Health insurers’ warped approach to competition

Posted by on Friday, Jun 26, 2015

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 Insurers Competed in the Affordable Care Act’s First Year

By Katherine Swartz, Mark Hall, Timothy S. Jost
The Commonwealth Fund, June 24, 2015


Prior to the Affordable Care Act (ACA), most states’ individual health insurance markets were dominated by one or two insurance carriers that had little incentive to compete by providing efficient services. Instead, they competed mainly by screening and selecting people based on their risk of incurring high medical costs. One of the ACA’s goals is to encourage carriers to participate in the health insurance marketplaces and to shift the focus from competing based on risk selection to processes that increase consumer value, like improving efficiency of services and quality of care. Focusing on six states — Arkansas, California, Connecticut, Maryland, Montana, and Texas — this brief looks at how carriers are competing in the new marketplaces, namely through cost-sharing and composition of provider networks.

From the Conclusions

The ACA reforms will surely stimulate continuing adaptations by carriers, providers, and policymakers, and we expect the competitive strategies in the marketplaces to evolve as consumers and carriers gain more experience with marketplace competition.…

What should the consumer expect from marketplace competition? Business experts tell us that competition is the key to higher quality at lower cost. So what has competition between private health insurance plans brought us?

Based on international comparisons, our health care quality is mediocre and our health care costs are by far the highest of all nations. The insurers have been ineffective in improving either of those. Okay, but what about the health plans themselves? Are we receiving high quality insurance products at low prices?

Before the Affordable Care Act (ACA), insurers competed primarily on the prices of their insurance premiums, and they still do. Before ACA, the most effective method of keeping their premiums from increasing more than they did was to exclude people from coverage who actually needed health care. The most important purpose of insurance is to make health care access affordable by diluting risk through insurance risk pools. Yet the insurers instead excluded risk by attempting to insure only those who could pass underwriting standards in the individual market, or by pricing group plans out of the market if they experienced high health care utilization.

A quality risk pooling program would be designed to ensure that everyone receives essential health care, yet by excluding those who have the greatest needs for care, the insurers abandoned any effort to ensure quality in their insurance products.

As far as costs are concerned, health care costs continued to escalate out of control, demonstrating that the insurers could not deliver on the promise of lower costs either.

What has happened since ACA was implemented?

Although the act prohibits medical underwriting, the insurers are still using devious methods to discourage individuals with greater heath care needs from enrolling. As an example, drugs used for certain chronic conditions are placed in upper tiers of drug coverage which require greater coinsurance payments, pricing these products out of reach for the patients, which deters them from joining the plan in the first place. Plans also are still selectively marketed to healthier populations. Professionals and institutions noted for providing care to high needs patents are frequently left out of the insurers’ networks, chasing away patients who use these providers. Again, these efforts to exclude those with needs confirm that the insurers are still marketing low quality insurance products that fall short of the health care needs of the community.

This new report from The Commonwealth Fund shows that the insurers are using two innovations to improve their competitive positions in the marketplace: cost sharing and narrow provider networks.

Cost sharing through deductibles, co-payments, coinsurance, and exclusion of coverage erects financial barriers to care, reducing the use of beneficial services and thus allowing the insurers’ premiums to be priced more competitively. An insurance product that is designed to keep people away from care that they need is a low quality product.

Narrow provider networks reduce health care utilization by preventing coverage of health care professionals and institutions that may be the most appropriate for the patients’ conditions, requiring them to turn to lesser care or no care at all. Also, care may be made less accessible simply by increasing the distances needed to travel to network providers while excluding nearby providers from the networks. Again, insurance products designed to impair access to appropriate health care providers are low quality products.

Thus, with ACA, insurers are impairing quality through the use of the barriers of cost sharing and narrow networks. And regarding costs, it appears that they are again on an upward trajectory. Health care prices have not been controlled. The only slowing has been due to a modest reduction in the use of beneficial health care services caused by these barriers that the insurers have erected. The insurers have failed again on their promise of higher quality at lower cost.

What about the future? The Commonwealth Fund report states, “we expect the competitive strategies in the marketplaces to evolve as consumers and carriers gain more experience with marketplace competition.” We know what this means. The insurers will not be looking for ways to pay for more beneficial health care services. They will be introducing more innovations that prevent patients from getting the care that they need. That’s the way that the marketplace for health insurance products works.

Medicare doesn’t work that way. Instead, efforts are made to include everyone who is qualified and to include all health care professionals and institutions. At the same time, payments are based on legitimate costs and fair margins – a system that is less costly because of administrative efficiencies.

If we really want higher quality at a lower cost, we need to improve Medicare and expand it to cover everyone. The private insurance industry certainly is never going deliver on quality and cost since they will do better for themselves with their warped approach to competition.

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Next step: Establishing health care as a right through single payer

Posted by on Thursday, Jun 25, 2015

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.



No. 14–114. Argued March 4, 2015—Decided June 25, 2015

Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.

The judgment of the United States Court of Appeals for the Fourth Circuit is Affirmed.


The Elusive Right to Health Care under U.S. Law

By Jennifer Prah Ruger, Ph.D., M.S.L., Theodore W. Ruger, J.D., and George J. Annas, J.D., M.P.H.
The New England Journal of Medicine, June 25, 2015

Is there a right to health care in the United States? No U.S. Supreme Court decision has ever interpreted the Constitution as guaranteeing a right to health care for all Americans. The Constitution does not contain the words “health,” “health care,” “medical care,” or “medicine.” But if we look deeper, a more nuanced picture emerges. The Court has found rights to privacy, to bodily integrity, and to refuse medical care within the vague right to “due process” contained in the Constitution. The Court has also constructed a right to decide to terminate a pregnancy, although it has also ruled that the government has no obligation to subsidize the exercise of this right. When this line of cases is considered together, it would appear that the U.S. Constitution provides scant affirmative obligation to provide health care.

Despite the absence of a universal right to health care in the Constitution, Congress and the Supreme Court have incrementally crafted an incomplete web of health care rights during the past 50 years. In prisons and emergency rooms across the country, physicians and medical institutions have for decades been required to provide medical care. In a 1976 landmark decision in Estelle v. Gamble, for example, the Supreme Court found a right to adequate medical care for prisoners grounded in the Eighth Amendment of the Constitution.


It is notable that all three of these litigation efforts against the ACA — the 2012 ruling on the individual mandate, the 2014 ruling in Hobby Lobby, and the forthcoming ruling on subsidies for exchange participants — arise from the devolved structures of American health governance; none of the three issues would be valid constitutional or statutory objections to a taxpayer-financed single-payer system. As the Court ruled in Hobby Lobby, religious objections to general taxation used to finance national imperatives are not protected as strongly as the specific claim of Hobby Lobby against the regulatory mandate of the ACA. Perhaps paradoxically, under the Court framework, a completely single-payer system is more constitutionally sound than the ACA statutory design, which aims to preserve a private institutional role in the health care system.

According to the Supreme Court, Congress’s plan was “to improve health insurance markets, not to destroy them,” and thus they upheld the subsidies for the plans offered through the state insurance exchanges. But Congress has failed to establish a process through which absolutely everyone is assured of health care when needed. That is, Congress has established health care as a right only in selected circumstances, but not for everyone. In contrast, as the authors of the NEJM article state, “…under the Court framework, a completely single-payer system is more constitutionally sound than the ACA statutory design…” Enacting a single payer system would finally establish health care as a right throughout the United States.

Physicians for a National Health Program release on the King v. Burwell decision by the Supreme Court:

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Unauthorized immigrants reinforce Medicare trust funds

Posted by on Wednesday, Jun 24, 2015

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.

Unauthorized Immigrants Prolong the Life of Medicare’s Trust Fund

By Leah Zallman MD, MPH, Fernando A. Wilson PhD, James P. Stimpson PhD, Adriana Bearse MS, Lisa Arsenault PhD, Blessing Dube MPH, David Himmelstein MD, Steffie Woolhandler MD, MPH
Journal of General Internal Medicine, June 18, 2015


Background and Objective

Unauthorized immigrants seldom have access to public health insurance programs such as Medicare Part A, which pays hospitals and other health facilities and is funded through the Medicare Trust Fund.

