PNHP

Charlie Munger supports single payer reform

Charlie Munger supports single payer reform

Charlie Munger says single-payer healthcare is the solution

By Andy Serwer
Yahoo Finance, May 7, 2017

Charlie Munger says that single-payer healthcare is the answer to fix the nation’s healthcare system woes. A longstanding Republican, the Berkshire Hathaway vice-chairman acknowledges it is an unusual position for someone from his party to espouse.

“I’m not a normal Republican,” he said, noting that there’s “a lot wrong” with the system.

“Having a basic level of care for everybody with no insurance aspect as a right I think is a good idea” Munger said.

Munger, who Berkshire CEO Warren Buffett calls his partner, made the remarks in Omaha the day after Berkshire’s annual meeting. Munger said there’s good and bad parts of our healthcare system.

“At the top, it’s the best medical care in the world,” Munger said. He explained that if you have a difficult type of cancer or you’re in need acute care, you’re better off in the U.S. than anywhere else.

“That’s the good part,” he said. “The bad part is the Rube Goldberg system that arose by accident. There’s massive amounts of excess cost.”

“And of course the politicians on each side don’t want to figure this out, they just hate each other and scream at each other, so it’s a disgusting outcome. And of course the cost goes up three, four, five six percent a year!”

I asked Munger how to fix it.

“A benign despot would create a single payer system with people being able to opt out into private care that was a little faster or a little fancier like all of Europe and Canada,” he said.

I asked Munger if he was saying that a single-payer system is really the answer.

“Yes,” he said.

With an opt-out on the high end?

“Yes,” he said.

“I think you young people will live to see a healthcare system that looks a lot like Canada’s with a better private opt out system,” Munger said. “I won’t.” (Munger is 93.)

During the meeting, Warren Buffett called rising healthcare costs “a tapeworm,” eating away at American business. Munger agreed and added that U.S. manufacturers have a “huge competitive disadvantage caused by the health system” over say European counterparts since U.S. businesses have to pay for health care costs while European companies don’t.”

https://www.yahoo.com…

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Comment:

By Don McCanne, M.D.

When a prominent Republican Wall Street billionaire, Charlie Munger, endorses single payer, it is clear that the message is getting across.

Also, when his partner, Warren Buffet, says that U.S. manufacturers have a huge competitive disadvantage caused by the health system, then all of Wall Street and the business community at large should be listening as well and then taking action in support of single payer reform.

(One concern is that he calls for wealthier individuals being able to opt out into faster or fancier care, presumably creating a two-tiered system. Perhaps the wealthy should be allowed extras that should not be part of a publicly financed system, such as a hospital penthouse suite, but they should not automatically be granted a position at the front of a queue for essential services. In an equitable, egalitarian system we need them to advocate for policies that reduce excessive queues so that everyone, including themselves, has timely access to appropriate care. However this should not deter Munger from supporting single payer, since, as a billionaire, he will always have a place at the front of the queue, no matter the rules.)

Any Republicans listening?

By Richard Ellerbrake, M.H.A.
Belleville News-Democrat, May 8, 2017

“Expanded and Improved Medicare for All,” H.R. 676, added its 108th (as of May 4) co-sponsor. For the first time, a majority of House Democrats support single payer national health insurance.

Medicare is a very popular government program. The first Republican to co-sponsor the bill will go down in history as a states-person, not “just another politician.”

We talk a lot about “affordable care.” The United States spends nearly six times as much per capita on health care administration as the average developed country, with poorer outcomes. Private insurance administrative costs are about 17 percent, Medicare’s only 2 percent.

During 30 years as health system COO/CEO, I’ve heard people say, “Keep government out of my Medicare!” No, the health and safety of the people is a prime government concern, and Medicare promotes both at lower cost.

Improving Medicare and making it available to everyone would be a smart move. Any courageous Republican representative listening?

http://www.bnd.com…

Physicians shouldering more of patients’ cost sharing

As Patients Take On More Costs, Will Providers Shoulder The Burden?

By Michael Chernew and Jonathan Bush
Health Affairs Blog, May 4, 2017

Despite the uncertainty about the future of the Affordable Care Act (ACA) and any replacement, in the coming years, more Americans will almost surely find themselves in health plans with considerable patient cost sharing at the point of service (for example, high deductibles, copayments, or co-insurance). The trend toward more limited plans has been a reality for more than a decade. For example, the average deductible has grown from $818 in 2006 to $2,069 in 2015.

