospitalization” (71.64 percent versus 73.53 percent). Scores on quality measures were lowest in the South, where for-profits predominate. Compared to nonprofits, proprietary agencies also had higher costs per patient ($4,827 versus $4,075), were more profitable, and had higher administrative costs. Our findings raise concerns about whether for-profit agencies should continue to be eligible for Medicare payments and about the efficiency of Medicare’s market-oriented, risk-based home care payment system.

Conclusion

Medicare’s home health payment system aims to harness market-oriented incentives for efficiency. CMS seeks to upgrade care through a quality monitoring program that imposes substantial documentation burdens on clinicians. Our findings suggest that this program may not fully insulate patients from profit-incentivized quality compromises.

Meanwhile, the payment incentives have nourished the growth of proprietary agencies whose costs (and profits) are far higher than those of their nonprofit counterparts. Overall, it appears that proprietary home care agencies deliver slightly lower-quality care at a substantially higher cost, belying claims that for-profit incentives increase efficiency.

Further analysis of the impact of proprietary ownership (and other factors associated with poor home health agency performance) is sorely needed. If our findings are confirmed, Medicare should consider returning to the pre-1980 prohibition on investor ownership of home health agencies and simplifying the current complex payment system, which has neither contained costs nor maximized quality.

http://content.healthaffairs.org/content/33/8/1460.abstract

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H.R. 676, Expanded & Improved Medicare For All Act

Sponsored by Rep. John Conyers, Jr and 60 cosponsors

Sec. 103.

(a) Requirement To Be Public or Non-Profit.–

  1. In general.–No institution may be a participating provider unless it is a public or not-for-profit institution. Private physicians, private clinics, and private health care providers shall continue to operate as private entities, but are prohibited from being investor owned.
  2. Conversion of investor-owned providers.–For-profit providers of care opting to participate shall be required to convert to not-for-profit status.

https://beta.congress.gov/bill/113th-congress/house-bill/676

Markets, competition, investor ownership, and profits are touted incessantly as being key to higher quality and lower costs in health care, even though Noble laureate Kenneth Arrow showed us decades ago why markets do not work in health care. Previously studies of hospitals, HMOs, nursing homes, hospices, and dialysis centers have show us that investor ownership is associated with lower quality and higher costs. We can now add Medicare home health agencies to that list wherein proprietary, for-profit investor ownership is detrimental.

H.R. 676, the Expanded & Improved Medicare For All Act, sponsored by Rep. John Conyers, Jr, is a single payer bill that includes provisions that would eliminate investor-owned, for-profit providers. Today’s article adds to the evidence as to why the leadership of Physicians for a National Health Program supports the elimination of passive investors and profit diversion from our health care system. Health systems must be designed to benefit patients, not market exploiters that sacrifice quality while draining resources from health care. The primary missions are different. One is to take care of patients and the other is to make money.

Now just try to make the plans work

Posted by on Monday, Aug 4, 2014

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.

Newly Insured, Many Now Face Learning Curve

By Abby Goodnough
The New York Times, August 2, 2014

Advocates of the Affordable Care Act, focused until now on persuading people to buy health insurance, have moved to a crucial new phase: making sure the eight million Americans who did so understand their often complicated policies and use them properly.

The political stakes are high, as support for the health care law will hinge at least partly on whether people have good experiences with their new coverage.

Many people who signed up for private coverage through the new marketplaces had never had health insurance, and even the basics — like what a premium is and why getting a primary care doctor is better than relying on the emergency room — are beyond their experience. Others have a sense of how insurance works but find the details of the marketplace plans confusing, especially if they signed up without the help of someone who understood them.

Insurers, too, are trying to help ease their new members’ confusion. Independence Blue Cross, which enrolled 165,000 people in its marketplace plans, has representatives traveling the Philadelphia region this summer in a tractor-trailer, the Independence Express, and offering educational seminars. Independence also has tried to reach all of the new members by phone to welcome them and “make sure they understand what they bought,” said Paula Sunshine, the company’s vice president of consumer sales and marketing.

The company knew going in that the learning curve would be steep. It held focus groups last year with nearly 2,000 people and found, for example, that virtually none knew what coinsurance was.

In one sign of widespread confusion, a recent Kaiser Family Foundation survey of programs that helped people apply for marketplace coverage found that 90 percent had already been re-contacted by consumers with post-enrollment questions.

http://www.nytimes.com/2014/08/03/us/newly-insured-by-health-law-million…

If health care reform had worked the way it should have, today anyone could get the health care that he or she needed without having to worry about how to pay for it. What are we seeing instead? Just trying to enroll in health care coverage has been a very difficult process for many, and tens of millions will still remain uninsured. And today’s article shows how problematic the next step is – trying to put your coverage to use.