Design and Main Measures

We tabulated annual and total Trust Fund contributions and withdrawals by unauthorized immigrants (i.e., outlays on their behalf) from 2000 to 2011 using the Current Population Survey and Medical Expenditure Panel Surveys. We estimated when the Trust Fund would be depleted if unauthorized immigrants had neither contributed to it nor withdrawn from it. We estimated Trust Fund surpluses by unauthorized immigrants if 10 % were to become authorized annually over the subsequent 7 years.

Key Results

From 2000 to 2011, unauthorized immigrants contributed $2.2 to $3.8 billion more than they withdrew annually (a total surplus of $35.1 billion). Had unauthorized immigrants neither contributed to nor withdrawn from the Trust Fund during those 11 years, it would become insolvent in 2029—1 year earlier than currently predicted. If 10 % of unauthorized immigrants became authorized annually for the subsequent 7 years, Trust Fund surpluses contributed by unauthorized immigrants would total $45.7 billion.


Unauthorized immigrants have prolonged the life of the Medicare Trust Fund. Policies that curtail the influx of unauthorized immigrants may accelerate the Trust Fund’s depletion.…


Unauthorized immigrants prolong the life of Medicare Trust Fund: JGIM study

PNHP, June 23, 2015

Unauthorized immigrants pay billions more into Medicare’s Hospital Insurance Trust Fund each year than they withdraw in health benefits, according to research from Harvard Medical School, the Institute for Community Health and the City University of New York School of Public Health at Hunter College.

In 2011 alone, unauthorized immigrants paid in $3.5 billion more than they utilized in care.  Unauthorized immigrants generated an average surplus of $316 per capita to the Trust Fund, while other Americans generated a deficit of $106 per capita. The authors conclude that reducing unauthorized immigration would worsen Medicare’s financial health.

Payroll taxes are the major revenue source for the Trust Fund, which mostly pays hospital bills. Unauthorized immigrants often pay these taxes, usually under a borrowed or invalid Social Security number. Unauthorized immigrants are mostly working age, have high rates of labor force participation, and hence contribute substantial payroll taxes. Medicare outlays for unauthorized immigrants are low because they are ineligible for Medicare benefits.

Senior author Dr. Steffie Woolhandler, professor of public health at City University of New York and lecturer in medicine at Harvard, said: “The numbers contradict the myth that unauthorized immigrants are a drain on the health system. Reducing immigration would worsen Medicare’s financial woes.”…

Discussions of expanding health care coverage to everyone frequently result in expressions of concern about immigration policy. That unauthorized immigrants place a burden on our public resources has become a meme that is not substantiated in fact. This study adds to the evidence that unauthorized immigrants contribute more toward our public resources than they consume in benefits. Their contributions have reinforced our Medicare trust funds.

Under a single payer system, everyone is included. Studies such as this should allay fears that the nation cannot afford the costs of including unauthorized immigrants. Acknowledging that they are here and are important contributors to our economy should ease concerns about the need to move them from non-compliant use of Social Security numbers to a transparent system of accurate identification. Under single payer, they would openly contribute their equitable share to our pooled health care funds.

Everyone should have health care whenever needed. Let’s fix our system.

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Robert Reich supports Medicare for all, but…

Posted by on Tuesday, Jun 23, 2015

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.

Making the Economy Work for the Many and Not the Few

#11: Medicare Isn’t the Problem; It’s the Solution

By Robert Reich
HuffPost Politics, June 22, 2015

Again and again the upcoming election you’ll hear conservatives claim that Medicare — the health insurance program for America’s seniors — is running out of money and must be pared back.

Baloney. Medicare isn’t the problem. In fact, Medicare is more efficient than private health insurance.The real problem is that the costs of health care are expected to rise steeply.

Medicare could be the solution — the logical next step after the Affordable Care Act toward a single-payer system.

Please see the accompanying video — #11 in our series on ideas to make the economy work for the many rather than for the few. And please share.

Some background: Medicare faces financial problems in future years because of two underlying trends that will affect all health care in coming years, regardless of what happens to Medicare:

The first is that healthcare costs are rising overall — not as fast as they were rising before the Affordable Care Act went into effect, but still rising too quickly.

The second is that the giant post­war baby boom is heading toward retirement and older age. Which means more elderly people will need more health care, adding to the rising costs.

So how should we deal with these two costly trends? By making Medicare available to all Americans, not just the elderly.

Remember, Medicare is more efficient than private health insurers ­­ whose administrative costs and advertising and marketing expenses are eating up billions of dollars each year.

If more Americans were allowed to join Medicare, it could become more efficient by using its growing bargaining power to get lower drug prices, lower hospital bills, and healthier people.

Allowing all Americans to join Medicare is the best way to control future healthcare costs while also meeting the needs of the baby boomer and other Americans.

Everyone should be able to sign up for Medicare on the healthcare exchanges set up under the Affordable Care Act. This would begin to move America away from its reliance on expensive private health insurance, and toward Medicare for all – a single­ payer system.

Medicare isn’t a problem. It’s part of the solution.…



Public Plan Option in a Market of Private Plans

By David Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, March 26, 2009

The “public plan option” won’t work to fix the health care system for two reasons.

1. It forgoes at least 84 percent of the administrative savings available through single payer. The public plan option would do nothing to streamline the administrative tasks (and costs) of hospitals, physicians offices, and nursing homes, which would still contend with multiple payers, and hence still need the complex cost tracking and billing apparatus that drives administrative costs. These unnecessary provider administrative costs account for the vast majority of bureaucratic waste. Hence, even if 95 percent of Americans who are currently privately insured were to join the public plan (and it had overhead costs at current Medicare levels), the savings on insurance overhead would amount to only 16 percent of the roughly $400 billion annually achievable through single payer — not enough to make reform affordable.

2. A quarter century of experience with public/private competition in the Medicare program demonstrates that the private plans will not allow a level playing field. Despite strict regulation, private insurers have successfully cherry picked healthier seniors, and have exploited regional health spending differences to their advantage. They have progressively undermined the public plan — which started as the single payer for seniors and has now become a funding mechanism for HMOs — and a place to dump the unprofitably ill. A public plan option does not lead toward single payer, but toward the segregation of patients, with profitable ones in private plans and unprofitable ones in the public plan.

In his enthusiastic endorsement of single payer Medicare for all, Robert Reich also renews the call for the “public option” of allowing people to purchase Medicare through the exchanges established by the Affordable Care Act. During the health care reform process, the public option had wide support, but was first weakened considerably and then eventually rejected by Congress in a power play by Sen. Joseph Lieberman.

In spite of the modest benefits of the Affordable Care Act, nothing has changed that would alter the concerns about the public option expressed by David Himmelstein and Steffie Woolhandler and others of us at PNHP.

At the time the public option was being considered, I wrote the following: “The option to purchase a public plan within a market of private health insurance plans would merely provide one more player in our inefficient, dysfunctional, fragmented, multi-payer system of financing health care, that is if the public option even survives the political process. It would leave in place the deficiencies that have resulted in very high costs with the poorest health care value of all nations (i.e., overpriced mediocrity in health care).”

Even if Medicare were offered for purchase in the exchanges, the premiums would not be competitive with the low-actuarial-value silver and bronze plans with their very high deductibles, especially since the Medicare risk pool includes higher cost elderly and disabled individuals. If Medicare were revised to make it competitive, benefits would have to be reduced when what we need instead is an improved Medicare with expanded benefits.

One possibility would be to provide subsidies for those electing the Medicare option, but either the beneficiaries’ share would still be too great, certainly making the plan non-competitive, or the public subsidies would have to be greater than those for the private low-actuarial-value insurance plans – an approach that would be vigorously opposed by the all-powerful private insurers.