Moreover, Congress may try to reduce cost-sharing subsidies and encourage people to select more limited plans in other ways, such as increasing the attractiveness of health savings accounts. Cost sharing lowers premiums (an important goal for payers and policy makers) by lowering use and, to some extent, encouraging consumers to shop for lower-price care. It also shifts costs away from payers toward patients.

Public debate about more limited insurance plans has mostly focused on their impact on beneficiaries. Missing from the discussion has been an analysis of how these plans could affect providers.

Calculating The Provider Burden From Cost Sharing

Using medical claims data from athenahealth’s national network of 88,000 providers, we computed out-of-pocket obligations for commercially insured patients across all provider specialties, from 2012 through 2016. Our sample includes 125 million visits for ambulatory services (for example, office visits and ambulatory surgical procedures) by 18 million patients across 1,348 practices.

For each visit, we computed the required patient cost-sharing amount. We looked at those patient obligations across four broad categories, based on size of the patients’ out-of-pocket charge for the visit: small ($0-$35), medium ($35-$75), large ($75-$200), and very large (more than $200). We found that the average patient obligation per visit increased 20 percent between 2012 and 2016, with the overall distribution shifting from small to larger obligations.

Using the 2015 data, we then computed collection rates after 12 months for the different patient obligation size categories. For visits with small patient obligations, 93.8 percent of the balance was paid within a year. The rate drops to just 66.7 percent for visits with obligations above $200. For visits with the highest obligation, roughly 16 percent were written off as bad debt or abandoned, and about another 17 percent were sent to collection agencies.

Compounding this issue with larger patient balances is the opacity of obligation amounts at the time of service. While practices have visibility at the point of service into patient copayment amounts through eligibility data, the amount they can collect for patients with high-deductible health plans is unknown. Under current rules, they must bill the insurance carrier and wait for an explanation of benefits (often a two-week lag time) before billing the patient for his or her portion. Aside from this being an extremely complex and costly process, we know that collecting any amount becomes markedly more difficult once the patient leaves the office.

Implications

The tax on providers from increased patient cost sharing occurs against a backdrop of very slowly rising fees. The new physician payment system outlined in the Medicare Access and CHIP Reauthorization Act of 2015 calls for physician fees to rise by 0.5 percent (before accounting for inflation) through 2019 and then to be flat through 2024 and beyond. If general inflation rises by 2 percent through 2024, roughly as projected by the Federal Reserve, this represents an inflation-adjusted reduction in fees on average of more than 10 percent. While some physicians may fare well under the performance bonus system, fee increases for the high performers, beyond the exceptional performance bonus, will be funded by a reduction in fees for low-scoring physicians. The result for physicians could be a perfect storm of fee cuts and losses from writing off uncollected patient payments.

As in other markets, providers should have the price transparency and flexibility to offer discounts for time-of-service payments.

For physicians to weather the financial pressures coming, they will need to design and manage a “retail front end” for their practices, with the ability to offer “sales” to patients in return for speedy payment. They will also need to get sophisticated about accessing insurance companies online to assess what patients will owe before they leave the office. As important, physicians will need to find ways to manage their practice costs. Under existing fee-for-service payment models, however, any efficiency gains made by reducing wasteful care are captured by payers.

http://healthaffairs.org…

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Comment:

By Don McCanne, M.D.

The increasing prevalence and magnitude of cost sharing is not news. We have long recognized the burden this has placed on patients, not only the financial burden but also the decline in access to beneficial health care because of the lack of affordability due to higher out-of-pocket expenses. Today’s article adds the concern that the burden of cost sharing is being shifted onto physicians because of the difficulty that patients have in paying their cost-sharing obligations.

This is no small burden for physicians. Patient deductibles now average over $2000. It would not take very many delinquent accounts to significantly reduce the physicians’ take-home pay. Further, MACRA not only brought to physicians the burden of MIPS and APMs but it also scheduled flat fees in the future amounting to a ten percent inflation-adjusted reduction of fees. Further, the performance rewards will be financed by fee reduction penalties for those physicians who dedicate themselves to caring for the most needy since these patient populations result in empirically low “quality” scores.