Some of the problems have already been widely publicized. Newer plans, especially those in the exchanges, have low actuarial values (i.e., very high deductibles and other excessive cost sharing). Cost sharing can make care unaffordable for those with modest incomes. Plans are now using narrow- and ultra-narrow networks of hospitals and health care professionals which limit patients’ choices in their health care, often preventing access to the most appropriate physicians and hospitals. We are now seeing tiered levels of specialized services and pharmaceuticals in which patients are financially penalized if they use specialists or drugs in the higher, more expensive tiers even if they are clearly preferred for medical reasons. The penalty is assessed by the insurers strictly to dissuade patients from using more expensive care even though it may be better care. Patients are also having difficulties determining not only whether specific providers are in or out of their networks, but also which tier they are in and what that means. Furthermore, the provider enrollment in these networks is quite unstable, not to mention the instability that arises when the patient must change plans and therefore change networks. This says nothing about the problems patients face when they try to get an appointment and find that there are no openings, or find that the distances are too far – directly due to the insurance innovation that promises a higher volume of patients to fewer physicians so that insurers can get greater discounts, even though overloading their practices. The list goes on and on with administrative excesses that are designed to enhance the business performance of the insurance products at a cost to the patients that they should be serving.

It should not have been this way. A single payer national health program would have automatically enrolled everyone; it would have included all providers, and it would have been financed through equitable taxes, making it affordable for everyone.

Although this New York Times article presents the problem as a need to teach individuals the complexities of using these newer insurance products, the problem is actually the complexities themselves and the tremendous injustices that ensue.

The remainder of this comment is composed of more excerpts from the NYT article. The experience of Salwa Shabazz should enrage us and drive us to demand health care justice for all. Her case shows us the compelling need for comprehensive structural reform of our health care financing system.

The following are excerpts from the NYT article (link above):

Last week, Salwa Shabazz arrived at the office of a public health network here with a bag full of paperwork about her new health insurance — and an unhappy look on her face. She had chosen her plan by phone in March, speaking to a customer service representative at the federal insurance marketplace. Now she had problems and questions, so many questions.

“I’ve had one doctor appointment since I got this insurance, and I had to pay $60,” Ms. Shabazz told Daniel Flynn, a counselor with the health network, the Health Federation of Philadelphia. “I don’t have $60.”

Mr. Flynn spent almost two hours going over her Independence Blue Cross plan, which he explained had a “very complicated” network that grouped doctors and hospitals into three tiers. Ms. Shabazz, who has epilepsy, had not understood when she chose the plan that her doctors were in the most expensive tier.

“None of that was explained when I signed up,” she said. “This is the first I’m hearing it.”

Independence Blue Cross has focused on making sure people understand the tiered-network plan that Ms. Shabazz chose, which was popular because of its relatively low price but also particularly hard to understand. Ms. Shabazz, 38, paid only about $32 a month in premiums, with federal subsidies of $218 covering the rest. But she could not afford the $60 co-payments to see her specialists on her annual income of $19,000.

Her financial situation worsened when she had to quit her job at the Pennsylvania Liquor Control Board in June because of the epilepsy, she said. She had called the federal marketplace to report her change in income, and had received a letter that she handed to Mr. Flynn, hoping he could explain it. The news, he said, was not good: With no more paychecks, she had fallen into the so-called coverage gap, earning too little to keep qualifying for the subsidies that made her premiums affordable, but likely still not qualifying for Medicaid because Pennsylvania has not expanded that program, as 26 states have under the Affordable Care Act.

“You’ll probably have to cancel your plan,” he said.

Ms. Shabazz’s mother, Waheedah Shabazz-El, who had accompanied her to the appointment, shook her head as her daughter wiped away tears. “There are so many layers to this,” Ms. Shabazz-El said.

Closing comment by Don McCanne:  We are not powerless. Let’s demand single payer, and not let up until we get it.

What does California’s 4.2% premium increase mean?

Posted by on Friday, Aug 1, 2014

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.

Obamacare premiums to rise a modest 4.2% in 2015

By Stuart Pfeifer, Chad Terhune, Soumya Karlamangla
Los Angeles Times, July 31, 2014

Defying an industry trend of double-digit rate hikes, California officials said the more than 1.2 million consumers in the state-run Obamacare insurance exchange can expect modest price increases of 4.2% on average next year.

“We have changed the trend in healthcare costs,” said Peter Lee, Covered California’s executive director. “This is good news for Californians.”

State officials and insurers credited the strong turnout during the first six-month enrollment window that ended in April for helping to keep 2015 rates in check. But others cautioned it’s still too early to gauge the health law’s impact, suggesting several factors may be temporarily holding rates down in the individual market.