Besides, it is unlikely that Congress would support higher subsidies for a public option Medicare when their agenda has been the opposite – providing higher subsidies for the private Medicare Advantage plans, sending us in the direction of a privatized Medicare.

Although Robert Reich proposes a public option version of Medicare as a way to begin moving us toward a single payer Medicare for all, it is difficult to perceive how the transition would take place. Offering an option to purchase Medicare is a very small step that leaves everything else in place. As Medicare Advantage demonstrates, one-third of beneficiaries have moved in the opposite direction – from traditional Medicare to private insurance options. That would continue as long as Congress continues to advance policies that cater to the insurers more than they do to the public.

Reich seems to be recommending a two step path to reform – one step offering the Medicare option and a second step of converting to single payer Medicare for all. Quentin Young has compared that to taking two steps to cross a chasm. That first step can lead to a serious misadventure, but it should not be a surprise.

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Pioneer ACO Evaluation Findings from Performance Years One and Two

L&M Policy Research,  March 10, 2015

The providers affiliated with Pioneer ACOs may change between performance years. … Because beneficiaries are aligned to the ACO based on a plurality of E&M [evaluation and management] services from ACO-participating providers, changes in ACO provider composition can impact which beneficiaries are aligned to the ACO in a given year. … Table 23 shows the number of these providers affiliated with [23 Pioneer] ACOs in 2012; the number of providers lost through attrition after 2012; the number of newly affiliated providers in 2013; the percent of continuously affiliated providers from 2012 to 2013; and the percent of beneficiaries aligned with an ACO in 2013 who were also aligned in 2012. [pp. 93-94] … The proportion of 2013 participating providers who participated with the same ACO in 2012 ranged from 0.47 to 0.92, with an average of 0.73. [p. 96]

pioneer aco turnover table

The annual “churn” rate among Medicare accountable care organization (ACO) doctors and assigned patients is enormous: It averages around one-third for both doctors and patients. Because of this constant doctor and patient turnover, ACOs lose the majority of their assigned patients over a five-year period. How is an ACO supposed to be held “accountable” for services given to such a rapidly changing panel of patients by such a rapidly changing roster of physicians?

This question was totally ignored by ACO proponents before the concept was invented at a November 2006 meeting of the Medicare Payment Advisory Commission. It has been almost totally ignored since by ACO proponents and health policy researchers. We have only a few reliable reports on churn rates among Medicare recipients assigned to Medicare ACOs by CMS, and virtually no research on churn rates among those under 65 in commercial or Medicaid ACOs.

The two most credible reports on the problem appeared in evaluations of ACO Medicare programs for CMS: the evaluation of the first two years of the Pioneer ACO program by L&M Policy Research released by CMS last May, and the final report on the Physician Group Practice (PGP) Demonstration published by CMS in 2012. The PGP demo is widely regarded as a test of the ACO concept.[1]

L&M reported doctor and patient retention rates for the second performance year (2013) of the Pioneer ACO program. The average retention rate for doctors was 73 percent, and for patients 62 percent (see Table 23 presented above).[2]  In other words, of the doctors listed by the ACOs at the beginning of 2012 as participating ACO doctors, only 73 percent were listed as participating at the beginning of 2013. Similarly, of the Medicare recipients assigned by CMS to ACOs as of January 2012, only 62 percent remained assigned in January 2013. This means the churn rate (the opposite of the retention rate) was 27 percent for doctors and 38 percent for patients.

Data from the PGP demo suggests that the churn rate for Pioneer ACOs will not change substantially in future years. The patient attribution algorithm for the PGP demo was almost identical to the algorithm CMS is using for the Pioneer program: Medicare beneficiaries were assigned to PGPs based upon the plurality-of-primary-care-visits method – if the primary care doctor who saw the patient the most often during a baseline period was in a PGP, CMS assigned that patient to that PGP.[3]

The final evaluation of the PGP demo reported that annual patient churn rates for the 10 PGPs stayed at approximately 30 percent over a five-year period (see Table 11-2b here, p. 222). (The report did not reveal churn rates for doctors.) Here is how the report summarized the data: “PGPs generally retained approximately 70 percent of their assigned beneficiaries from one year to the next; and … PGPs generally retained approximately 40 percent of their assigned beneficiaries after five years.” (p. 221)

If an average annual patient churn rate of 30 percent results in a loss of 60 percent of the original patient pool over five years, a churn rate of 38 percent (the churn rate for the Pioneer ACOs over the first two years) should produce an even higher loss over five years.

For any ACO program in which patient attribution is determined by the plurality-of-primary-care-visits method, patient churn rates will be largely determined by patient “leakage” rates. Leakage rates are the rates at which patients in a given ACO visit primary care doctors outside the ACO during the previous year (or whatever period the administrator of the ACO has chosen to measure plurality of services).[4]  If the estimates of patient churn rates we have just reviewed – 38 percent for the Pioneer ACOs and 30 percent for the PGPs – are in the ballpark, we should expect to find patient leakage rates of roughly the same magnitude. In fact we do.

Valerie Lewis et al. reported a 31 percent patient leakage rate for simulated Medicare ACOs. For their simulation, Lewis et al. used the same assignment method CMS used in the Pioneer and PGP experiments – the plurality of E&M visits during a baseline period. Lewis et al. reported that 31 percent of the patients assigned to ACOs did not visit a primary care doctor within the ACO.[5]

What little data we have for the non-elderly population indicates the churn rate is higher for that population. A paper by HealthPartners, the third largest insurance company in Minnesota, analyzed 2010 claims data to determine what would happen if HealthPartners were to allocate all the patients seen by its 52 clinics to an ACO using several formulas, including the plurality-of-E&M-visits method. The authors reported an annual patient churn rate of 47 percent using the plurality method. This rate is much higher than the rates reported for the Pioneer program (38 percent), the ACOs simulated by Lewis et al. (31 percent), and the PGP demo (30 percent).[6]

In a 2011 article on the ACO fad, Kaiser Health News characterized the ACO as a notion that hadn’t been thought through. Paraphrasing a scholar at the Brookings Institution, the article stated, “The health industry tends to operate with a ‘kind of a herd behavior,’ rushing to implement an idea ‘without working through the detailed business questions of how they’ll work.’” The problem of high churn rates is the premier example of a fundamental issue “the herd” failed to think through before stampeding off to implement ACOs.

The supreme irony of high churn rates is that they make “accountability” impossible at all levels – the doctor, ACO, regulator, legislative, and policy entrepreneur levels. This is most obvious with respect to assigned patients ACO providers never see – let’s call them “phantom patients.” But it’s true as well for patients assigned to ACOs for only a short period of time – let’s call them the “short-term patients.” Finally, it’s even true to some degree for patients who churn in and out of the ACO over a period of years – let’s call these patients “revolving-door patients.’

If ACOs should not and cannot hold doctors accountable for patients they never or rarely see, and if a substantial portion of “attributed” patients in fact are phantom, short-term, or revolving-door patients, then ACOs cannot and should not be held accountable by CMS, members of Congress, and other policy makers for the cost and quality of care provided to their assigned patients. And if ACOs cannot be held accountable, then ACO proponents cannot be held accountable for their role in fooling “the herd” into rushing off to promote ACOs. ACO proponents can go on making their claims for ACOs year after year and no one can prove them right or wrong.

The unfairness and irrationality of attempting to hold ACOs accountable for their treatment of so many phantom, short-term and revolving-door patients is aggravated by the fact that CMS’s patient-attribution method appears to guarantee that ACOs have healthier patients to work with.[7]  Healthier patients tend to have more stable sources of care than sicker patients. It doesn’t matter which way the causality runs (from healthy patients to greater continuity of care, or from continuity of care to healthier patients). Whichever way it runs, the result of assigning to ACOs those patients who are more loyal to a particular clinic is to guarantee that ACOs get a healthier pool of patients to work with.

Those who argue that accurate risk adjustment can solve at least the biased selection problem are deluding themselves. The best risk-adjustment methods available today predict very little of the variation in cost and quality outcomes among patients.