Nobody expects the insurers or legislators to back off on the march toward more patient responsibility for paying medical bills. It will get worse, and, as these authors state, “a perfect storm of fee cuts and losses from writing off uncollected patient payments” will be brewing.

But what is the authors’ solution? Design and manage “a retail front end” – offer discounts, hold sales, reward speedy payments, develop more sophistication in accessing insurance companies to determine cost sharing requirements, and, of course, the inevitable recommendation that physicians are simply going to have to reduce their practice costs (where do you cut when you’re already down to the bone?).

Is this really the practice environment that patients want for their physicians (“… but today only, just for you, a deal you can’t refuse …”)? For that matter, do patients really want to exercise their consumer prowess by having the opportunity to pay upfront charges for their health care?

Sorry. This is not where we should be headed. We need to dump all this and move forward with first dollar coverage through a well-designed single payer national health program – an improved Medicare for all.

Donald Trump’s homicidal healthcare bill will kill some, and enrich others

Medicine saves lives, while stripping healthcare coverage to fund tax breaks for the rich takes lives. If this bill passes, legislators will have blood on their hands.

By Adam Gaffney, M.D.
The Guardian, May 5, 2017

Let us imagine that you would like to redistribute hundreds of billions of dollars from working class people to the rich, and wouldn’t hesitate to risk the lives of tens of thousands of people to do so. Well, as luck would have it, there is a bill—the “American Health Care Act” (AHCA)—that does precisely that.

On Thursday, it squeezed through the House of Representatives. Trumpcare – at least for the moment – has been triumphant.

Many of us thought – or hoped – that Paul Ryan’s bill was as good as dead on 24 March, when, in a pleasurable political moment (a rare event these days), he admitted he lacked the votes to push it through. But where there is a will to degrade the healthcare safety net, there is a way. And, to the House Republicans’ credit, they indeed found a way to ram this grotesquerie through.

To do so, the hard right had to compromise with the harder right, which made the current version of the AHCA fouler than the original.

The harder right found much to like about the original bill – like its historic gouging of Medicaid. The problem was that it left too much of the regulatory infrastructure of the Affordable Care Act (ACA) intact. Rules that insurers must cover 10 “essential health benefits” and cannot discriminate against those with pre-existing conditions? Eliminate those provisions, and let healthcare freedom reign.

The compromises worked. First, there was the MacArthur amendment, which permits states to redefine “essential health benefits” (this would allow insurers to exclude coverage of some types of healthcare, such as maternity care), or to allow insurers to charge people with pre-existing conditions higher premiums if they failed to maintain coverage.

As Timothy Jost noted on the Health Affairs blog, the latter provision “could effectively make coverage completely unaffordable to people with pre-existing conditions”, notwithstanding the clearly inadequate high-risk pools.

So far, so good.

However, in appeasing the harder right, the House leadership risked estranging the less hard right. But the latter proved to be a cheap date: they were bought off by the Upton amendment, added at the eleventh hour, which gave another $8bn to the fund theoretically designed to cover those left behind by the AHCA. Though this was a drop in the bucket relative to the size of the problem created by the AHCA, it brought just enough moderates back on board to secure a winning vote.

If the AHCA were signed into law by Trump – an unlikely but not impossible proposition given the headwinds it faces in the Senate – the negative impact on ordinary Americans would be enormous.

Given that the House GOP didn’t bother to wait for the Congressional Budget Office (CBO) score before voting, we don’t know just how bad it will be. But relying on the CBO’s initial estimates, we can say that the AHCA will, over a decade, reduce spending on Medicaid alone by more than $800bn.

Together with savings from having less adequate, skimpier insurance subsidies, these reductions will allow hundreds of billions of dollars to be channeled to the wealthy and corporations in the form of tax cuts.

By enriching the rich in this manner, the AHCA would leave an estimated 24 million more uninsured by 2028. Similar calculations have already been done, but it’s worth briefly revisiting the blood-arithmetic on this.

Colleagues of mine recently reported estimates, in the American Journal of Public Health, of how many newly insured people there would have to be to prevent one death per year. These estimates, which, being estimates, aren’t perfect, were based on five studies. The numbers ranged from 300 to 1,239 people.

