Narrow Provider Networks: Balancing Affordability with Access – a flawed approach

Posted by on Tuesday, Jun 17, 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.

Narrow Provider Networks in New Health Plans: Balancing Affordability with Access to Quality Care

By Sabrina Corlette, JoAnn Volk, Robert Berenson and Judy Feder
Urban Institute, Georgetown University Center on Health Insurance Reforms, May 2014

New network configurations offer trade-offs for consumers. Many insurers were able to lower their overall costs by reducing the prices they pay participating providers, which in turn allowed them to lower their premiums to attract price-conscious shoppers. However, in many cases, consumers have been surprised to discover that their new plan offers a more limited choice of providers. Some others willing to pay more to purchase a plan with broader access to providers have found that only limited-network plans are available in their area.

It is not yet clear whether these new, narrower network plans can effectively deliver on the benefits promised under the plan. If policyholders opt to seek medically necessary care out-of-network, it could expose them to significant financial liabilities. If policyholders delay or forgo care because in-network providers can’t meet their needs, it could put their health at risk.

Consequently, state and federal policy-makers are taking another look at the Affordable Care Act (ACA) requirement that plans participating on the new health insurance marketplaces maintain an adequate provider network. In doing so, they must strike a delicate balance. If they overly constrain insurers’ ability to negotiate with providers, consumers could face significant premium increases. On the other hand, consumers must be able to choose among plans with confidence that they have a sufficient network to deliver the benefits promised and that they will not be exposed to unanticipated health and financial risks because of an inadequate network. Insurers also need incentives to take provider quality into account (in addition to prices).

Conclusion

There is no perfect approach to the oversight of health plan networks. In the absence of other government policies to constrain provider prices, insurers’ ability to exclude or threaten to exclude providers from the network is important to their ability to negotiate reimbursement rates and offer more affordable premiums to consumers. On the other hand, if insurers narrow their networks too much, consumers could be harmed if forced to go out-of- network or to a less-preferred provider tier to meet their needs. Policy-makers therefore need to strike a balance between consumer protection and insurer flexibility.

Our proposed approach sets minimum quantitative standards, with waivers for certain providers based on price and quality; improves transparency and consumer information to give consumers better tools to make informed choices; gives insurers the flexibility to develop more value-oriented network designs so long as they maintain a provider network that can meet people’s needs; and — to assure effective consumer protection — calls for continuous monitoring of consumers’ use of out-of-network services, complaints and appeals, and more active oversight of plan behavior.

Full report (10 pages):http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf413643

This report provides an excellent discussion of the tradeoffs between affordability and access to care when insurers use networks of providers, especially the trendy narrow networks in many of the ACA exchange plans. Unfortunately, the authors’ approach to trying to achieve an optimal balance misses an opportunity both to totally avoid the impaired access characteristic of narrow networks, and to make health care even more affordable.

The flaw is that they assume that private health plans are a given. With that, they then try to achieve a compromise between avoiding excessively reduced access to providers and reducing insurance premiums by restricting patients to providers who agree to lower contracted rates. A single payer system would have full choice of providers and would be more affordable because of the efficiencies of a government administered program, including its power as a monopsony. Compared to single payer, patients enrolled in narrow network plans have less choice of providers and pay more. They lose on both counts.

Even broader networks found in the majority of private plans still compromise between these choices, though not to as great of a degree. But they still do compromise.

The remedial proposals in this report are designed to support the superfluous private insurer intermediaries, while compromising access and cost for patients. Our health care system should be about patients, not insurers.

It is not as if the authors of the report do not understand this. They write, “In the absence of other government policies to constrain provider prices…” If they are going to change policy, why don’t they move to policies that actually benefit patients? Like a single payer national health program – full access to all health care professionals and institutions, in an equitably funded system that all of us can afford.

The U.S. health system ranks last again

Posted by on Monday, Jun 16, 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.

Mirror, Mirror on the Wall: How the Performance of the U.S. Health Care System Compares Internationally

By Karen Davis, Kristof Stremikis, David Squires, and Cathy Schoen
The Commonwealth Fund, June 2014

The United States health care system is the most expensive in the world, but this report and prior editions consistently show the U.S. underperforms relative to other countries on most dimensions of performance. Among the 11 nations studied in this report—Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States—the U.S. ranks last, as it did in the 2010, 2007, 2006, and 2004 editions of Mirror, Mirror. Most troubling, the U.S. fails to achieve better health outcomes than the other countries, and as shown in the earlier editions, the U.S. is last or near last on dimensions of access, efficiency, and equity. In this edition of Mirror, Mirror, the United Kingdom ranks first, followed closely by Switzerland.

The most notable way the U.S. differs from other industrialized countries is the absence of universal health insurance coverage. Other nations ensure the accessibility of care through universal health systems and through better ties between patients and the physician practices that serve as their medical homes.

Key Findings

Quality: The indicators of quality were grouped into four categories: effective care, safe care, coordinated care, and patient-centered care. Compared with the other 10 countries, the U.S. fares best on provision and receipt of preventive and patient-centered care. While there has been some improvement in recent years, lower scores on safe and coordinated care pull the overall U.S. quality score down.

Access: Not surprisingly—given the absence of universal coverage—people in the U.S. go without needed health care because of cost more often than people do in the other countries. Americans were the most likely to say they had access problems related to cost.

Efficiency: On indicators of efficiency, the U.S. ranks last among the 11 countries, with the U.K. and Sweden ranking first and second, respectively.

Equity: The U.S. ranks a clear last on measures of equity. Americans with below-average incomes were much more likely than their counterparts in other countries to report not visiting a physician when sick; not getting a recommended test, treatment, or follow-up care; or not filling a prescription or skipping doses when needed because of costs. On each of these indicators, one-third or more lower-income adults in the U.S. said they went without needed care because of costs in the past year.