Sooner or later ACO proponents must recognize that high churn rates make ACO accountability impossible. When they do, they will have two choices. They can either call off the ACO experiment, or they can change the definition of ACO to include a requirement that patients enroll in an ACO for at least a one-year period and suffer penalties if they seek care outside the ACO’s network. If ACO proponents make the latter choice, they will in effect admit that what they have wanted all along was a re-run of the failed HMO experiment.


1. Even ACO proponents viewed the PGP demo that way. Like the Pioneer ACO program, the groups selected by CMS to participate in the PGP demo were large organizations that had years of experience using managed care tactics. Seven of the 10 groups owned or previously owned an HMO.

2. These churn rates were for the 23 ACOs that were still in the program as of the end of 2013. Nine ACOs, out of 32 that began the program in January 2012, dropped out during 2013. (A total of 13 have dropped out to date.) L&M calculated the average retention rate for doctors based on the data for each of the 23 ACOs reported in Table 23. I calculated the average for patients using the same method.

3. The PGP demo used what is called “retrospective” assignment while the Pioneer ACO program uses “prospective” assignment. For purposes of determining churn rates, this distinction does not matter. What matters is that both experiments assigned patients based on the plurality-of-E&M-visits method.

4. Consultants who advertise their ability to reduce “leakage” are usually referring to the rates at which patients in a given ACO visit any doctor or hospital outside the ACO In this comment, I define leakage more precisely as the rate at which patients visit primary care doctors outside their ACO.

5. Lewis et al. did not use the word “leakage” to describe this phenomenon, and they did not indicate whether the entire 31 percent who failed to seek care from an ACO-affiliated primary care doctor visited doctors outside the ACO. But given that only 6 percent of those 65 and older visit no doctor in the course of a year (see Table 78 here), we may deduce that a large majority of that 31 percent sought care from primary care doctors outside their ACO.

6. The higher rate is probably due to the fact that the non-elderly see primary care doctors less often than the elderly do, and a large portion of the non-elderly visit no doctors at all in any given year. According to the 2011 report to the Vermont legislature by William Hsiao et al. (in which the authors recommended a multiple-ACO system), “approximately 40 percent of covered individuals do not have any contact with a primary care physician in a one-year period.” (p. 159)

7. According to the final evaluation of the PGP demo, the plurality-of-E&M-visit method guaranteed the PGPs healthier populations in Year One of the demo. The average risk score for the Medicare recipients assigned to the PGPs that year was 0.921 (1.0 equaled average risk). Interestingly, the report demonstrated that these risk scores would have risen to approximately average if the method of assignment had been merely “one or more visits,” and would have fallen to 0.898 if “a majority of visits” had been used (see tables at page 222 of the final report). L&M Policy took note of this issue as well. They suggested, but did not demonstrate, that CMS’s assignment method may assign healthier patients to ACOs.

Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.

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Medicare at 50: Strengths to Build On

Posted by on Monday, Jun 22, 2015

by John Geyman, M.D.

Traditional, or Original Medicare, turns 50 on July 30, having had many challenges and achievements from the days of its passage to today. It is time to celebrate its many successes, note some of its current challenges and threats to its future, and briefly discuss how it gives us a strong foundation upon which to build still-needed health care reform.

When it was enacted in 1965, about one-half of seniors in the U. S lacked health insurance, and many could not afford necessary health care. When it was passed with strong bipartisan support (313-116 in the House, and 70-24 in the Senate), 20 million Americans age 65 and older gained health insurance. (1)

From the start, Medicare was a political football raising strong arguments for and against any kind of universal health insurance, quite similar to those we hear today, including from the American Medical Association, hospitals, and the health insurance industry. But a “corporate compromise” was struck in 1965 whereby private insurers were relieved of their worse health risks, hospitals could expect assured payments for their costs of serving a previously disadvantaged population, and physicians gained a permissive “usual, customary, and reasonable” reimbursement policy. (2) Claims processing and bill auditing were contracted out by the government to private fiscal intermediaries, especially Blue Cross and Blue Shield plans. (3)

From the beginning, Medicare has provided a broad set of benefits, defined by law, protecting all seniors, many of whom could not afford health insurance in the private market. Part A provides hospital insurance, while Part B provides supplementary medical insurance for 80 percent of physician services (initially with a $50 deductible and 20 percent coinsurance), X-ray and laboratory tests, and some home health and outpatient and mental health services. Some additional benefits were added in later years to this basic program, including coverage for the disabled and patients with end-stage renal disease in 1972 and partial coverage for prescription drugs in 2003 (Part D).  Medicare’s benefits have always been considered an earned right, not an entitlement, since all beneficiaries pay into the program through mandatory contributions from individuals and/or employers. (4)

Today, Medicare is a very large program, covering more than 55 million Americans, including all seniors and 9 million people with permanent disabilities under age 65. It accounted for 14 percent of the federal budget in 2014 and about 20 percent of total personal health expenditures in 2013. (5) Since the 1990s, we have seen an increasing trend toward privatized Medicare plans (Part C), starting with Medicare + Choice HMOs in the 1990s and their sequel, Medicare Advantage (MA) since 2003. These plans have been promoted by conservative policymakers and think tanks with a goal to replace Medicare as an “entitlement program” with private market plans, health savings accounts and vouchers. Almost one-third of seniors are now enrolled in MA plans.

The Many Strengths of Traditional Medicare over 50 Years

Traditional Medicare has performed much better over the years than any of these private plans, which operate with the goal of profits more than service. Table 1 summarizes the major differences between traditional Medicare and privatized plans. (6)


Source: Adapted from Geyman, JP. Shredding the Social Contract:
The Privatization of Medicare. Monroe, ME. Common Courage Press, 2006, p. 206.

These comparisons are supported by many studies over the years. As just four examples:

  • A literature review by the Kaiser Family Foundation of 40 studies since 2000 found that beneficiaries rated access and quality of care better in traditional Medicare than in Medicare Advantage, especially by those who were sick. (7)
  • An analysis by the Urban Institute over three decades found that private Medicare plans cost the government more than fee-for-service traditional Medicare, which contained costs better than private plans over those years. (8)
  • Traditional Medicare operates with an administrative overhead of 2  percent, compared to overhead of Medicare Advantage about seven times higher. (9)

The Centers for Medicare and Medicaid Services (CMS) took 35 enforcement actions against Medicare Advantage plans and Medicare Part D plans in 2014, particularly for inappropriate denials of care and requiring unnecessary preauthorization of services and medications that resulted in more cost shifting to beneficiaries. (10)

Some Major Challenges Facing Medicare Today

As in 1965, Medicare remains a lightning rod for intense political  debates over its future. Despite its proven track record for efficiency, reliability, and responsible service over these last 50 years and widespread public support, Republicans are united in their attempts to dismember it, convert it to a voucher program, and shift patients to the private marketplace, all under the guise of reining in federal spending and austerity. Some Democrats are amenable to raising the eligibility age for Medicare and increasing cost sharing. These ideas are a complete disconnect with the needs of our aging society in a time of increasing inequality of incomes. More than 25 million seniors and people with disabilities live on annual incomes of $23,500 or less, many of whom cannot afford premiums and cost-sharing in either traditional or privatized Medicare. And as our population ages, pensions that in the past assured defined benefits are shifting to defined benefit pensions, without such assurances. (11) There are still many gaps in coverage, even within traditional Medicare, including for long-term care and dental care.

Future funding for Medicare is seriously threatened and murky at best. The Obama administration has told us that the Affordable Care Act (ACA) will be financed in part by $716 billion in Medicare cuts over 10 years, with the unbelievable claim that these cuts will not result in reduction of services. The recently passed H. R. 2, the “doc fix” bill, has provisions in it that will require new deductibles in first-dollar supplemental Medigap plans (held by 40 percent of Medicare beneficiaries) and expand means-testing for Medicare Part D, both of which will increase costs for seniors and further undermine traditional Medicare.