If we were to pick a round number on the conservative end of that range – say 1,000 – we would estimate that stripping insurance from 24 million people would produce an estimated 24,000 additional deaths annually. That is 40% more than the sum total of all murders, estimated by the FBI at 14,429 for 2014 (using somewhat different numbers, Vox’s Julia Belluz makes this point and comes to the same figure).

Now, in all fairness to House Republicans, as a critical care physician, I too get blood on my hands when I go to work. The only difference is I can wash mine off.

Modern medicine saves lives, while stripping healthcare coverage from millions to fund tax breaks for millionaires takes lives. There’s no way around it, whatever some may tell themselves to help them sleep at night.

This, of course, raises an even larger issue, namely the injustices of the healthcare status quo, wherein 28 million remain uninsured and even more without adequate coverage – shortcomings that leave open the door to continued attack from the right.

This execrable, homicidal bill must obviously be stopped. But that’s not all we must do. The most enduring defense against the rightwing saboteurs is not continued championship of a flawed status quo, but instead the promise of a better tomorrow: healthcare for all, through a single-payer universal system. That alone will put an end to these deadly assaults on healthcare.

Adam Gaffney is an instructor in medicine at Harvard Medical School, a pulmonary and critical care doctor at the Cambridge Health Alliance, and a national board member of Physicians for a National Health Program. He blogs at theprogressivephysician.org.

https://www.theguardian.com…

Dr. Carol Paris on ‘The Real News’

PNHP president Dr. Carol Paris appeared on “The Real News” on May 5, 2017, to discuss the House of Representatives passing the American Health Care Act by the slimmest of margins. She said real reform, in the form of a single-payer national health program, would only come about as the result of a broad-based movement that pressured Congress to act.

Trump’s forbidden love: Single-payer health care

By Aaron Blake
Washington Post, May 5, 2017

President Trump claimed a victory Thursday after the House approved a more free-market approach to health care.

Then he capped it off by praising a country with government-run, universal health care.

Alongside Australian Prime Minister Malcolm Turnbull at an event in New York, Trump reflected on what the House had just done. He took the occasion to bash Obamacare as being terrible, and then he turned to Turnbull.

“We have a failing health care — I shouldn’t say this to our great gentleman and my friend from Australia,” Trump said, as The Post’s Abby Phillip reports, “because you have better health care than we do.”

Australia’s health-care system is run by the government. It’s essentially a single-payer, Medicare-for-all system that is available to everyone, with private insurance also available. (They even call it “Medicare.”)

Consider this merely the latest evidence that Trump, in his heart of hearts, wants single-payer health care. Indeed, it seems to be his forbidden fruit.

Back in 2000, he advocated for it as both a potential Reform Party presidential candidate and in his book, “The America We Deserve.”

“We must have universal health care. Just imagine the improved quality of life for our society as a whole,” he wrote, adding: “The Canadian-style, single-payer system in which all payments for medical care are made to a single agency (as opposed to the large number of HMOs and insurance companies with their diverse rules, claim forms and deductibles) … helps Canadians live longer and healthier than Americans.”

Just before the 2016 campaign, Trump appeared on David Letterman’s show and held up Scotland’s socialized system as the ideal.

“A friend of mine was in Scotland recently. He got very, very sick. They took him by ambulance and he was there for four days. He was really in trouble, and they released him and he said, ‘Where do I pay?’ And they said, ‘There’s no charge,’” Trump said. “Not only that, he said it was like great doctors, great care. I mean, we could have a great system in this country.”

Then, early in the 2016 campaign, he again praised the single-payer systems in Scotland and Canada — while also arguing that the United States needed to have a private system.

Asked on “Morning Joe” whether he supported single-payer, he said: “No, but it’s certainly something that in certain countries works. It actually works incredibly well in Scotland. Some people think it really works in Canada. But not here, I don’t think it would work as well here.”

He said two days later at a GOP debate: “As far as single-payer, it works in Canada. It works incredibly well in Scotland. It could have worked in a different age, which is the age you’re talking about here.”

Later on, Trump would repeatedly push for universal health care without specifically subscribing to the words “single-payer.”

“Everybody’s got to be covered. This is an un-Republican thing for me to say,” Trump said in a September 2015 “60 Minutes” interview. “I am going to take care of everybody. I don’t care if it costs me votes or not. Everybody’s going to be taken care of much better than they’re taken care of now.”