From the Discussion

It is difficult to disentangle the effects of health insurance coverage from the quality of care experiences reported by U.S. patients. Comprehensiveness of insurance and stability of coverage are likely to play a role in patients’ access to care and interactions with physicians. We found that insured Americans and higher-income Americans were more likely than their counterparts in other countries to report problems such as not getting recommended tests, treatments, or prescription drugs. This is undoubtedly a reflection of the lack of comprehensive health insurance coverage and the high out-of-pocket costs for care in the U.S., even among the insured and those with above-average incomes. Fragmented coverage and insurance instability undermine efforts in the U.S. to improve care coordination, including the sharing of information among providers. Patients in other countries, in addition, are more likely to have a regular physician and long-time continuity with the same physician.

These results indicate a consistent relationship between how a country performs in terms of equity and how patients rate other dimensions of performance: the lower the performance score for equity, the lower the performance on other measures. This suggests that, when a country fails to meet the needs of the most vulnerable, it also fails to meet needs for the average citizen. Rather than regarding performance on equity as a separate and lesser concern, the U.S. should devote far greater attention to building a health system that works well for all Americans.

http://www.commonwealthfund.org/~/media/files/publications/fund-report/2…

In this 2014 update of The Commonwealth Fund study on the performance of the U.S. health care system compared to other nations, the United States once again comes in last, in spite of having the most expensive system of all nations.

This year the authors express hope that implementation of the Affordable Care Act (ACA) will improve our performance, though so far the changes in the first three years of ACA have not been enough to lift us from the bottom. There is reason to believe that it is too weak of a program to ever have enough impact.

An interesting finding in this report is that the United Kingdom came in first in most categories studied, placing it in solid first place overall. Their National Health Service is government owned and operated – socialized medicine – and is one of the least expensive systems of all, spending only 40 percent per capita of what we spend in the United States. The next time someone claims that we are headed towards socialized medicine, we can respond, “Don’t we wish.”

However we do have to be careful about drawing sweeping conclusions from this study. Canada, which has a single payer system, scored next to the bottom, just above the United States. They scored lower in access, especially in timeliness of care, and in efficiency and safety. Although they have single payer government insurance systems in each province, the health care delivery system remains largely private. Since the deficiencies are primarily those of private delivery systems, it would suggest that the Canadian government should play a much greater role in improving resource allocation.

One of the more important deficiencies of a single payer system is that when conservative governments are in control – as they now are in Canada – the politicians attempt to reduce the role of government. Currently in Great Britain, conservatives are attempting to move more towards privatization, but so far their solidarity has prevented a massive shift in that direction, though they have introduced some worrisome policies.

Nevertheless, politics will always play a role in any system. That makes it even more imperative to put in place a system that is much less vulnerable to political whim – a universal national system in which the people take pride.

Pew Research on the Government’s Role in Health Care

Posted by on Friday, Jun 13, 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.

Political Polarization in the American Public

Pew Research Center, June 12, 2014

Section 4: Political Compromise and Divisive Policy Debates

Government’s Role in Health Care

The idea of a single-payer health care system – in which the government pays for all health care costs – has long been a dream of many liberals. But when Congress took up health care reform in 2009, Democrats united behind a market-based proposal – what became the Affordable Care Act – which was seen as more politically feasible.

The current survey finds that government involvement in the health care system continues to draw extensive liberal support: Fully 89% of consistent liberals say it is the responsibility of the federal government to make sure all Americans have health care coverage. And roughly half – 54% – think health insurance “should be provided through a single national health insurance system run by the government.”

Overall, the public is divided over how far the government should go in providing health care. About half (47%) say the government has a responsibility to make sure all Americans have health care coverage, while 50% say that is not the responsibility of the federal government.

Those who believe the government does have a responsibility to ensure health coverage were asked if health insurance should be provided through a mix of private insurance companies and the government, or if the government alone should provide insurance. The single-payer option was supported by 21%, while about as many (23%) favor a mix of public and private insurance.

On the other side of the issue, while half say it isn’t the government’s responsibility to make sure all have health care coverage, relatively few want the government to get out of the health care system entirely. Rather, 43% say it’s not the government’s responsibility to ensure health care coverage for all, but believe the government should “continue programs like Medicare and Medicaid for seniors and the very poor.” Only 6% of Americans go so far as to say the government “should not be involved in providing health insurance at all.”

Even among consistent conservatives, there is minimal support for the government having absolutely no role in providing health care. Three-quarters of consistent conservatives (75%) say the government should continue Medicare and Medicaid while just 20% think the government should not be involved in providing health insurance.

http://www.people-press.org/2014/06/12/section-4-political-compromise-an…

Bar graph of poll results on government involvement in health care: http://www.people-press.org/2014/06/12/section-4-partisan-compromise-and…

Table 4.7 Government Role in Health Care

Q121/a/b: Do you think it is the responsibility of the federal government to make sure all Americans have health care coverage, or is that not the responsibility of the federal government?

ASK IF GOV’T RESPONSIBILITY: Should health insurance (Be provided through a single national health insurance system run by the government) OR (Continue to be provided through a mix of private insurance companies and government programs) [RANDOMIZE]?

ASK IF NOT GOV’T RESPONSIBILITY: Should the government (Not be involved in providing health insurance at all) OR (Continue programs like Medicare and Medicaid for seniors and the very poor) [RANDOMIZE]?

Table of results at this link: http://www.people-press.org/2014/06/12/government-role-in-health-care/

It is often said, based on many polls, that about 60 percent of Americans support a single payer national health program. How solid is that support? This important poll from Pew Research Center provides some perspective.

Those polled were split into two groups based on whether or not they thought that it is the responsibility of the federal government to make sure all Americans have health care coverage. They were split fairly evenly – 47 percent believing that it is a government responsibility and 50 percent believing that it is not. But then the 50 percent who thought it is not a government responsibility split into 43 percent of the total believing that we should keep Medicare and Medicaid and only 6 percent holding the position that government should not be involved at all.