Just as the future of Medicare is unclear, so is that of our entire health care system. The U. S. Supreme Court is expected to rule in coming days on the legality of subsidies under the ACA. A negative ruling will be a serious blow to the ACA and call into question where we should go next. Republicans in Congress will push for repeal or defunding parts of the ACA.  As the debate heats up, the leading alternatives will likely be: (1) continuation of the ACA as it unravels, (2) some GOP “plan” based on patients having “more skin in the game” that further threatens access and affordability of care; (3) revival of the “public option” idea, hardly an effective fix as merely adding one more payer to our dysfunctional multi-payer financing system; and (4) long-overdue  consideration of single-payer national health insurance that would cover all Americans in a large risk pool with more benefits, less cost, more reliability and equity in a sustainable way, as described in my recent book, How Obamacare Is Unsustainable: Why We Need a Single-Payer Solution for All Americans. (11)

Traditional Medicare has proven its superiority over any private, market-based alternatives for the last 50 years. It is time to build on this social insurance model as the health care debate continues.


1. Rosenblatt, B. House passes massive expansion of health care coverage. Washington, DC. National Academy of Social Insurance, April 10, 2015.

2. Geyman, JP. Shredding the Social Contract: The Privatization of Medicare. Monroe, ME. Common Courage Press, 2006, pp. 49-51.

3. Oberlander, J. The Political Life of Medicare. Chicago. The University of Chicago Press, 2003, p. 33.

4. Study Panel on Medicare’s Larger Social Role, Final Report.
Washington, DC. National Academy of Social Insurance, 1999, pp. 31-35.

5. Cubanski, J. A primer on Medicare: Key facts about the Medicare program and the people it covers. Kaiser Family Foundation, March 20, 2015.

6. Ibid # 2, p. 206.

7. Gold, J, Casillas, G. What do we know about health care access and quality in the Medicare Advantage versus the traditional Medicare program? Kaiser Family Foundation, November 6, 2014.

8. Boccuti, C, Moon, M. Comparing Medicare and private insurers: growth rates in spending over three decades. Health Affairs (Millwood) 22 (2): 230, 2003.

9. Himmelstein, D, Woolhandler, S. The post-launch problem: the Affordable Care Act’s persistently high administrative costs. Health Affairs Blog, May 27, 2015.

10. Herman, B. Medicare is doing more to police Advantage and Part D lapses, but does it matter? Modern Healthcare, December 4, 2014.

11. Geyman, JP. How Obamacare Is Unsustainable: Why We Need a Single-Payer Solution for All Americans. Friday Harbor, WA. Copernicus Healthcare, 2015.

CBO: Repeal of ACA would raise economic output (per dynamic scoring)

Posted by on Monday, Jun 22, 2015

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.

Budgetary and Economic Effects of Repealing the Affordable Care Act

CBO, June 2015

In this report, the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) analyze the main budgetary and economic consequences that would arise from repealing that law.

What Would Be the Major Effects of Repealing the ACA?

CBO and JCT estimate that repealing the ACA would have several major effects, relative to the projections under current law:

  • Including the budgetary effects of macroeconomic feedback, repealing the ACA would increase federal budget deficits by $137 billion over the 2016–2025 period. That estimate takes into account the proposal’s impact on federal revenues and direct (or mandatory) spending, incorporating the net effects of two components:
    • Excluding the effects of macroeconomic feedback — as has been done for previous estimates related to the ACA (and most other CBO cost estimates) — CBO and JCT estimate that federal deficits would increase by $353 billion over the 2016–2025 period if the ACA was repealed.
    • Repeal of the ACA would raise economic output, mainly by boosting the supply of labor; the resulting increase in GDP is projected to average about 0.7 percent over the 2021–2025 period. Alone, those effects would reduce federal deficits by $216 billion over the 2016–2025 period, CBO and JCT estimate, mostly because of increased federal revenues.
  • For many reasons, the budgetary and economic effects of repealing the ACA could differ substantially in either direction from the central estimates presented in this report. The uncertainty is sufficiently great that repealing the ACA could reduce deficits over the 2016–2025 period — or could increase deficits by a substantially larger margin than the agencies have estimated. However, CBO and JCT’s best estimate is that repealing the ACA would increase federal budget deficits by $137 billion over that 10-year period.
  • Repealing the ACA would cause federal budget deficits to increase by growing amounts after 2025, whether or not the budgetary effects of macroeconomic feedback are included. That would occur because the net savings attributable to a repeal of the law’s insurance coverage provisions would grow more slowly than would the estimated costs of repealing the ACA’s other provisions — in particular, those provisions that reduce updates to Medicare’s payments. The estimated effects on deficits of repealing the ACA are so large in the decade after 2025 as to make it unlikely that a repeal would reduce deficits during that period, even after considering the great uncertainties involved.
  • Repealing the ACA also would affect the number of people with health insurance and their sources of coverage. CBO and JCT estimate that the number of nonelderly people who are uninsured would increase by about 19 million in 2016; by 22 million or 23 million in 2017, 2018, and 2019; and by about 24 million in all subsequent years through 2025, compared with the number who are projected to be uninsured under the ACA. In most of those years, the number of people with employment-based coverage would increase by about 8 million, and the number with coverage purchased individually or obtained through Medicaid would decrease by between 30 million and 32 million.
    • About 14 million fewer people would be enrolled in Medicaid.
    • About 18 million fewer people would have nongroup coverage. That reduction is the net effect of a projected decline of about 22 million in nongroup coverage purchased through exchanges (which would no longer serve as a conduit for federal subsidies and might not exist at all) and a projected increase of about 4 million enrollees in nongroup coverage purchased directly from insurers.
    • About 8 million more people, on net, would have employment-based coverage—roughly mirroring the agencies’ estimate of the extent to which the ACA will reduce employment-based coverage in future years.
    • About 24 million more nonelderly U.S. residents would be uninsured.

The Macroeconomic Feedback Effects of a Repeal and Their Impact on the Federal Budget

CBO and JCT also have analyzed the effects that repealing the ACA would have on the U.S. economy and estimated the budgetary impact — or feedback effects — of those macroeconomic changes. CBO and JCT estimate that the net effect on the economy’s output would be negligible in 2016 but would grow after that. According to the agencies’ estimates, from 2021 through 2025, a repeal would increase GDP by about 0.7 percent, on average — mostly by repealing provisions that, under current law, are expected to reduce the supply of labor.

Labor Supply

CBO and JCT estimate that repealing the ACA would increase the supply of labor and thus increase aggregate compensation (wages, salaries, and fringe benefits) by an amount between 0.8 percent and 0.9 percent over the 2021–2025 period. Those effects would be the result of repealing various provisions of the ACA that are estimated to reduce the amount of labor that people choose to supply. In particular, the subsidies and tax credits for health insurance that the ACA provides to some people are phased out as their income rises — creating an implicit tax on additional earnings — and those subsidies, along with expanded eligibility for Medicaid, generally make it easier for some people to work less or to stop working without losing health insurance coverage. For other people, the act directly imposes higher taxes on labor income, thus discouraging work. Repealing the ACA would reverse those effects. In percentage terms, the increase in total hours worked is estimated to be larger than the increase in aggregate compensation because the largest increases in labor supply would occur among the lower-wage workers whose incentives would be most strongly affected. Specifically, repealing the ACA would increase the aggregate number of hours worked by about 1.5 percent over the 2021–2025 period, CBO and JCT estimate.

How Would a Repeal Affect the Budget and the Economy Beyond 2025?