“We don’t really know what the real cost of Obamacare is yet because insurance companies are heavily subsidized for the first three years” of the law’s implementation, said Robert Laszewski, a healthcare consultant in Virginia who has closely tracked the overhaul. “The insurance companies essentially can’t lose money.”

California Insurance Commissioner Dave Jones said the modest uptick in premiums was a positive sign, but he said insurers were likely motivated by a November ballot initiative, Proposition 45, that would give his office new authority to regulate health insurance rates.

“This is merely a pause in the double-digit rate increases we’ve seen historically,” Jones said.

Consumer Watchdog, the Santa Monica advocacy group pushing Proposition 45, said insurers held back this year to avoid that kind of voter backlash.

WellPoint Inc., Anthem Blue Cross’ parent company, Kaiser and other insurers have contributed more than $25 million to defeat the ballot measure.

http://www.latimes.com/business/la-fi-obamacare-2015-rates-20140801-stor…

Before we discuss some of the possible reasons that the 2015 increase in premiums for California’s ACA exchange were held down to 4.2 percent, we should mention the bad news that is not being covered by the media. We are celebrating an artificially low increase that is still twice the rate of inflation – 2.1 percent (Consumer Price Index, June 2014 – Bureau of Labor Statistics), as workers continue to fall behind over the last three decades of increasing income inequality.

Although ACA enthusiasts are touting success in controlling health insurance premiums, there are many reasons why their celebration is premature, but two stand out.

Proposition 45, which will be on the November ballot, would provide authority to California’s insurance commissioner to regulate health insurance premiums. The last thing the insurers want to do is to anger voters with high rate increases just before this election. The insurers have already contributed over $25 million to defeat this measure.

The other important reason is that the insurers are still protected by reinsurance and insurance rate corridors. In fact, the Obama administration adjusted this coverage to be sure that the insurers were fully protected again next year should they not receive enough premium revenue to meet their expenses. They can’t lose! Of course they are going to come in with low bids when they are under the threat of voter revolt.

And what about the next year when they no longer have protection against losses? We already know the routine. “The patients enrolled in our plans were older and sicker while the younger, healthier individuals were covered by plans at work, or bought the cheap catastrophic plans, and the new drugs that cost tens of thousands of dollars or more placed a strain on our budgets, and our contingency reserves were depleted with the market crash of 2015, and we’ve lost our rate flexibility with the termination of government reinsurance, and…” Well, you know.

Although there are many other uncertainties as the implementation of ACA plays out, one certainty that we can rely on is that insurers will be requesting much larger premium increases for 2017, possibly double digits. That would not be happening under a single payer national health program.

Victor Fuchs on the solution for high health care costs in US

Posted by on Thursday, Jul 31, 2014

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.

Why Do Other Rich Nations Spend So Much Less on Healthcare?

By Victor R. Fuchs
The Atlantic, July 23, 2014

Despite the news last week that America’s healthcare spending will not be rising at the sky-high rate that was once predicted, the fact remains that the U.S. far outspends its peer nations when it comes to healthcare costs per capita. This year the United States will spend almost 18 percent of the gross domestic product (GDP) on healthcare.

Why does the United States spend so much more?

The biggest reason is that U.S. healthcare delivers a more expensive mix of services. For example, a much larger proportion of physician visits in the U.S. are to specialists who get higher fees and usually order more high-tech diagnostic and therapeutic procedures than primary care physicians.

A second important reason for higher healthcare spending in the U.S. is higher prices for inputs such as drugs and the services of specialist physicians. The prices of branded prescription drugs in the U.S. are, on average, about double those in other countries. The fees of specialist physicians are typically two to three times as high as in other countries. The lower prices and fees abroad are achieved by negotiation and controls by governments who typically pay for about 75 percent of all medical care. Government in the U.S. pays about 50 percent, which would still confer considerable bargaining power, but the government is kept from exerting it by legislation and a Congress sensitive to interest-group lobbying.

The third and last important reason for higher spending in the U.S. is high administrative costs of insurance. Many of our peer countries have lower administrative costs through more coordination, standardization, and in some countries a single national system or several regional healthcare-insurance systems, even when the provision of care is primarily a private-sector responsibility.

The complexity of private-sector insurance is not in the public interest. Each company offers many plans that differ in coverage, deductibles, co-pays, premiums, and other features that make it difficult for buyers to compare the prices of different policies.

If we turn the question around and ask why healthcare costs so much less in other high-income countries, the answer nearly always points to a larger, stronger role for government. Governments usually eliminate much of the high administrative costs of insurance, obtain lower prices for inputs, and influence the mix of healthcare outputs by arranging for large supplies of primary-care physicians and hospital beds while keeping tight control on the number of specialist physicians and expensive technology. In the United States, the political system creates many “choke points” for diverse interest groups to block or modify government’s role in these areas.