He added when asked who is going to pay for it: “The government’s gonna pay for it.” That was enough for Breitbart, which would become vehemently pro-Trump during the 2016 campaign, to declare Trump had embraced single-payer.

Then Trump told The Washington Post mere days before his inauguration, “We’re going to have insurance for everybody.” He clarified: “I don’t want single-payer. What I do want is to be able to take care of people.”

And some see the current debate eventually winding up with single-payer.

Law professor F.H. Buckley argued in the New York Post last month that, in the face of defeat for the Republican health-care bill, Trump should just go for it. He argued that it would be a great thing for the Republican Party because it would eliminate Democrats’ claim to being the party of compassion and that Trump’s supporters would actually like it.

“Leave behind all the people who hated you, who curse when you succeed,” Buckley wrote. “Reach out to the people who voted for you. Challenge the Democrats by offering them what they’ve always said they wanted.”

It’s not the most far-fetched thing in the world — the idea that health-care reform would fail and Trump would pursue the thing that he’s praised for years. Sixty percent of Americans believe the government should guarantee health care, according to a recent Pew study, and even Republicans have moved toward this position. But it would risk breaking the Republican Party in half. The GOP has warmed to Trump’s pro-big-government message, but even that could have limits.

Whatever happens, though, Trump’s past — and now current — rhetoric doesn’t lie: He’s pretty impressed with government-run health care in the places it works. It’s almost like he wishes he could do it here.

https://www.washingtonpost.com…

Vote on the American Health Care Act

House of Representatives, May 4, 2017

Yea: 217
Nay: 213

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Comment:

By Don McCanne, M.D.

Fulfilling a rhetorical election promise was more important to conservative members of Congress than is the health care of the American people. After all, how could they face their voters? Yes, how can they?

Doctors’ group: House leaders are out of touch with majority of Americans demanding Medicare for all

FOR IMMEDIATE RELEASE, May 4, 2017
Contact: Clare Fauke, PNHP communications specialist, 312-782-6006, clare@pnhp.org

Physicians for a National Health Program (PNHP), a nonprofit research and education organization of 20,000 physicians, medical students and health professionals, responded to today’s House of Representatives’ passage of the American Health Care Act (AHCA).

“This vote shows that House leaders are not only out of ideas on health care, but out of touch with their own constituents,” said Carol Paris, M.D., president of PNHP. “In polls and at town hall meetings, Americans consistently demand Medicare for all, the only plan that is universal, sustainable, and proven to work in every other industrialized nation.”

Dr. Paris urged members of both parties support H.R. 676, the Expanded and Improved Medicare for All Act, which would provide immediate, comprehensive coverage to all Americans and achieve President Trump’s campaign promises of more coverage, better benefits and lower costs. The bill has 108 co-sponsors in the House, 24 of whom have signed on in the past month.

“The Medicare for all train is leaving the station and the majority of Americans are on it,” said Dr. Paris. “Members of Congress need to get on board or get out of the way.”

Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and educational organization of more than 21,000 doctors and health professionals who support a single-payer national health program. It was founded in 1986.

A fiscally conservative businessman says single payer would be better

Why I’m finally ready to agree a single-payer healthcare system would be better for business

By Gene Marks
The Washington Post, April 28, 2017

My wife is English and one of the biggest surprises she had when moving to this country was healthcare. “I don’t understand why my employer is involved in my healthcare,” she said back then – and still says today. After years of listening to that argument, I’m starting to understand what she means.

I can’t believe I’m saying this. I consider myself a smaller-government, fiscally right-of-center guy. I own a small business. I want lower taxes and less regulations. And yet, after watching and studying and writing about healthcare reform for going on 10 years I think I’m finally to the point of caving in and admitting that maybe, just maybe, a single-payer system would be what’s best for businesses, including businesses like mine.

Every year I speak and work with thousands of business owners and managers and each and every one of them are terrified come summertime when healthcare rates for the next year are announced. Every year – and I mean every year – my clients have suffered with double-digit increases in their healthcare costs. Sure, they are pushing more of these costs down to their employees. But most are still covering a large part of the health insurance offered to their people.

We spend too much time trying to figure out ways to reduce our healthcare insurance – which, to many represents a significant line item on our income statements. This time distracts us from ways to grow our businesses. But we have to do this because we have to offer a healthcare benefit. Our employees expect it. Our competitors are offering theirs. The labor pool is tight. My wife asks “why?” So do I.