This demonstrates a problem with polling. We tend to think that answers to seemingly straightforward questions accurately represent the views of the public. But against a background of rhetoric, memes, subliminal persuasion, and the messages of controlled media (think Fox), simple responses are not all that simple. The oft-repeated line, “Keep government out of my Medicare,” facetiously represents the complexity of seemingly simple concepts. Fully half of people seem to believe that they do not want the government to have the responsibility of making sure that all Americans have health care coverage, yet actually only 6 percent do not want the government involved if it means eliminating Medicare and Medicaid. That does not seem to be intuitive. People do want the government involved, even though half said that health care coverage wasn’t the government’s responsibility.

Single payer supporters likely will be troubled by the further responses of the nearly one-half who do believe that the government should be involved. Of those individuals ideologically classified as “Consistently Liberal” 89 percent believe that it is a government responsibility, yet only 54 percent believe that we should have a single national health insurance system run by the government; 31 percent believe that we should have a mix of private insurance and government programs. Of “Consistently Conservative” 98 percent believe that the government should not be involved, and zero percent support single payer (though that 98 percent drops to 20 percent of the “consistently conservative” when asked about Medicare and Medicaid).

Overall, only 21 percent of Americans in this poll seem to believe that we should have a single national health insurance system run by the government.

Most single payer supporters find this difficult to believe. But the view is quite malleable and subject to exposure to memes, rhetoric, political advertising and whatever. As examples, California’s Proposition 186 and Oregon’s Measure 23 – two single payer ballot measures – had support in the polls early in their campaigns, yet three-fourths of voters rejected Prop. 186, and four-fifths rejected Measure 23. Late in each campaign, the insurance industry had very little difficulty in taking advantage of the malleability of the views on single payer.

How could the voters be so deceived? It’s easy. It took only one more question in this Pew poll to change opposition to government involvement from 50 percent to 6 percent!

The lesson is that we cannot rest on believing that the 60 percent of Americans who support single payer will eventually drive the political process and bring us reform. That 60 percent is not an absolute – ask single payer supporters in California and Oregon. People need to have a much better understanding of health policy than they do. We need a solid foundation that cannot be washed away by memes. That is a monumental task, but that is what we are faced with.

We have a lot of educating to do. Get to work.

Addendum:  The full Pew report represents a massive undertaking of defining political polarization in America. It is important to understand better this polarization if we hope to communicate our views on a superior alternative for health care financing – a single payer national health program (or, using malleable political rhetoric, “an improved Medicare for all”).

Political Polarization in the American Public: http://www.people-press.org/2014/06/12/political-polarization-in-the-ame…

I also want to thank Harvard Professor Robert Blendon for the help he has given me in understanding political polling. Several years ago, responding to my request to get the wording right on single payer in the polls that Harvard and Kaiser Family Foundation were conducting, he sent me a large package of material that amounted to a mini-course on political polling. He convinced me how naive my view was that if we could just phrase the poll questions appropriately, we could get a stronger response supporting single payer and then use that to move the political process. We may have many polls with a 60 percent favorable response, but do we have single payer?

Austin Frakt: ACA fails moral test for affordable care

Posted by on Thursday, Jun 12, 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.

The Moral Case for Affordable Coverage and How Obamacare Fails To Live Up to It

By Austin Frakt, PhD
The JAMA Forum, June 11, 2014

Some health policy commentators have claimed that President Obama and Affordable Care Act (ACA) supporters have not made a convincing moral case for coverage expansion. Scholars suggest that support for the law could turn, in part, on the moral argument for it. What is that argument, and is implementation of the law consistent with it?

We can make some headway by turning to Norman Daniels, PhD; Brendan Saloner, PhD; and Adriane Gelpi, who articulate one possible moral case for universal coverage. Their key assumption is that there is a “social obligation to protect opportunity.”

From this, a lot follows. One’s opportunity is threatened by poor health. In sickness, one cannot learn or earn as efficiently, let alone enjoy the same length or quality of life. Therefore, protecting opportunity implies protection of access to health care services that promote and preserve health. And, it’s hard to argue with the notion that such access should be protected equally.

Access to health care is enhanced by health insurance. As Daniels, Saloner, and Gelpi argue, universal health insurance is a means to this end. But it’s not the only way. The key is to recognize that equality of access is not equality of receipt. The authors are not suggesting that we have a moral obligation to ensure that everyone receive the same amount of health care, merely that everyone have the same degree of access to it.

This more modest obligation would be met in a system that does not cover everyone but extends equal opportunity of access to affordable coverage to everyone. That is, equal opportunity to obtain coverage is a necessary condition for equal access to health care, though some may choose not to avail themselves of that care or that coverage. Put another way, if we are morally satisfied with a regime under which people can choose whether to receive care, we ought to be morally satisfied with one under which people can choose whether to obtain coverage for it, so long as there is equal opportunity of access to that coverage and the care it facilitates.

The distinction is crucial because the ACA was not designed for universal coverage, and it will not achieve it. However, it was passed with the more modest ambition to provide universal access to affordable coverage, the very thing we’re morally obligated to provide.

But, when you go beyond the law’s ambition and consider its actual implementation, there are some problems. It has failed to provide universal access to affordable coverage in at least 2 ways. First, the Supreme Court ruled to permit states to opt out of Medicaid expansion without penalty. Though gradually, more states are expanding their programs, many states still have not. In those states, millions of poor residents lack access to affordable coverage. No matter what institution one wishes to blame, this is a moral failing.

Second, for some consumers, the products offered in the new exchanges are unaffordable, even with subsidies. This is a serious ethical concern, as addressed by Saloner and Daniels.

“[T]he exchanges leave families vulnerable to burdensome out-of-pocket spending for treating health conditions that are costly but not necessarily catastrophic. For example, 25 percent of individuals in the United States have a major chronic condition such as a mood disorder, diabetes, heart disease, asthma, or hypertension. The annual cost of treating such conditions, including visits with specialists and payments for medications, can exceed several thousands of dollars, even with health insurance (Soni 2009). Under the ACA, a family of four with an income around 275 percent of the [federal poverty level] ($64 000 in 2010) would be responsible for premium costs of around $5600 and would not experience relief from cost sharing until it had reached half the family cap, around $6000 in 2010 (KFF 2010b).”