For those who would like to limit government control, there is an alternative route to more efficient healthcare through “managed competition,” proposed by Alain Enthoven, a Stanford University Business School Professor, more than 25 years ago. It is based on integrated group practice, which brings the insurance function, physicians, hospital, drugs, and other elements of care into a single organization that takes responsibility for the health of a defined population for an annual risk-adjusted per capita payment. Examples include the Group Health Cooperative of Puget Sound in Seattle and the Kaiser Permanente organizations in California.

With regard to healthcare, the United States is at a crossroads. Whether the Affordable Care Act will significantly control costs is uncertain; its main thrust is to reduce the number of uninsured. The alternatives seem to be a larger role for government or a larger role for managed competition in the private sector. Even if the latter route is pursued, government is the only logical choice if the country wants to have universal coverage. There are two necessary and sufficient conditions to cover everyone for health insurance: Subsidies for the poor and the sick and compulsory participation by everyone. Only government can create those conditions.

http://www.theatlantic.com/business/archive/2014/07/why-do-other-rich-na…

Highly respected Stanford economist Victor Fuchs has long supported private solutions to universal coverage, such as Alain Enthoven’s managed competition. Although there is much to be said for establishing integrated health care delivery systems within the community, the logistics of providing all care through competing integrated delivery systems have proven to be insurmountable, as witness the managed care revolution that reduced this concept to competition between inefficient, expensive and intrusive third party insurer money managers.

Fuchs now notes that “the complexity of private-sector insurance is not in the public interest.” He acknowledges the crucial role of government in other nations. He states that we are now at a crossroads between “a larger role for government or a larger role for managed competition in the private sector.” Even if private managed competition is selected, “government is the only logical choice if the country wants to have universal coverage.”

But look at the government requirement he would impose if the private managed competition option were selected: “Subsidies for the poor and the sick and compulsory participation by everyone.” We already have that in the Affordable Care Act, and yet we will be left with 31 million uninsured.

At least Fuchs is right when he says, “Only government can create those conditions.” But the vehicle has to be functional. That’s why we need to do it through a single payer national health program. We can still have our integrated health care delivery systems that Arnold Relman also supported, but in addition we will need the other components that make the system work efficiently for all of us.

Who are those remaining uninsured?

Posted by on Wednesday, Jul 30, 2014

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.

Where are California’s Uninsured Now? Wave 2 of the Kaiser Family Foundation California Longitudinal Panel Survey

By Bianca DiLulio, Jamie Firth, Larry Levitt, Gary Claxton, Rachel Garfield and Mollyann Brodie
Kaiser Family Foundation, July 30, 2014

Of those Californians who were uninsured prior to open enrollment, 58 percent now report having health insurance, which translates to about 3.4 million previously uninsured adult Californians who have gained coverage, and 42 percent say they remain uninsured. The most common source of coverage was Medi-Cal with 25 percent of previously uninsured Californians reporting they are now covered by Medi-Cal. An additional 9 percent of California’s previously uninsured say they enrolled in a plan through Covered California, resulting in about a third reporting new coverage from the two sources most directly tied to the ACA. Twelve percent say they obtained coverage through an employer and 5 percent report enrolling in non-group plans outside of the Covered California Marketplace; some enrollment in these types of coverage may have been motivated by the ACA’s requirement to purchase insurance and some may be the result of normal movement within the marketplace.

Section 3: The Remaining Uninsured

Who Remained Uninsured?

As many previously uninsured Californians gained coverage, 42 percent remained uninsured. Many of the remaining uninsured have tenuous links to health insurance posing challenges for future enrollment efforts. Forty-five percent of the remaining uninsured reported in the baseline survey that they had been without health insurance for two or more years and an additional 37 percent said they have never had insurance. Hispanics make up 62 percent of the remaining uninsured and nearly half of them (29 percent) are undocumented Hispanics who are not eligible for Medi-Cal or assistance through Covered California. About 4 in 10 (39 percent) report family income that put them in the group likely eligible for Medi-Cal and another quarter (24 percent) are likely eligible for financial assistance through Covered California. These shares reflect the demographics of people who were uninsured prior to the first ACA open enrollment period and did not get coverage during the open enrollment period. Others may have been covered prior to open enrollment but now uninsured – a group not captured by this survey.

Why Did They Remain Uninsured?