We’re at the point where many of my clients – and many who are fiscally right-of-center like me – would seriously consider an individual tax increase and all the risks of a single-payer system just to take this headache away from our businesses so we can focus on…well…our businesses.

https://www.washingtonpost.com…

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Comment:

By Don McCanne, M.D.

Placing health financing decisions into the hands of employers for a majority of Americans is a historical fluke and continuing to do so defies logic. A single payer national health program would end this nonsense (not to mention providing affordable, comprehensive health care for everyone).

Expanding coverage under ACA did not reduce access for the continuously insured

By Salam Abdus and Steven C. Hill
Health Affairs, May 2017

Abstract

Recent expansions in health insurance coverage have raised concerns about health care providers’ capacity to supply additional services and how that may have affected access to care for people who were already insured. When we examined data for the period 2008–14 from the Medical Expenditure Panel Survey, we found no consistent evidence that increases in the proportions of adults with insurance at the local-area level affected access to care for adults residing in the same areas who already had, and continued to have, insurance. This lack of an apparent relationship held true across eight measures of access, which included receipt of preventive care. It also held true among two adult subpopulations that may have been at greater risk for compromised access: people residing in health care professional shortage areas and Medicaid beneficiaries.

From the Introduction

The ways in which population-level increases in insurance coverage affected people who were already insured during the recent insurance expansions depend on three key factors. The first is providers’ capacity and willingness to offer more visits and supply additional services. If providers had excess capacity, then increased demand could easily be met, but many observers have expressed concern that providers could not supply enough additional services—especially primary care services. Concern about reduced access may be most relevant in medically underserved areas—that is, areas already facing shortages of primary care providers.

The second factor is the extent to which the provider market is segmented by the types of insurance patients carry, if any. Some providers, such as federally qualified health centers, primarily serve patients with public insurance and the uninsured. More generally, providers are less likely to accept Medicaid patients than Medicare and privately insured patients. Thus, people who had Medicaid before the ACA-related Medicaid expansions might have been at greater risk of reduced access, especially because Medicaid enrollment increased 25 percent from 2013 to 2014 in states that expanded eligibility for Medicaid.

The third factor is the effects of ACA provisions intended to increase health care capacity. In particular, the act provided funding for expanding the capacity of federally qualified health centers; training more physicians, mid-level practitioners, and nurses; and encouraging more providers to work in primary care and in underserved areas. It also temporarily increased Medicaid payments for some services supplied by primary care providers. The ACA set its capacity-building activities in motion before the biggest eligibility expansions occurred, whereas Massachusetts did not begin to address provider capacity problems until after its insurance expansion. Thus, the efforts to increase supply built into the ACA had the potential to mitigate negative spillovers such as those seen in Massachusetts. Moreover, many of the ACA provisions were designed to mitigate negative spillovers among the groups most likely to be negatively affected: people in medically underserved areas and Medicaid beneficiaries.

From the Discussion

We found no consistent evidence that increased local-area insurance coverage rates reduced access to care among the continuously insured. This remained true even when we restricted our sample to adults residing in geographic Health Professional Shortage Areas or to adults continuously insured by Medicaid.

Our results are consistent with the possibility that funding in the ACA to increase provider capacity mitigated potential negative spillovers, as intended. While we know of no rigorous evaluations of these provisions, data suggest that capacity did expand. ACA funding was used to add sites of care and other expansions of community health center capacity, which was associated with serving more patients. ACA funding for training might have contributed to growth in the number of midlevel practitioners, who can help meet increased demand for primary care. From 2009 to 2014 the number of employed physician assistants rose 19 percent, and from 2012 to 2014 the number of employed nurse practitioners rose 15 percent. ACA funding to expand capacity began to be disbursed shortly after the act passed, before the major insurance eligibility expansions in 2014.

From the Conclusion

Despite concerns, increasing rates of insurance coverage did not appear to reduce access to care among the continuously insured.

http://content.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

One concern about the increases in the numbers of people insured as a result of implementation of the Affordable Care Act was that people already insured might find that their access to care became impaired because the increased demand for care might overload the delivery system. However, measures to increase capacity in the system, such as expansion of community health centers and increased training of health care professionals helped to alleviate that concern. Thus, “increasing rates of insurance coverage did not appear to reduce access to care among the continuously insured.”