CBO and JCT expect that the trend projected for the latter part of the coming decade would probably continue after 2025, whether or not the effects of macroeconomic feedback are incorporated into the analysis. To generate rough estimates for the decade beyond 2025, CBO and JCT extrapolated the budgetary effects that a repeal of the ACA would have in the years before 2025. According to that analysis, and excluding the budgetary effects of macroeconomic feedback, a repeal would increase annual deficits over the 2026–2035 period by amounts that lie within a broad range around one percent of GDP. Although the macroeconomic feedback stemming from a repeal would continue to reduce deficits after 2025, the effects would shrink over time because the increase in government borrowing resulting from the larger budget deficits would reduce private investment and thus would partially offset the other positive effects that a repeal would have on economic growth. Consequently, taking that feedback into account would not substantially alter the increases estimated for federal deficits that would occur over that period. A repeal of the ACA would probably increase deficits in subsequent decades as well, whether or not the effects of macroeconomic feedback are included.…


Mixed Effects Are Seen on an Affordable Care Act Repeal

By Robert Pear
The New York Times, June 19, 2015

The nonpartisan Congressional Budget Office said Friday that repealing the Affordable Care Act would significantly increase federal budget deficits and the number of people who are uninsured.

But, it said, repealing the law would also raise economic output because it would create incentives for some people to work more.

The estimates came in the first major study issued by the new director of the budget office, Keith Hall. It was also the first report to use new methods of fiscal analysis, according to instructions from the Republican majority in both houses of Congress.

Repealing the law would increase federal budget deficits by $137 billion in the decade from 2016 to 2025, Mr. Hall said in the report. In addition, he said, the number of uninsured people, estimated at 35 million under current law, would increase by 24 million if the law was repealed.

Senator Michael B. Enzi, Republican of Wyoming and the chairman of the Senate Budget Committee, said the report showed that “repealing the president’s health care law will increase economic growth.” But Representative Nancy Pelosi of California, the House minority leader, said it showed that “repeal will explode the deficit.”

The report analyzes the economic effects of the health care law and the ways in which those effects may, in turn, influence federal spending and revenues — a technique known as dynamic scoring. Democrats fear that Republicans will use that approach to help justify tax cuts. But at least in the report on Friday, Mr. Hall was cautious in using the new technique and carefully documented the economic assumptions that led to his conclusions.…


Dynamic Scoring in Congress Is Defensible but Slippery

By N. Gregory Mankiw
The New York Times, February 28, 2015

… congressional leaders appointed Mr. Hall, a veteran of the Bush administration, to be the new head of the budget office.

Until now, conventional budget analysis has used a process called static scoring, which assumes that the path of gross domestic product remains the same when the government changes taxes or spending. This procedure has the virtues of simplicity and transparency.

We don’t yet know how Mr. Hall’s leadership will differ from Mr. Elmendorf’s but we do know that he will face a big challenge. House Republicans have recently changed the rules: The Congressional Budget Office and Joint Committee on Taxation are now required to use “dynamic scoring” when evaluating major changes in tax and spending policy. This is the can of worms that awaits Mr. Hall as he takes on his new job.…


Obamacare and Labor Supply

By Paul Krugman
The New York Times, June 20, 2015

I was critical of CBO yesterday — probably excessively — for giving what seemed like undue cover for deficit scolds in its long-run budget projection. So credit where credit is due: the new report on the consequences of repealing the ACA is definitely not what the Congressional majority wants to hear. Despite including “dynamic scoring”, the report finds, unambiguously, that Obamacare reduces the deficit and repealing it would enlarge the deficit.

Is there anything in the report that provides fodder for the opponents? I see that the Times report says that there are “mixed effects”, because CBO says that GDP would be higher if the ACA were repealed. And maybe the usual suspects will try to spin it that way.

But the truth is that this report is much, much closer to what supporters of reform have said than it is to the scare stories of the critics — no death spirals, no job-killing, major gains in coverage at relatively low cost.

And there’s another important point: while the ACA may lead to somewhat lower GDP because it reduces labor supply, this does not imply a one-for-one loss in welfare. Suppose that a family’s second earner, now assured of being able to get health insurance, chooses as a result to work shorter hours and spend more time taking care of the children. GDP goes down — but there is a compensating non-monetary gain.

In fact, in a perfectly competitive economy the gain would fully offset the fall in GDP: if workers are paid their marginal product, the fall in GDP from the ACA is equal to the lost wages, but workers choosing to work less clearly prefer to have the extra time to the extra wages. Or to put it a bit differently, other things equal it’s a good thing if workers, freed from the fear that they won’t be able to get health insurance, respond by voluntarily working less.

OK, the story is made more complicated by taxes, which place a wedge between wages paid and income received; so there probably is a net cost to a fall in labor supply. But this effect is fully captured by the loss in revenue, which CBO doesn’t think would be large.

So overall this isn’t at all a “mixed” report — it’s a very big win for Obamacare supporters.

This report from the Congressional Budget Office (CBO) is important because it describes the consequences of repealing the Affordable Care Act (ACA) – a goal of many conservatives in Congress. But there also is an important sub-story here – the advent of the use of “dynamic scoring” by the CBO and its potential implications.

One of the more severe deficiencies of ACA is that when it is fully implemented about 29 million people will still be uninsured. This CBO analysis indicates that repeal of ACA will increase the numbers of uninsured by another 24 million – bringing the total to over 50 million. If no other lesson is drawn from this report, it is that  we should not move backwards with efforts to reject what progress has been made, but that instead we should move forward with real reform that would cover everyone (in case you need any hints, that would be single payer).

From the perspective of the federal budget, this report also shows that repeal of ACA would cause significant increases in the deficit which presumably would require either increased revenues (taxes) which the conservatives reject, or decreases in spending which would be intolerable when considering that our discretionary federal budget is already spartan. If we moved forward with more effective reform – single payer – the provisions of that reform would include equitable financing, and thus the budgetary damage done by the displacement of ACA would become a moot point.

But what about dynamic scoring, and what is it? It seems to have more to do with politics and less with economic science. When the CBO analyzes the potential impact of proposed legislation on the federal budget, they look at not only the direct impact of the legislative requirements, but they also look at the macroeconomic impact – the changes in the economy at large that can result from the legislation. They can do this with static scoring – assuming that the gross domestic product remains the same when government changes taxes or spending – or they can use dynamic scoring – evaluating how fiscal policy influences the course of the economy.

The Republicans who now control Congress have changed the rules for the non-partisan CBO and now require dynamic scoring, and this is the first CBO report in which this tool has been applied. Does it represent economic science or political posturing?

They determined that repeal of ACA would increase the supply of labor, and this increase would result in a 0.7 percent increase in the gross domestic product (GDP) – an example of dynamic scoring. Why should the supply of labor be increased? They say that loss of insurance would drive greater employment rates amongst the unemployed and underemployed. With a continued sluggish economy, limited employment opportunities, and the permanent exiting of millions from the job market, do they really believe that health insurance status is a significant driver when everyone already wants income and job security? Do they really believe that people are not working because having insurance makes “it easier for some people to work less or to stop working,” as the CBO report states? Do they really believe that employers are not hiring now because there is a robust job market, whereas they would start hiring if the job market contracted? Does anyone of any integrity really propose that we do the experiment of repealing ACA and then follow the change in the GDP to see if it increases, while ignoring declines in insurance coverage and increases in the federal deficit?

Another concept implicit in this report is that the reduction in government expenditures for health care brought about by repealing ACA would somehow improve the economy. Yet health care is one of the most important sectors of our economy, and its strength likely prevented the Great Recession from becoming a full-on depression. Sidestepping the issue of precisely how GDP is or should be defined, wouldn’t the stimulus to the health care industry provided by ACA (confirmed by Wall Street reports) have a much greater impact on the economy than would this reduction in labor supply caused by more people being insured?

Considering the numbers who would become uninsured and considering the increase in the national debt that would occur with ACA repeal, it sounds like repeal would be a cruel and fiscally irresponsible act. Yet the conservatives are celebrating the fact that the CBO has allegedly implied in this report that repeal of ACA would be good for the economy. As Senate Budget Committee Chairman Mike Enzi said, “repealing the president’s health care law will increase economic growth” (Robert Pear, New York Times, June 19), and Senate majority leader Mitch McConnell said, in a tweet, “The CBO says an Obamacare repeal actually boosts the American economy” (Kate Gibson, CBS Moneywatch, June 19).