Why did 42 percent of California’s uninsured prior to open enrollment remain without coverage? Most of the remaining uninsured seem to value insurance, with majorities saying it is something they need (71 percent) and that it is worth the costs (59 percent). Still roughly 3 in 10 of the remaining uninsured say they can get by without insurance (28 percent) or don’t feel coverage is worth the price (33 percent), including 4 in 10 (40 percent) of those who are likely eligible for coverage through Covered California or Medi-Cal due to their self-reported income level and immigration status.

The cost of insurance (whether perceived or actual) remains a barrier. When asked in their own words why they didn’t get coverage, one-third (34 percent) point to costs as the reason. Fifteen percent say they don’t qualify or don’t think they do, including 9 percent who say they can’t enroll or are worried about signing up because of their immigration status. Other reasons the remaining uninsured give for not signing up for coverage include not having yet tried or being too busy (9 percent), not having enough information about enrolling (9 percent), having tried but not being successful (8 percent), and not wanting or needing coverage (7 percent). A few (6 percent) say they didn’t get insurance because of issues associated with the application process, including three percent who say they are still awaiting contact or approval – a finding that is perhaps related to the large backlog of about 900,000 Medi-Cal applicants waiting for counties across the state to process their applications.

California’s Undocumented Uninsured

In California, undocumented immigrants make up about a fifth of those who were uninsured before the ACA expansions kicked in, and under the law, they are not eligible for Medi-Cal or subsidies through the exchange. As a group they are largely aware of these restrictions – 63 percent say they are not eligible for Medi-Cal and 70 percent say they don’t qualify for financial assistance through Covered California. Half say the mandate doesn’t apply to them and most (60 percent) correctly respond that they won’t have to pay a fine for not having coverage.

While the ACA restricts access to health benefits for undocumented immigrants under the law, there is still keen interest in coverage among this group. Since last summer about a third (35 percent) of California’s undocumented uninsured say they obtained coverage and of those who remain uninsured, half say they intend to get coverage later this year. In fact, the remaining undocumented uninsured are more apt to say they place a high value on insurance than other remaining uninsured Californians; nearly three quarters (73 percent) of the undocumented uninsured say health insurance is worth the cost and 85 percent say it is something they need, each 20 percentage points higher than the share for other remaining uninsured Californians.

http://kff.org/uninsured/report/where-are-californias-uninsured-now-wave…

California’s aggressive efforts to implement the provisions of the Affordable Care Act resulted in 58 percent of the previously uninsured now having coverage – about 3.4 million individuals. While this certainly gives cause for celebration, it must be tempered by the knowledge that 42 percent of the previously uninsured are still uninsured. Who are these people and why are they not insured?

The excerpts above provide a brief answer, though much more is available in the comprehensive report at the link above. In very general terms, as these authors note, many of the remaining uninsured “have tenuous links to health insurance posing challenges for future enrollment efforts.” The roughly 2.5 million previously uninsured who still remain uninsured will provide much greater challenges in trying to get them enrolled in some form of coverage, and a great many of them will still remain uninsured.

A comment should be made about California’s undocumented residents. They tend to be blamed by some for California’s high numbers of uninsured. Actually they constituted only about one-fifth of the uninsured before implementation of ACA. Although they are not eligible for Medi-Cal (Medicaid) nor for subsidies under Covered California (ACA insurance exchange), 35 percent obtained coverage on their own and another 50 percent intend to later this year. They have, in fact, been more responsible in this regard than have other uninsured Californians who were not enrolled in Medi-Cal or Covered California.

California’s efforts have been exemplary, and those involved in the ACA implementation are to be commended. Yet it is likely that one or two million people will remain uninsured. That’s not acceptable, and it is not California’s fault. California, and the entire nation for that matter, has an irreparably flawed health care financing infrastructure with which to work. It is obvious what we need to do. We need to replace this flawed system with a single payer national health program covering everyone, including the undocumented. The sooner the better.

David Dranove and Craig Garthwaite warn of a system without narrow networks

Posted by on Tuesday, Jul 29, 2014

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.

Code Red: Two Economists Examine the U.S. Healthcare System

By David Dranove and Craig Garthwaite
Narrow Networks Redux, July 29, 2014

The Affordable Care Act is premised, at least in part, on the notion that competition can be harnessed to reduce healthcare costs and improve quality.

When most people think about the benefits of competition, they tend to think about prices. Monopolies charge high prices; competitors charge low prices. There is nothing wrong with this perspective, but it misses a more fundamental point. In the long run, the greatest benefit of competition is that it has the potential to fuel innovation.