Jed Graham of Investor’s Business Daily recently reported that such affordability concerns have become reality. He documents that some families covered by exchange plans could face out-of-pocket costs as high as 40%. By any reasonable definition of affordable, this is not. This is another moral failing.

So, what can be done to bring policy into better alignment with morality? First, all states could expand Medicaid. Second, Saloner and Daniels suggest that subsidies could be increased for families with higher health care burdens, such as chronic conditions. Third, tax credits, (which now kick in when premiums are higher than a specified percentage of income) could take into account other out-of-pocket costs. Saloner and Daniels offer a final suggestion:

“[E]xchanges could be redesigned to protect specific types of investments by providing income disregards for money that low-income families set aside for paying children’s college tuition, opening a small business, or saving for retirement. An added benefit is that such a proposal would encourage families to increase their assets and to build financial stability.”

All of these approaches would make coverage expansion more expensive, unless they could be offset by policies that would make health system delivery or health insurance more efficient.

Perhaps the moral argument for the ACA was not made fully or loudly in years past. That’s a failing we can now easily remedy. I’ve just done my part. But, having done so, it’s now clear that as designed and implemented, the law is not consistent with what that moral reasoning demands. That too can be remedied, but it will require some changes, potentially at some cost. Do we have the moral fiber to make them?

http://newsatjama.jama.com/2014/06/11/jama-forum-the-moral-case-for-affo…

Austin Frakt is a highly credible health economist with great values, and a person for whom I have profound respect. But sometimes he thinks too much. He is certainly correct when he states that the design and implementation of the Affordable Care Act (ACA) is not consistent with “what moral reasoning demands.” Where he falls short is in his endorsement of flawed recommendations for improvement.

In conceding that ACA was not designed for universal coverage and will not achieve it, he implies that this is acceptable since our only moral obligation is to provide universal access to affordable coverage. The problem is that no matter how much you modify our existing fragmented, multi-payer system, you can never achieve truly universal access to affordable coverage, much less to affordable health care.

Let’s look at his suggestions. He says that all states could expand Medicaid. Sure, but they aren’t, and the Supreme Court ruled that we can’t make them do it. He says that we could increase subsidies for families with greater health care burdens. Sure, but imagine the administrative complexity assigning a health-care-needs status to each individual and then continually adjusting that status as needs change with time. He says that premium tax credits could take into consideration other out-of-pocket costs. Sure, but which would be allowable and how much documentation would be required? He says that exchanges could be redesigned to protect certain investments such as the children’s college education fund, the expenses of starting a small business, or saving for retirement. Sure, but talk about an administrative nightmare, and the error rate would likely be very great.

He says that these approaches would make coverage expansion more expensive. Sure. Much of the increased cost would be in the waste inherent in adding more administrative complexity to a system that is already uniquely heavily burdened with expensive administrative excesses. He says that these extra costs could be offset by increasing efficiency in health system delivery, but that has proven to be an elusive goal with little gain to date. Besides, wouldn’t we want the gains from increased efficiency to be used to improve health care delivery rather than to add to the administrative waste we already have?

The proper moral argument is to make actual health care – not health care coverage – accessible and affordable for absolutely everyone. This is what a single payer system would do. Tweaking our highly flawed financing system so that more people have access to an insurance card falls far short of the moral obligation that we have to each other. Austin Frakt knows this. He should give up on trying to think up ways to skirt single payer.

AHIP supports catastrophic plans as option

Posted by on Wednesday, Jun 11, 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.

Continuing Our Commitment to Consumers: Solutions That Will Enhance Affordability, Stability and Accessibility in the New Health Care Marketplace

America’s Health Insurance Plans (AHIP), June 2014

Enhancing affordability by creating a new lower premium Catastrophic Plan option

While millions of Americans have the peace of mind that health insurance provides, more can be done to maximize choice and affordability for individuals and families. As a solution to bring more families into the marketplace:

Health plans support the creation of a new, lower-premium catastrophic plan.

Such a plan would offer consumers the option of coverage that has lower monthly premiums but still provides the comfort of knowing that their costs will be limited in the event of a serious illness or injury.

Under the ACA, plans offered in the marketplaces fall into several metal-level categories, based on their “actuarial value” (AV) standard – essentially, what percentage of health care costs the policy would cover for a standard population. Plans are labeled as platinum (90% AV), gold (80% AV), silver (70% AV), or bronze (60% AV). A limited number of individuals — including individuals under the age of 30 — also have the option to purchase a catastrophic, high-deductible plan, although it has an actuarial value that is comparable to the bronze plan.

The new catastrophic plan would offer an AV just below the current minimum requirement, allowing for lower premiums, but would still include coverage of the law’s mandated essential health benefits, have no annual or lifetime benefit limits, and cover all preventive health services with zero cost-sharing for consumers. This would allow individuals and families eligible for premium subsidies to use that financial assistance to purchase the new plan, an option currently unavailable to consumers purchasing the ACA catastrophic plan.

We believe a new catastrophic plan would further the public policy goal of affordability and call upon policymakers to expand consumer choices by allowing this lower-premium option to be offered.

http://www.ahip.org/News/Press-Room/2014/Policy-Solutions/

One of the worst failures of the Affordable Care Act (ACA) is that, even with subsidies, the premiums and out-of-pocket expenses are unaffordable for far too many people. AHIP now proposes to make the premiums slightly more affordable by offering catastrophic plans with very high deductibles that would make accessing health care truly unaffordable for even more people (cost sharing subsidies are available only for silver plans, but coverage of the proposed catastrophic plans would fall even below the lowest-level bronze plans).

Why would they do this? Could it be that they want to capture a portion of the market of the 31 million people who will still remain uninsured after ACA is fully implemented?