The CBO has always been the source of highly credible, non-partisan reports on important matters before Congress. Dynamic scoring could be used to increase the accuracy of CBO analyses, but it would have to be very carefully applied to avoid analyses driven by political ideology. Through the appointment of a conservative economist with an order to institute dynamic scoring, the Republicans may be impairing the credibility of the CBO. Imagine how they might use dynamic scoring to try to discredit single payer.

(In fairness to CBO Director Keith Hall, economist Paul Krugman does remind us, “the ACA may lead to somewhat lower GDP because it reduces labor supply.” Also respected New York Times reporter Robert Pear concludes, “Mr. Hall was cautious in using the new technique and carefully documented the economic assumptions that led to his conclusions.” So a generous application of this economic principle allows CBO to include in its summary the statement, “Repeal of the ACA would raise economic output, mainly by boosting the supply of labor; the resulting increase in GDP is projected to average about 0.7 percent over the 2021–2025 period.” But this isolated statement does allow, as Krugman indicates, fodder for the usual suspects to try to put a positive spin on repeal – exemplified by the statements of McConnell and Enzi. Nevertheless, I still contend that the loss of health insurance would not cause a major incremental increase in the labor supply for a population that already craves employment security. “Hey, I got insurance; forget about food and rent.”)

[Corrected text posted June 23, 2015.]

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Part D drug benefit did not save money for Medicare

Posted by on Friday, Jun 19, 2015

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.

Did Medicare Part D Affect National Trends in Health Outcomes or Hospitalizations?: A Time-Series Analysis

By Becky A. Briesacher, PhD; Jeanne M. Madden, PhD; Fang Zhang, PhD; Hassan Fouayzi, MS; Dennis Ross-Degnan, ScD; Jerry H. Gurwitz, MD; and Stephen B. Soumerai, ScD
Annals of Internal Medicine, June 16, 2015

Background: Medicare Part D increased economic access to medications, but its effect on population-level health outcomes and use of other medical services remains unclear.

Objective: To examine changes in health outcomes and medical services in the Medicare population after implementation of Part D.

Results: Five years after Part D implementation, no clinically or statistically significant reductions in the prevalence of fair or poor health status or limitations in ADLs or instrumental ADLs, relative to historical trends, were detected. Compared with trends before Part D, no changes in emergency department visits, hospital admissions or days, inpatient costs, or mortality after Part D were seen. Confirmatory analyses were consistent.

Conclusion: Five years after implementation, and contrary to previous reports, no evidence was found of Part D’s effect on a range of population-level health indicators among Medicare enrollees. Further, there was no clear evidence of gains in medical care efficiencies.


Researchers find prescription drug benefit did not save money for Medicare

By Joe O’Connell
news@Northeastern, June 16, 2015

For years, the Medicare pre­scrip­tion drug ben­efit Part D has been cred­ited with pos­i­tively impacting national trends in health out­comes and med­ical ser­vices. But a recent study led by North­eastern asso­ciate pro­fessor Becky Briesacher chal­lenges that assump­tion.

“We are con­cluding that Medicare Part D did not save the (Medicare) pro­gram any money overall,” said Briesacher, a health ser­vices researcher in the School of Phar­macy with nationally-​​recognized exper­tise in drug policy and med­ica­tion use in older adults. “You have to be real­istic about the fact that giving people access to med­ica­tion is impor­tant, but it’s not going to sub­stan­tially save money in other parts of the health care system or keep a sig­nif­i­cant number of people out of the hospital.”…

Although it was important to include a drug benefit in the Medicare program there was concern that the conservatives designing the program wanted to allow the market to work its magic. The program was to be administered by private pharmacy benefit managers (PBMs) rather than the government. In fact, the government was even prohibited from negotiating drug prices with the manufacturers. Further, it was thought that the benefits of improving access to drugs would make patients healthier thus reducing future costs for Medicare.

This study shows that the magic did not work in that the drug benefit did not save money for Medicare, and it did not measurably change the health status of Medicare beneficiaries. Specifically there were no changes in emergency room visits, hospitalizations, and inpatient costs, nor was there any change in mortality.

It would not be surprising to see conservatives propose that the Part D program be terminated since it supposedly isn’t doing any good. But there are innumerable studies that have shown that some medications do provide at least a modest benefit, though those benefits were not detected by this study.

At any rate, it is clear that PBMs are not as effective price negotiators as is our government, as demonstrated by the greater value in drug purchasing that we have through the VA and the Medicaid program. Also, the PBMs waste considerable funds in excess administrative activities, not to mention the added middleman profits that they divert to themselves.

Under an improved Medicare for all we would have a more efficient and less costly publicly-administered program that would ensure that the government was paying fair prices for our drugs. It is not that way now.

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Our unethical health reform violates the principle of equipoise

Posted by on Thursday, Jun 18, 2015

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.

Randomize evaluations to improve health care delivery

By Amy Finkelstein, Sarah Taubman (MIT)
Science, February 13, 2015

The medical profession has long recognized the importance of randomized evaluations; such designs are commonly used to evaluate the safety and efficacy of medical innovations such as drugs and devices. Unfortunately, innovations in how health care is delivered (e.g., health insurance structures, interventions to encourage the use of appropriate care, and care coordination approaches) are rarely evaluated using randomization. We consider barriers to conducting randomized trials in this setting and suggest ways for overcoming them. Randomized evaluations of fundamental issues in health care policy and delivery should be — and can be — closer to the norm than the exception.


Health care reform unethical by research standards

Science, June 19, 2015

A. Finkelstein and S. Taubman report on the underuse of randomized controlled trials for U.S. health care reform (“Randomize evaluations to improve health care delivery” Policy Forum, 13 February). This reliance on suboptimal research compromises information needed for policy. However, a second problem about health reform decision-making is more serious, constituting a major ethical breach.

The principles of research with humans require that deviations from the standard of care are allowable only if there is real uncertainty regarding which intervention is better. This is called the “principle of equipoise”; only when we don’t know which strategy yields the best results is it acceptable to compare them (1).

Yet for health care reform writ large — i.e., the basic payment system — there is no equipoise. Research from dozens of developed countries demonstrates convincingly that single-payer financing reduces costs, assures access, and improves outcomes.

To ignore this compelling evidence risks lives in the United States as we experiment with partial fixes to the multi-payer system. This experimentation would be rejected by any responsible university institutional review board as violating the principle of equipoise and causing unacceptable patient harm.

James G. Kahn (UCSF)
Paul Hofmann (Moraga CA)

1. Freedman B. Equipoise and the Ethics of Clinical Research. N Engl J Med 1987; 317:141-145


Equipoise and the Ethics of Clinical Research

By Benjamin Freedman, Ph.D.
New England Journal of Medicine, July 16, 1987

The ethics of clinical research requires equipoise — a state of genuine uncertainty on the part of the clinical investigator regarding the comparative therapeutic merits of each arm in a trial. Should the investigator discover that one treatment is of superior therapeutic merit, he or she is ethically obliged to offer that treatment. The current understanding of this requirement, which entails that the investigator have no “treatment preference” throughout the course of the trial, presents nearly insuperable obstacles to the ethical commencement or completion of a controlled trial and may also contribute to the termination of trials because of the failure to enroll enough patients.

I suggest an alternative concept of equipoise, which would be based on present or imminent controversy in the clinical community over the preferred treatment. According to this concept of “clinical equipoise,” the requirement is satisfied if there is genuine uncertainty within the expert medical community — not necessarily on the part of the individual investigator — about the preferred treatment.

Here’s a shocker. Enactment and implementation of the Affordable Care Act has been and continues to be unethical, under the “principle of equipoise.” How could that be?

Amy Finkelstein and Sarah Taubman, of MIT, call for an increased use of “randomized evaluations of fundamental issues in health care policy,” likening policy research to medical research. On the surface this seems quite reasonable, but James Kahn and Paul Hofmann reveal the potential dire implications of such a proposal when policies are studied that, at best, would fall short of already well established beneficial policy principles.