This is as true, in theory, for health insurers as it is for telecommunications and consumer electronics. It hasn’t always been true in practice; for several decades after the IRS made employer-sponsored health insurance tax deductible, insurers tended to offer the same costly indemnity products. But consumers eventually demanded lower premiums, and insurers responded with managed care. After the backlash, insurers developed high deductible health plans and value based insurance design. Insurers are now moving towards reference pricing. These plans offer consumers reimbursement up to a pre-specified level for treatments that can be easily broken into a treatment episode such as hip replacements or MRIs.

High deductibles and reference pricing are fine, but do not always work in practice. Chronically ill patients quickly exhaust their deductibles, and reference pricing does not work well for chronic diseases. In order to complement these tactics, some insurers are once again offering narrow network plans. We commented in earlier blog posts that the ACA would catalyze the return of these narrow networks and also warned that this might fuel another backlash. Unfortunately, a recent New York Times article shows, the backlash is well underway.

Make no mistake, restrictive networks are essential to cost containment. Through narrow networks, insurers can negotiate lower prices. More importantly, they can direct enrollees to providers who have lower overall costs and higher quality. Dranove has written two books about this. Don’t take his word for it. The independent Robert Wood Johnson Foundation has published two comprehensive studies showing that the competition triggered by networks has been successful in reducing costs and improving quality.

By definition, some providers are excluded from narrow networks, and this is where the trouble begins. Excluded providers who have lost out in the cauldron of competition always complain the loudest. We should have no sympathy for them.

What about patients? Some patients knowingly choose health plans with narrow networks in order to save money, and should not be surprised to find that some of their favorite providers are excluded. Others may be in the dark about their networks. The solution isn’t to regulate narrow networks out of existence; it is to shine some light on network structure.

Another concern may be that low income enrollees who cannot afford broader networks might be at a disadvantage. But if we want to provide big enough subsidies so that all enrollees have broad networks, we will have to either (a) raise taxes further, or (b) limit the number of uninsured we can enroll. Neither choice seems better than the status quo.

Now, this does not mean that we think there is no place for regulation of narrow network plans. We don’t think that the newly formed ACA exchanges, or any market, should be the proverbial Wild West. For example, if we want consumers to make educated choices across insurance plans, then they require timely and accurate information about which providers are in which networks. We would think this would be more than feasible, though healthcare.gov was somehow unable to provide this information to many of the initial enrollees. We understand that providers go in and out of networks all the time and it would be burdensome for insurers to inform enrollees of all network changes in real time. But insurers could provide regular updates. We also wonder if insurers have the capability of identifying, through billing records, when a particular patient’s provider has gone out of network, and sending that patient an immediate update. In these situations, patients should be allowed to change their choice of plans outside of the open enrollment period in the same way they might be able to if they had another qualifying event such as the birth of a child.

In addition, narrow network plans are only effective if there are multiple high quality providers offering services in an area. Given the recent wave of provider consolidations, it is critical that anti-trust authorities carefully monitor these mergers. After all, competition can only work in truly competitive markets.

But what we must avoid is mandating broader access. This would spell the end of market-based health reform. If insurers cannot exclude some providers, then providers have little incentive to lower prices and become more efficient.

Many states have already attempted to mandate minimum access through Any Willing Provider laws. These laws require insurers who have come to terms with a specific provider to accept all providers who agree to those same terms. This may sound fair, but the economic implications of AWP for patients are anything but fair. Under AWP, no providers need negotiate with insurers or accede to an insurer’s request for discounts. Providers can bide their time, knowing that they can always force their way into the network. Having lost all their leverage, insurers can no longer demand discounts, and prices invariably rise.

The push for broad access seems to be especially strong in sparsely populated states such as Montana. But proposals to assure access, which often take the form “At least X% of enrollees must live within Y miles of a provider” do more to drive up costs than any other rules we can imagine, because they grant effective monopoly rights to rural providers. Insurers facing such rules have two options (a) accede to the pricing demands of the local monopolies, or (b) drop coverage in areas where providers have been granted local monopolies. Montanans may as well have nationalized healthcare.

http://dranove.wordpress.com/2014/07/29/narrow-networks-redux/

This blog entry by David Dranove and Craig Garthwaite is another example, like yesterday’s, where economists from “the other side” clearly understand the policy issues, but are guided by an ideological preference for market solutions as opposed to more effective government solutions.

Narrow networks do terrible things. As these authors state, narrow networks provoke backlashes from patients who are unhappy with the restrictions. Healthy individuals select their plans primarily based on price but then are disappointed when they find that the networks are unable to meet either their needs or their choices. The narrow networks become anti-competitive when excluded providers leave the community and are not available for the next year of provider contracting. The authors point out that requiring the providers to be within a reason distance from patients drives up costs, as if cost containment is far more important than access. With the inevitable changes in patient plan enrollment and in provider network enrollment, narrow networks can be highly disruptive because of the need to leave your established care and enter new narrow networks. Perhaps worst of all, the authors state that “low income enrollees who cannot afford broader networks might be at a disadvantage.” But then they state that if we are to broaden the networks we must “either (a) raise taxes further, or (b) limit the number of uninsured we can enroll,” as if there were absolutely no other option for containing costs that did not involve narrow networks. They seem to believe that the trade-off is worth the cost of disadvantaging low income enrollees.