Who would actually select these plans with very high deductibles but lower premiums? Those with very low incomes who would struggle even with subsidized premiums might choose these plans if they consider their subsidized premiums to be “all that they can afford.” These are individuals who would be much more likely to forgo essential health care simply because they couldn’t afford their portion of the deductibles.

Very high income individuals might select these plans to insure against catastrophic losses while deciding to self insure against more modest medical costs. The problem with this is that this is a form of regressive financing of the insurance risk pools. Since average health care costs are well beyond the means of middle income families to pay for them, wealthier individuals need to contribute more to the collective insurance pools (as they would in a single payer financing system). The AHIP proposal for low-premium catastrophic plans would allow them to contribute less than average instead.

For healthy middle-income families there is a preference for the tradeoff of lower premiums for higher-deductibles – an observation confirmed by behavior in the individual insurance market before the enactment of ACA. Families that remain healthy will come out ahead, but those families that later face significant health problems often find that they will face severe financial hardship as well – even bankruptcy.

So the insurance industry is taking a position that they can increase their market, that they will not have to pay for routine medical expenses, and that they can lower their medical losses by paying only for the comparatively few individuals with high medical expenses. Little does it matter that they have the health coverage function backwards in that the healthy and wealthy do very well but the sick and poor suffer. Limiting essential protection for the most vulnerable demonstrates again why the private insurance industry should be dismissed.

The insurance industry has been very successful in getting innovations that benefit themselves. This release by AHIP suggests that this is the beginning of another self-serving public campaign – this time to allow individuals to have (in marketing terms) “the choice of purchasing only the insurance they need” – a high-deductible catastrophic health plan.

Social solidarity takes another beating.

CBO microsimulation of demand for health insurance

Posted by on Tuesday, Jun 10, 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.

Microsimulation of Demand for Health Insurance: A Method Based on Elasticities

By Jessica S. Banthin
AcademyHealth Annual Research Meeting, Congressional Budget Office, June 9, 2014

CBO’s Health Insurance Simulation Model (HISIM)

  • The first version was developed in 2002 to model various proposals for expanding coverage, including direct subsidies, changes to tax incentives, and insurance market reforms.
  • The model is updated regularly to incorporate new data, the most recent economic forecast, changes in law or regulations, and technical improvements.

Major Outcomes Modeled by CBO’s HISIM

  • Effects on the federal budget
  • Changes in coverage by source of coverage
    • Uninsured
    • Employment-based coverage
    • Medicaid
    • Exchange(Subsidized and unsubsidized)
    • Other(Including nongroup coverage outside of the exchanges, Medicare, and military health care)
  • Occasional analyses of premiums, individual out-of-pocket spending, and outcomes by relationship to the Federal Poverty Level

By simulating behavior for each individual and family unit, the estimates capture the distribution of responses rather than average response by cell or subgroup, as in a simpler spreadsheet-type approach.

By taking advantage of detailed information collected in household surveys such as the SIPP on individuals and families and the relationships between key variables such as income, health status, employment status, and coverage, the estimates better reflect outcomes under new policies.

Individual behavior is modeled using an elasticity approach, not an expected utility approach.

Estimated Effects of the Affordable Care Act on Health Insurance Coverage, 2024 (non-elderly people):

UNINSURED:

  • Without the ACA:  57 million
  • Under the ACA:  31 million

INSURED:

Without the ACA

  • 35 million – Medicaid and CHIP
  • 166 million – Employment-Based
  • 27 million – Nongroup and Other

Under the ACA

  • 25 million – Exchanges
  • 48 million – Medicaid and CHIP
  • 159 million – Employment-Based
  • 22 million – Nongroup and Other

Estimated Budgetary Effects of the Insurance Coverage Provisions of the Affordable Care Act, 2015 to 2024: ~ $1,400 billion

http://www.cbo.gov/sites/default/files/cbofiles/attachments/45427-Academ…

Imagine how complex it is trying to estimate who will be eligible for and how many will select each of the various sources of coverage, how many will end up uninsured, and what impact that will have on the federal budget. The few excerpts above from the CBO presentation, “Microsimulation of Demand for Health Insurance: A Method Based on Elasticities,” provide an inkling of the complexity of that task.

Now imagine how simple it would be to estimate coverage under a single payer system. To the total population, estimates of births and immigration would be added and estimates of deaths and emigration would be subtracted. The CBO microsimulation serves as a proxy for the profound unnecessary administrative complexity and waste in our system.

The CBO is tasked with making projections for our federal budget. They estimate that the increase in federal spending on health care over the next decade due solely to the insurance coverage provisions of the Affordable Care Act will be ~ $1.4 trillion! This does not include the fact that individuals will be paying more because of the decrease in actuarial value of plans within and outside of the exchange, including especially the declining actuarial value of the largest sector of all – employer-sponsored plans. Our total national health expenditures is a much more important number than is the portion in the federal budget.

As we’ve said repeatedly, the ACA model falls short on most of the goals and it is the most expensive of the comprehensive models of reform. In contrast, the single payer model meets essentially all goals and is the least expensive of comprehensive models.

Because of the great number of variables and interdependent complexity of our health care financing, the CBO has declared that in the future it can no longer give a reasonable estimate of the changes in the federal budget due to the implementation and perpetuation of the provisions of the Affordable Care Act. That should tell you something. It’s time for single payer.

Charity, but not for all

Posted by on Monday, Jun 9, 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.

Shifts in Charity Health Care

By The Editorial Board
The New York Times, June 8, 2014

Health care reform was supposed to relieve the financial strain on hospitals that have provided a lot of free charity care to poor and uninsured patients. The reform law, known as the Affordable Care Act, was expected to insure most of those patients either through expanded state Medicaid programs for the poor or through subsidized private insurance for middle-income patients, thereby funneling new revenues to hospitals that had previously absorbed the costs of uncompensated care.