Well designed health care reform includes giving attention to system capacity. Central planning along with separate budgeting of capital improvements is designed to ensure that capacity is adequate and equitably distributed. People who are satisfied with their current insurance need not be concerned that expanding coverage to include everyone – as in an improved Medicare for all – would result in impaired access. Not only would access be assured, they would have better coverage than the best of current plans in the private sector.

Insurers use ‘medical loss ratios’ to cheat us

NBER Working Paper No. 23353; Cost of Service Regulation in U.S. Health Care: Minimum Medical Loss Ratios

By Steve Cicala, Ethan M.J. Lieber, and Victoria Marone
National Bureau of Economic Research, April 2017

Abstract

In health insurance markets, an insurer’s Medical Loss Ratio (MLR) is the share of premiums spent on medical claims. As part of the goal of reducing the cost of health care coverage, the Affordable Care Act introduced minimum MLR provisions for all health insurance sold in fully- insured commercial markets as of 2011, thereby explicitly capping insurer profit margins, but not levels. This cap was binding for many insurers, with over $1 billion of rebates paid in the first year of implementation. We model this constraint imposed upon a monopolistic insurer, and derive distortions analogous to those created under cost of service regulation. We test the implications of the model empirically using administrative data from 2005–2013, with insurers persistently above the minimum MLR threshold serving as the control group in a difference-in- difference design. We find that rather than resulting in reduced premiums, claims costs increased nearly one-for-one with distance below the regulatory threshold, 7% in the individual market, and 2% in the group market.

From the Introduction

At its simplest level, this paper observes that our hypothetical insurer with $100 in premium revenue and $79 in claims finds it must bear the full administrative cost of keeping expenditures below $80, but reaps none of the rewards. That is, minimum MLR requirements encourage higher costs, not lower. We draw the direct parallel between MLR regulation and cost of service regulation, and show empirically that the 80/20 rule has, indeed, substantially increased insurers’ medical expenditures. While perhaps obvious ex post, this connection has not been established (nor estimated) to date.

From the Conclusion

This paper connects regulations of actuarial fairness to cost of service regulation, and uses the recently-implemented ‘80/20’ rule in the ACA to estimate the role these forces play in the determination of claims costs and premiums in the market for health insurance. The 80/20 rule requires health insurers in the commercial, fully-insured market to keep the share of their premium revenue spent on medical claims, known as the Medical Loss Ratio (MLR), above a minimum threshold, and to rebate the difference to customers if they fall short of this minimum. We find robust evidence that insurers increased their MLRs to comply with the regulation, and that this increase came largely by increases in claims costs.

We find that insurers in the individual market were most strongly impacted by the 80/20 rule, with affected insurers increasing their claims costs 7% on average and as much as 11% after two years of adjustment. We find that the rule also resulted in higher MLRs and claims costs in the group market, though the regulation was less binding in this segment. We generally find that the magnitude of the increase in claims costs scales with the initial distance from the minimum threshold. These results stand in stark contrast to the original intention of the rule: lower premiums. We do not find that insurers lowered premiums as a means to increase their MLR.

Instead, it is more likely that insurers raised their claims costs from a combination of more comprehensive coverage and reduced cost-containment effort, such as negotiations with providers or claims utilization management practices.

http://www.nber.org…

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Quote of the Day: AHIP on medical loss ratios

By Don McCanne, M.D.
Physicians for a National Health Program, July 26, 2010

Excerpt from Comment:

An extremely important unintended consequence of fixed medical loss ratios has been mentioned here before, but seems to have escaped the mainstream media, so it is being repeated: Once the MLR rules are established, the primary method by which insurers can increase the services they sell us, while increasing their profits, is by increasing gross revenues, since they are guaranteed a fixed percentage of those revenues. The most effective way to increase gross revenues is to increase the amount of health care services authorized and paid for.

If the insurers change provider incentives to double the amount of health care that is being delivered, they can double their own total revenues, keeping even more as profit because of the smaller marginal administrative costs of paying for more care. This incentive of the insurers to increase total health care spending is the exact opposite of the reform goal of slowing future health care cost increases.

All of this is good business. But that’s the problem. Our elected representatives chose a business model to finance health care when what we desperately need is a service model.