They contend that “restrictive networks are essential to cost containment,” after making the case that other market tools of competition have been inadequate. But ideology dictates that market competition must be the driving force for cost containment. They caution that mandating broader access “would spell the end of market-based health reform.”

The case they make for Montana seems to be the clincher on why narrow networks are such a highly flawed policy – a conclusion that they did not intend. They complain that requiring reasonable distances to health care creates a provider monopoly that will cause insurers to either charge outrageous rates or simply drop coverage. They say that “Montanans may as well have nationalized healthcare.” Maybe they should, as should the rest of us.

If the inadequacy of other tools of market competition have required insurers to turn to perverse narrow networks maybe we should be questioning whether market competition is the best policy for controlling costs. Come to think of it, maybe we should listen to these authors when they say that allowing broader access “would spell the end of market-based health reform.” Other national systems depending on government administered pricing provide care for everyone at an average of half of what we are spending per capita. Now that’s effective cost containment, and it’s accomplished without kowtowing to the ideologues who insist that health reform must be market based.

Dana Goldman and Tomas Philipson warn of double jeopardy of health insurance

Posted by on Monday, Jul 28, 2014

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.

‘Double Jeopardy’ In American Health Insurance

By Dana P. Goldman and Tomas J. Philipson
Forbes, April 1, 2014

Health insurance markets allow people to share risks; those lucky enough not to need health care pay premiums to cover care for the unlucky ones who do. This risk-sharing—which most of us are very willing to purchase — amounts to a modest income loss through our premiums when we are healthy to avoid serious financial trouble when we are sick.

However, a disturbing trend has emerged over the last few years. As health care costs have risen, many insurance companies have responded by starting to increase cost-sharing on to patients when they get sick, sometimes dramatically. This has occurred particularly for the unlucky patients who are the sickest and who need highly specialized therapies. Such so called “specialty drugs” are different than standard prescription drugs and often cost substantially more, many times because they are harder to manufacture. For example, the Centers for Medicare and Medicaid Services, the agency that implemented the Medicare Part D prescription drug benefit, allowed plans to create a ‘formulary tier’ specifically for drugs costing $600 or more per month—and about 90 percent of plans use them. And, among the plans who use the tier, more than half require patients to pay 25% or more of costs. The drugs on this tier are those of patients faced with many difficult conditions – it includes medications for rheumatoid arthritis, osteoporosis, MS, and even cancer.

This insurance design often means that the sickest patients also take the largest financial hits; what we argue amounts to a “double jeopardy” of current health insurance. Consider the case of cancer care which is a relatively rare event compared to diseases like hypertension or diabetes, but often leads to a cascade of high expenses. Insurance companies are now pushing those expenses on patients at the time of care, rather than covering them through premiums paid before illness. Ironically, this has led to outrage against manufacturers of cancer treatments rather than payers, For example, oncology specialists have often criticized the manufacturers for the high prices involved because their patients can’t afford the treatments. The irony is that other forms of care are much more expensive — such as the use of intensive care units (ICUs) — yet there is no outcry by physicians against the device manufacturers concerning these costs. The reason is that ICU care–which often costs about $4,000 per day in the most futile cases–is fully covered (as it should be), whereas the specialty treatments remain only partially covered.

Pushing these costs onto the patient at the time of sickness not only distorts treatment patterns, but also leads to inequity. One common strategy to manage these specialty products is to force patients to try cheaper treatments before insurers will cover more expensive ones – a practice euphemistically called ‘step therapy.’ For those who respond to the cheaper therapy, they get better and pay very little. But for those who are unlucky enough not the respond to the first treatment, they move to the next therapy, often at much higher cost. The result is both worse health prospects but also a larger financial burden for the same but more severe form of the same disease, another form of double jeopardy. The high out-of-pocket costs of second-line therapy may also encourage patients and their physicians to retry ineffective, first line therapies, sometimes at great risk to the patient. Patients with more recalcitrant disease are being asked to pay more—the opposite of what we want insurance to do.