In return for the new income streams, hospitals that treat large numbers of the poor and get special subsidies to defray the cost would have those subsidies reduced on the theory that they would no longer need as much help.

But after the Supreme Court ruled that the reform law could not force states to expand their Medicaid programs, 20 or more states declined to do so. That failure has hurt some big urban hospitals, because their charity care burden remains essentially the same even as their federal aid has been cut. Even in California, which has expanded its Medicaid program, public hospitals that serve the poorest patients could face a big funding shortfall in future years, according to a study just published by researchers at the University of California at Los Angeles.

A recent report in The Times by Abby Goodnough found that some hospital systems have started tightening the requirements for charity care in efforts to push uninsured people into signing up for subsidized health plans on the insurance exchanges created by the reform law. In St. Louis, for example, Barnes-Jewish Hospital has started charging co-payments to uninsured patients no matter how poor they are. Those at or below the poverty level ($11,670 for an individual) are charged $100 for emergency care and $50 for an office visit.

But some medical centers have seen their charity care costs decline. A report late last month in Kaiser Health News and USA Today said that Seattle’s largest “safety net” hospital, run by the University of Washington, saw its proportion of uninsured patients drop from 12 percent last year to a surprisingly low 2 percent this spring, putting the hospital on track to increase its revenue by $20 million this year from annual revenues of about $800 million.

How all of this will shake out is still uncertain. Some vulnerable groups may find it even harder to get the care they need. Through a quirk in the reform law, residents below the poverty line in states that have failed to expand Medicaid are not eligible for either Medicaid or for subsidized coverage on the insurance exchanges. Undocumented immigrants are not eligible for Medicaid or the subsidized coverage. And some low-income people who have enrolled in subsidized health plans may have trouble paying their cost-sharing.

There are some ways to address these gaps. All states ought to expand their Medicaid programs since the federal government is offering very generous matching funds. Hospitals should move aggressively to help people enroll in Medicaid or in subsidized plans on the exchanges. And federal health officials need to review regularly whether health plan co-payments are actually affordable to those living on very modest incomes.

Reader Comments:

NYT Picks
paradocs2, San Diego

It has been little appreciated that one of the most important accomplishments of the Affordable Care Act was to create universal national health insurance for all poor legal residents of the United States who earned less than 138 percent of the federal poverty level. This magnificent and compassionate action of social innovation and national unity was frustrated by the insensitive, tragic and immoral decision of the Supreme Court. The consequences described in this editorial go beyond costs and inefficiencies to the persistence of the lack of medical services in many areas of our country with appallingly poor health statistics. The problem is more than “the financial strain on hospitals that have provided a lot of free charity care to poor and uninsured patients,” for it extends to the suffering of those millions of people excluded from ongoing medical care. In addition, the circumstances described in this editorial highlight the conundrum of our country’s health care system, based as it is on on a commercial market model and profit generating insurance companies. The best solution to these problems, both the economic inefficiencies and the human suffering, is the creation of a universal, national, single payer health system looking like Medicare expanded to cover all residents. It is profoundly upsetting that our individualistic contemporary culture and the politicians who represent it are blind to both the moral and economic consequences of their position.

http://www.nytimes.com/2014/06/09/opinion/shifts-in-charity-health-care….

PNHP’s Jeoffry Gordon, MD (paradocs2, above) stated it so well that no additional comment is being provided today.

Care of cancer in this country is outpacing other health care problems and is already pricing itself beyond the reach of many Americans unfortunate enough to contract the disease. In my 2009 book, The Cancer Generation: Baby Boomers Facing a Perfect Storm, this storm warning was included:

  • Cancer soon to be nation’s No. 1 cause of death
  • Costs soaring out of control
  • Decreasing access, increasing disparities
  • Widening gaps in quality of care
  • Insurance costs more and covers less
  • Profit-driven market-based system is unaccountable and unsustainable
  • Reform is blocked by powerful market stakeholders
  • 79 million Baby Boomers face increased risk of cancer as they age, and will confront this challenge with dwindling resources. (1)

Now, five years later, let’s see where we are with this gathering storm.

Here are markers that show that the situation worsens every year as costs and prices continue to escalate, access and affordability decline, and gaps in quality of care further widen:

  • In Massachusetts, out-of-pocket (OOP) costs for breast cancer treatment are as high as $55,250 for women with high-deductible health insurance. (2)
  • Typical yearly OOP expenses of 20 to 30 percent for cancer treatment often amount to one-half of the average annual household income. (3)
  • Many insured cancer patients are forced to reduce the frequency of their prescribed medications or cut their spending on food and clothing in order to make ends meet. (4)
  • Over the ten-year period from 2004 through 2014, the Consumer Price Index (CPI) has increased by about 2.3 percent a year while the Milliman Medical Index, which measures the actual cost of health care, has increased by an average annual rate of 7.6 percent. (5)
  • With some newer cancer drugs costing as much as $100,000 per round of treatment, there are still perverse financial incentives for many oncologiststo prescribe more expensive drugs. (6)
  • Insurers’ narrowed networks often exclude major cancer centers, often interrupting continuity of care by treating oncologists and burdening patients with much higher OOP costs. (7,8)
  • In other attempts to rein in their (not the patient’s!) costs, insurers are starting to adopt “reference pricing”, by which they just pay a portion of cancer drugs’ costs, leaving the rest to the patient.
  • Chemotherapy continues to be overused in terminally ill cancer patients,with little hope of extending life or adding to quality of life.
  • A recent report from the International Federation of Health Plans (IFHP) found that prices for medical procedures, tests, scans and treatments in the U.S. still have the highest prices among ten countries, are not related to patient outcomes, and “in some cases reflect a damaging degree of market failure.” (9)

All this represents an ominous trend, standing out more starkly all the time compared to other advanced countries around the world, where comprehensive cancer care is available to everyone, typically with little or no cost-sharing and often with better outcomes. The Affordable Care Act (ACA) has not contained costs and prices, but instead has allowed insurers and the drug industry to continue to profiteer at patients’ expense. Future developments in cancer care will certainly add to the cost and price problem, such as gene-based designer cancer drugs. (10)

Markets will never fix this kind of problem. Nor will most parts of the medical industrial complex, driven as they are to profits before service. As other countries have found many years ago, the government must become more involved in pricing and financing of health care services, together with a more rigorous process of assessing services based on scientific evidence, efficacy, and cost-effectiveness.