Medical research requires the adherence to the principle of equipoise – the principle that it is unethical to expose a patient to an experimental treatment when there exists a better treatment that would always be recommended regardless of the outcome of the study. Only when there is agreement that the more effective and safer treatment is not known is it ethical to proceed with a randomized trial.

How would this apply to health policy research? In randomized trials proposed health policies could be compared with existing or other proposed health policies to determine which policies produce more favorable outcomes. This would require that the existing comprehension of the policies would be clearly inadequate to reliably predict the outcomes. Keep in mind that a health system’s policies can impact individual health as much or even more than the actual health care received. If the outcomes are predictable, it would be unethical to proceed with the study.

The problem with the proposal by Finkelstein and Taubman is that health policy science is quite advanced, and we have a rich body of knowledge of the potential impacts of various health policies. These researchers suggest that randomized evaluations should be closer to the norm when, in fact, it would be quite rare that two or more policy options would be so poorly understood that it would require a randomized trial to determine which would produce better outcomes.

To understand the enormous impact of this, let’s compare the most basic policies perpetuated and enacted by the Affordable Care Act with fundamental policies inherent in a well designed single payer system – policies that are well understood through our experiences and the experiences of many other nations.

The Affordable Care Act

  • Tens of millions will be left uninsured
  • Tens of millions will be underinsured
  • Financial barriers to care that result from being uninsured or underinsured clearly impair access to beneficial health care services and thus often result in poor health outcomes and even death

Single Payer National Health Program

  • Everyone would be insured
  • Underinsurance is eliminated by removing financial barriers, especially high deductibles and coinsurance
  • Removal of financial barriers improves access to health care with a consequent improvement in health outcomes and with a lower mortality rate

Further, our current system wastes hundreds of billions of dollars on administrative excesses – much of which could be recovered under a single-payer system and be redirected into health care delivery.

We cannot do a randomized trial comparing single payer with the Affordable Care Act since a single payer system cannot exist commingled with a fragmented, multi-payer system, but we would not want to do that study anyway since we already understand the policy science behind these systems. Such a study would clearly violate the principle of equipoise.

To continue with our current grand national experiment in health care reform is clearly unethical because of the financial hardships, physical suffering and premature deaths that are perpetuated and would be prevented if we switched to a single payer national health program.

It would be unethical to repeal the Affordable Care Act and do nothing else since some provisions of the Act are beneficial. But since we can enact and implement a single payer national health program, we are engaging in unethical behavior by failing to do so.

Our national policymakers need to understand how profoundly unethical their behavior is by their continued violation of the principle of equipoise. People are suffering and dying as a result.

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How deficient is California’s Medicaid program?

Posted by on Wednesday, Jun 17, 2015

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.

Improved Monitoring of Medi-Cal Managed Care Health Plans Is Necessary to Better Ensure Access to Care

California State Auditor, California Department of Health Care Services, Report 2014-134, June 2015

Cover letter of report:

June 16, 2015

Dear Governor and Legislative Leaders:

As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning the California Department of Health Care Services’ (Health Care Services) oversight of California Medical Assistance Program (Medi-Cal) managed care health plans (health plans).

This report concludes that Health Care Services did not verify that the provider network data it received from health plans were accurate. Therefore, it cannot ensure that the health plans it contracts with had adequate networks of providers to serve Medi-Cal beneficiaries. Health Care Services’ contracts with health plans to provide medical services to Medi-Cal beneficiaries generally require the plans, among other things, to maintain a network of primary care providers that are located within either 30 minutes or 10 miles from a member’s residence. To determine whether the health plan has an adequate provider network to meet these standards, Health Care Services receives provider network data from each of the health plans. However, for the health plans we reviewed, Health Care Services did not verify the accuracy of these data before certifying the health plans’ network adequacy during the Healthy Families Program transition to Medi-Cal and did not verify data for another health plan at the time the health plan entered the Medi-Cal program. Similarly, it does not verify the accuracy of the data it receives from health plans and that it provides to the California Department of Managed Health Care (Managed Health Care), with which it has an agreement to conduct quarterly network adequacy reviews. Furthermore, it has not ensured that Managed Health Care performed all quarterly reviews of health plans’ provider networks required pursuant to the agreement.

In addition, flaws in Health Care Services’ process for reviewing provider directories have resulted in it approving provider directories with inaccurate information. Specifically, our review of provider directories for three health plans — Anthem Blue Cross, Health Net and Partnership HealthPlan — found many errors in directories, including incorrect telephone numbers and addresses, or information about whether they were accepting new patients. However, Health Care Services’ review of these same directories had not identified these inaccuracies before it approved the directories for publication. Furthermore, we noted that thousands of calls from Medi-Cal beneficiaries seeking assistance through Health Care Services’ Medi-Cal Managed Care Office of the Ombudsman have gone unanswered. Specifically, each month between February 2014 and January 2015 an average of 12,500 calls went unanswered. Finally, Health Care Services has not performed all statutorily required annual medical audits of Medi-Cal managed care health plans to determine whether the health plans meet their beneficiaries’ needs.

Respectfully submitted,


State Auditor

Full report:

Summary of report:

Fact sheet:

Medicaid patients throughout the nation are being transferred into Medicaid managed care plans, allegedly to provide more coordinated care at a lower cost. There has been some justifiable concern that these plans may not be delivering on their promises. This auditor’s report of California’s Medi-Cal managed care plans provides some limited insight into the performance of these plans.

Medi-Cal is California’s Medicaid program for low-income individuals and families. Three-fourths of the 12 million Medi-Cal patients are already enrolled in the Medi-Cal managed care plans (state population 39 million). Astonishingly nearly half of all children in California are enrolled in Medi-Cal managed care, especially since those previously enrolled in CHIP were transferred to Medi-Cal. It is a massive program.

The auditor did not look at the adequacy or the quality of the health care services that are being delivered. Rather she looked at the plans’ reports submitted to the Department of Health Care Services on the adequacy and accessibility of their networks, the accuracy of the provider directories, and the effectiveness of the Medi-Cal Managed Care Office of the Ombudsman – basically just whether or not the infrastructure was adequate to provide the promised services.

The auditor found that the reports from the plans were inadequate and the oversight provided by the California Department of Health Care Services and the Department of Managed Health Care was also inadequate. It was not possible to determine the degree of the failures, but enough information was gathered to know that the system fell far short of the requirements. Some perspective of the extent of this problem is demonstrated by the fact that each month about 12,500 calls to the Office of the Ombudsman went unanswered. The Medi-Cal system wasn’t working for the patients, and the calls for help overwhelmed the telephone system.

Some have suggested that the funding was inadequate. Medicaid has been chronically underfunded, and Medi-Cal is near the bottom of all states in its level of funding. Also governments chronically underfund their own agencies. In a health care system that is infamous for its administrative excesses, under the Affordable Care Act we have expanded the need for yet more administrative services for both the health plans and for the government bureaucracies that provide oversight (not to mention the providers), yet our federal and state legislators do not authorize adequate funds to carry out their requirements.

Although the auditor attributed most of the blame to failures of the California Department of Health Care Services, the real blame lies with those who devised these expensive and inefficient programs and then failed to fund them adequately. The agencies cannot do their job if they are unable to hire the personnel that they need.

Although this report raises serious concerns about the infrastructure, much more important is whether or not the actual health care services are adequate in both quantity and quality. Though this report does not address that, there is reason to be concerned. Are the health plans really delivering more integrated care at a lower cost? Is the funding enough for the dedicated health care professionals to deliver on this promise? Unlikely, based on preliminary information. It is unfortunate that we will have to wait longer until the severity of the deficiencies is exposed.

If nothing else, it does appear that, through Medicaid, we have institutionalized a lower tier of a two-tiered health care system. The Affordable Care Act perpetuates a mediocre system for middle-income individuals and families and a substandard system for those with low incomes. Most other wealthy nations have a single higher health care quality standard for all of their people, delivered at a much lower cost. What is our resistance to learning from them?

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