Since the 1960’s, economists have noted that cost-sharing at the time of illness for medical services is a way to balance the financial risks of health care spending against improper incentives for care when sick. On the one hand, full coverage eliminates all financial risks to patients, but it provides no incentive to economize on care when sick. On the other hand, no insurance imposes too much risk on a patient while it provides better incentives to economize on care. Thus, economists agree that the optimal cost-sharing should strike a balance between financial protection and proper incentives to economize on care. In particular, when treatments are valuable and patients are willing to seek them at very high prices, economists recognize there is little value to high copayments because they would just impose financial risks through care that would have been undertaken anyway. However, double jeopardy of American insurance imposes financial risk on the patient at precisely the moment when it is likely least appropriate. A cancer patient is willing to pay large sums to cling on to life, but is hit with both the dreaded disease and a large medical bill at the same time.

What can be done to limit the damage of double jeopardy in insurance? In cases where treatment is effective, payers should provide real insurance and not impose substantial burdens on patients when they are sick—especially those who do not respond to conventional first line care. In face of market forces, we would expect patients or their benefit managers to sooner or later shun plans with double jeopardy designs. The second best alternative would be to encourage manufacturers to fix the insurance failure by providing copayment assistance for these patients. The analogy is Medigap coverage, which provides secondary insurance for costs that Medicare does not cover. In the private sector, such coverage is often outlawed on the grounds that it interferes with payer’s incentives to make patients economize on care.

The bottom line is that insurance that doesn’t cover the financial risks for the sickest seriously lowers the value of coverage to the insured pool, imposes the largest losses on the sickest even within the same diagnosis, and leads to finger-pointing at the wrong parties.

Dana P. Goldman is the Leonard D. Schaeffer Chair and Director of the Schaeffer Center for Health Policy and Economics at the University of Southern California. Tomas J. Philipson is the Daniel Levin Chair of Public Policy at the University of Chicago. Both are founding partners of Precision Health Economics LLC.

http://www.forbes.com/sites/tomasphilipson/2014/04/01/double-jeopardy-in…

This is an important article. The topic is important because it represents one of the more serious flaws in recent trends of health care financing reform – a flaw which results in greater financial burdens being imposed on people with serious medical disorders. It is also important because it represents the views of two authorities in the health policy community who come from the “other side,” generally holding views at odds with the health care justice positions of PNHP. This time they are right.

Insurers are using several techniques that place patients in “double jeopardy” – facing both the burdens of serious illness and the high costs imposed on them by insurance plan design. When serious medical problems develop, the insurers impose higher cost sharing on patients through techniques such as ever higher deductibles, large coinsurance requirements (paying a higher percentage of costs rather than lower copayments), and tiering of drugs and specialized services with even higher coinsurance requirements for the most expensive tiers.

The authors note that, not only are the patients exposed to higher costs, but some insurers require less expensive treatments as a trial before high cost treatments will be authorized (stepped therapy). The risk of delay of definitive treatment is obvious in disorders such as cancer, not to mention that it introduces more inequity into health care.

Although they repeat the consumer-directed canard that cost sharing is essential to provide incentives to economize on care, they seem to express the opposite view when they state, “when treatments are valuable and patients are willing to seek them at very high prices, economists recognize there is little value to high copayments because they would just impose financial risks through care that would have been undertaken anyway.”

Further, they state, “double jeopardy of American insurance imposes financial risk on the patient at precisely the moment when it is likely least appropriate. A cancer patient is willing to pay large sums to cling on to life, but is hit with both the dreaded disease and a large medical bill at the same time.”

Their solution is even more interesting, considering where they come from. “In cases where treatment is effective, payers should provide real insurance and not impose substantial burdens on patients when they are sick — especially those who do not respond to conventional first line care. In face of market forces, we would expect patients or their benefit managers to sooner or later shun plans with double jeopardy designs.” Imagine that. They suggest that the markets will reject precisely those cost sharing plans that their colleagues on the “other side” are pushing – plans which have gained great traction in recent years, especially since the implementation of the Affordable Care Act.

An alternative proposal of theirs also seems to reject the concept of making the consumer a better health care shopper through cast sharing. “The second best alternative would be to encourage manufacturers to fix the insurance failure by providing copayment assistance for these patients. The analogy is Medigap coverage, which provides secondary insurance for costs that Medicare does not cover.” Wow. Right now their colleagues are recommending that Medigap be pared back to deliberately increase exposure of patients to the direct costs of health care.

We can be thankful that these authors have pointed out the perversities of cost sharing. They do speak of “balance” but not when the burden is significant. Although, what might seem to many to be modest levels of cost sharing, that balanced level has been shown to be a harmful burden for those of more modest means.

We should accept their principle that payers should provide real insurance without burdens or secondary insurance for uncovered costs. But far easier and much more efficient than altering the private insurance model would be to replace it with a universal prepaid health system with equitable public funding (i.e., single payer). Although Goldman and Philipson are not quite there, maybe we can coax them over.

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Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

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