Fortunately, we are now seeing a major backlash from many oncologists, the cancer doctors who provide most of our cancer care. The American Society of Clinical Oncology (ASCO) has identified this top priority for its members:
For patients with advanced solid-tumor cancers who are unlikely to benefit, do not provide unnecessary anticancer therapy, such as chemotherapy, but instead focus on symptom relief and palliative care. (11)

More recently, leading oncologists have called on their colleagues, working with ASCO, to champion single-payer national health insurance as the only way to bring necessary cancer care to all Americans.

With ACA now the law of the land, and its retention of the private insurance industry at the center of the health system, the trend toward high-deductible health plans, underinsurance, and cost shifting to patients will almost certainly worsen. 59 years of private-sector solutions have failed. There needs to be a major paradigm shift in our approach to funding health care in the United States. . . . Because ACA will fail to remedy the problems of the uninsured, the underinsured, rising costs, and growing corporate control over caregiving, we cannot in good conscience stand by and remain silent. . . .  Life is short, especially for some patients with cancer; they need help now. . . All our patients deserve dignity. It is our moral and ethical obligation as physicians to advocate for universal access to health care. (12)

These words are right on target, and need to be heeded if we are ever going to redress increasing inequities and disparities in cancer care, and start to catch up with the rest of the world.

Original story posted at health Care Disconnects: http://blog.hc-disconnects.com/2014/06/09/cancer-care-in-the-usachilles-heel-of-a-profit-driven-system.aspx

Suggested Reading:

1. Geyman, JP. The Cancer Generation: Baby Boomers Facing a Perfect Storm. Monroe, ME. Common Courage Press, 2009.
2. National Center for Health Statistics. Financial burden of medical care: early release  of estimates from the National Health Interview Survey, January-June 2011. 2012.
3. Kantarjian, H, Steensma, D, Sanjuan, JR et al. High cancer drug prices in the United States: reasons and proposed solutions. Journal of Oncology Practice, May 6, 2014.
4. Zafarm, SY, Peppercorn, JM, Schrag, D et al. The financial toxicity of cancer treatment: a pilot study assessing out-of-pocket expenses and the insured cancer patient’s experience. Oncologist 18: 381-390, 2013.
5. Girod, C, Mayne, LW, Weltz, SA et al. 2014 Milliman Medical Index, Milliman, May 20, 2014.
6. Mathews, AW, Insurers push to rein in spending on cancer care. Wall Street Journal, May 28, 2014: A1.
7. Tozzi, J. Obamacare limits choices under some plans. Bloomberg Businessweek. March 20, 2014.
8. Andrews, M. Warning: opting out of your insurance plan’s provider network is risky. Kaiser Health News, March 18, 2014.
9. IFHP publishes 2013 price report. International Federation of Health Plans, 2014.
10. Wheelwritht, V. Adventures in personal genomics. The Futurist, May-June 2014, 43-45.
11. American Society of Clinical Oncology. Oncology “Top Five” list identifies opportunities to improve quality and value in cancer care. April 3, 2012.
http://www.asco.org/advocacy/oncology-top-five-list-identifies-    opportunities-improve-quality-and-value-cancer-care
12. Drasga, RE, Einhorn, LH. Why oncologists should support single-payer national health insurance. Journal of Oncology Practice, January 2014.

http://www.pnhp.org/news/2014/january/oncologists-call-for-single-payer-in-leading-cancer-journal

Insurer executive rolls her eyes over hokey ACOs

Posted by on Friday, Jun 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.

Doctors, hospitals and insurers team up

By Bernard J. Wolfson
Orange County Register, May 1, 2014

In an office building across the street from St. Joseph Hospital in Orange, midlevel managers from Blue Shield of California gathered around a conference table last week with representatives of St. Joseph Heritage Healthcare. The setting was unremarkable, but the conversation that took place was part of an increasingly common collaboration between a larger insurer and one of its key medical providers.

Christy Mokrohisky perked up when Nancy England, a senior pharmacist at Blue Shield of California, proposed a pilot program in which pharmacists would be parachuted into the clinics and physician offices of St. Joseph Heritage Healthcare to manage the prescriptions of sick patients for doctors who are too busy to do it.

For Mokrohisky, who oversees St. Joseph’s performance improvement efforts, the idea spoke directly to one of her driving ambitions: to keep chronically ill patients out of the hospital and away from the emergency room.

“We all know that issues around medication are the number one or close to the number one reason for trips to the ER or admissions to the hospital,” said Mokrohisky, giving voice to the consensus around the table.

The weekly meeting is only one manifestation of the huge upgrade in communication and information sharing between the two groups that has resulted from a 2-year-old alliance known, in the techno-jargon of the industry, as an accountable care organization, or ACO.

The main goal of the ACO is to improve the quality of patient care and save money through closer attention to patients’ needs, monitoring of their compliance with doctors’ orders and avoidance of unnecessary treatments.

Early signs indicate the Blue Shield-St. Joseph ACO is paying dividends. In its first year, it produced a sharp reduction in patient admissions, length of hospital stays, emergency room visits, outpatient surgeries and readmissions, according to in-house data from the insurance company. The group saved a total of $11.5 million, some of which the parties divvied up.

The financial windfall aside, people in both organizations say this kind of ongoing collaboration between an insurance company and a large medical group – virtually unheard of a few years ago – has changed the way they do business with each other.

“It sounds kind of hokey, and sometimes when I say it out loud I have to roll my eyes at myself, but it has created something I have never seen,” says Kristen Miranda, who oversees Blue Shield’s 15 ACOs statewide. “It absolutely has changed the way we interact with these providers and the way they interact with each other. We all now see ourselves as coming together to look at this population as if we are on the same side instead of just battling it out at the negotiating table every year.”

Blue Shield views the kind of orchestrated care it is offering through its ACOs as a competitive wedge against Kaiser Permanente, a health care giant in California that has a built-in advantage because its doctors, hospitals and insurance are integrated.

Some industry observers say ACOs are little more than traditional HMOs in new clothing.

(Glenn Melnick, a health economist at USC) worries that the ability of ACOs to save health care dollars may be time-limited.

“At some point, you are going to reduce inpatient days and other measures as low as they can possibly go,” he says. “Then the question becomes whether these ACOs will be able to generate additional savings from other areas that might be more difficult.”

http://www.ocregister.com/articles/blue-612097-shield-care.html

So now with ACOs, insurers and providers are “coming together to look at this population as if we are on the same side instead of just battling it out at the negotiating table every year.” They are sharing a “financial windfall” by having accomplished “a sharp reduction in patient admissions, length of hospital stays, emergency room visits, outpatient surgeries and readmissions, according to in-house data from the insurance company.” The insurers and providers have conspired to split the gains from not providing care. No wonder the person overseeing Blue Shield’s 15 ACOs has to “roll my eyes” since it seems so “hokey.”

No more hokey. Let’s have a financing system geared to patients, not to insurers – a single payer national health program.

Center for Public Integrity on the Medicare Advantage Money Grab

Posted by on Thursday, Jun 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.

The Medicare Advantage Money Grab

The Center for Public Integrity, June 4, 2014

Why Medicare Advantage costs taxpayers billions more than it should

By Fred Schulte, David Donald and Erin Durkin

(Medicare Advantage) plans have sharply driven up costs in many parts of the United States — larding on tens of billions of dollars in overcharges and other suspect billings based in part on inflated assessments of how sick patients are, an investigation by the Center for Public Integrity has found.

Dominated by private insurers, Medicare Advantage now covers nearly 16 million Americans at a cost expected to top $150 billion this year. Many seniors choose the managed-care Medicare Advantage option instead of the traditional government-run Medicare program because it fills gaps in coverage, can cost less in out-of-pocket expenses and offers extra benefits, such as dental and eye care.

But billions of tax dollars are misspent every year through billing errors linked to a payment tool called a “risk score,” which is supposed to pay Medicare Advantage plans higher rates for sicker patients and less for those in good health.

Government officials have struggled for years to halt health plans from running up patient risk scores and, in many cases, wresting higher Medicare payments than they deserve, records show.

The Center’s findings are based on an analysis of Medicare Advantage enrollment data from 2007 through 2011, as well as thousands of pages of government audits, research papers and other documents.

Federal officials who run the Medicare program repeatedly refused to be interviewed or answer written questions.

Key findings:

  • Federal officials have made billions in “improper” payments to Medicare Advantage plans traced to risk score errors.
  • Medicare Advantage risk scores rose much faster than the national average in hundreds of counties nationwide between 2007 and 2011. That rise in risk scores cost taxpayers more than $36 billion; critics attribute that more to aggressive billing than sicker patients.
  • Though federal health officials have recently disclosed some Medicare billing data, key financial records of Medicare Advantage plans have been kept under wraps.
  • The failure to crack down on health plans that overbill doesn’t bode well for the Affordable Care Act, which relies on a similar risk scoring system.

Thomas Scully, who helped get the program running under President George W. Bush, said rates were generous in hopes of enticing insurers to expand their Medicare business and not shy away from people in poor health.

“We very intentionally tried to overpay them a little bit,” said Scully, now a Washington lobbyist with numerous health care industry clients.

http://www.publicintegrity.org/2014/06/04/14840/why-medicare-advantage-c…

“The Medicare Advantage Money Grab”:http://www.publicintegrity.org/health/medicare/medicare-advantage-money-…

Medicare Advantage is a program in which our government has conspired with insurers to privatize Medicare, even though it costs far more when private insurers are inserted as intermediaries than it does when Medicare is administered as a public program. This report from The Center for Public Integrity is just the latest that has exposed this outrageous use of our tax funds.

The program was set up to deliberately overpay the plans so that they could offer additional benefits that would entice Medicare beneficiaries into the private plans (see Scully’s comment above). Recognizing these overpayments, Congress included in the Affordable Care Act gradual reductions. Not to be outdone, the insurance industry has conspired with the Obama administration and has enlisted individual members of Congress to fight these reductions. In response, the Obama administration has used dishonest budgetary manipulations to offset a portion of the reductions for 2013, 2014 and 2015.

Even more outrageous is that the private insurance industry has used “innovations” to selectively enroll healthier beneficiaries, yet used “touch of illness” serious diagnostic codes to game risk adjustment, which has rewarded the insurers handsomely for claiming that their beneficiaries were much sicker than they really were. According to this report, federal Medicare officials refused to answer questions about these perverse practices.

The insurance industry has been very successful in framing this as “cutting payments for Medicare,” while mobilizing citizens to demand that these cuts be prevented. The cuts are not in Medicare, but they are a reduction of overpayments to private insurers. Yes, those who sign up with the private plans often have lower out-of-pocket costs, but the rest of us are paying for that through higher taxes and through our Part B Medicare premiums that are partially transferred to the private insurers.

Since we are paying for it, we should be receiving in the traditional Medicare program the same benefits of reduced out-of-pocket expenses. Let the people enrolled in Medicare Advantage keep the same level of benefits, but increase the benefits in the traditional Medicare program to the same level, then fire the private insurers that have been responsible for most of the cost overruns in the Medicare Advantage program.

The politicians seem to agree that we should be spending these excess funds on Medicare, so let’s be fair and spend them equitably on an improved Medicare, but not on insurer profits and waste. While we’re at it, let’s make that an improved Medicare for all.

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