“Medical loss ratio” is a term that needs to be moved into the history books of failed policy concepts. Instead, we need our own public service model – an improved Medicare for everyone.

https://www.pnhp.org…

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Comment:

By Don McCanne, M.D.

Paying for health care is a loss for insurers. They get to keep for their administrative costs and profits whatever they do not spend on health care. In crafting the Affordable Care Act our legislators surmised that they could limit the administrative waste and excess profits by requiring that at least 80 percent of premiums be used for health care for individual plans and 85 percent for small group plans – the medical loss ratio. If you were an insurer, think of the opportunity this offers.

In previous messages it was pointed out that the more the insurers pay out in health benefits, the more they can expand their administrative expenses and especially their profits. They get to keep 15 to 20 percent of the premiums.

How do you pay out more in health benefits? Simple. Negotiate higher prices with physicians and hospitals. Maximize benefits covered. Authorize more care; be very conservative with rejecting prior authorization requests. Avoid adjusting claims and avoid claim denials. Do not investigate over-utilization or frank health care fraud. Then have your actuaries calculate the premiums to include 15 to 20 percent over the inflated health care spending. Make that a little bit over 15 to 20 percent which will then have to be refunded but will ensure that the full padded margin is received.

As with so many policy flaws of the Affordable Care Act that we have reported here, there is some disbelief that the insurers would do that. But isn’t that the way markets work? Maximize revenues and profits? There is nothing illegal here.

Today’s report indicates that, guess what, “insurers raised their claims costs from a combination of more comprehensive coverage and reduced cost-containment effort, such as negotiations with providers or claims utilization management practices.” Thus the insurers defeated the MLR rule that was intended to reduce premiums.

From a 2010 Quote of the Day:

“If the insurers change provider incentives to double the amount of health care that is being delivered, they can double their own total revenues, keeping even more as profit because of the smaller marginal administrative costs of paying for more care. This incentive of the insurers to increase total health care spending is the exact opposite of the reform goal of slowing future health care cost increases.

“All of this is good business. But that’s the problem. Our elected representatives chose a business model to finance health care when what we desperately need is a service model.

“‘Medical loss ratio’ is a term that needs to be moved into the history books of failed policy concepts. Instead, we need our own public service model – an improved Medicare for everyone.”

Dr. David Ansell, author of ‘The Death Gap,’ talks about health care inequities

Scientific racism and lack of access to quality health care hurts low-income families and people of color.

By Casey Quinlan
ThinkProgress, May 1, 2017

Although the Affordable Care Act has expanded health care access for millions of people, unequal access to treatment is still shortening the lives of many Americans. David Ansell, who has worked as a doctor in low-income Chicago communities for nearly four decades, focuses on these health care disparities in his new book, The Death Gap.

ThinkProgress interviewed Ansell on some of the health disparities he documents in his book, as well as possible solutions to these health care inequities.

Half of your book is devoted to issues of economic inequality that contribute to health disparities. Who is your book’s intended audience?

I’m actually aiming the book toward a reading public who might be interested in the question, “Why are things the way they are?” Because I’ve been a doctor in Chicago for over 30 years and have worked in three hospitals on one street. I call it “one street, two worlds” because the lives people live in one neighborhood are so different than the lives people live in another neighborhood, and sometimes they are juxtaposed next to each other.

While I think medical personnel and students will read [the book], it’s really aimed for people to understand how inequality itself leads to people dying early, and that that is an unacceptable proposition from a human rights perspective.

Most of the patients you mentioned in your book were people of color. As white people die at greater numbers, media outlets are taking notice, but does it ever disappoint you that the health issues of people of color appear to get less attention?

On the loop in Chicago, you can live to be 85 years old. Yet my hospital was just three stops away, and that life expectancy plummets to 69. As a problem, it’s not what people are doing, it’s due to the conditions in their neighborhoods. The conditions in black neighborhoods, especially urban black neighborhoods…these are conditions that have led to this neglect for hundreds of years, plus the exploitation and structural racism.

But the income equality, inequality in educational achievement, and other things are impacting white folks in the country as well, and what is underlying this is cumulative disadvantage, and sometimes generational disadvantage. When this disadvantage is concentrated in neighborhoods and families, people die earlier. So people are calling deaths in white people “diseases of despair,” and people are saying “About time you noticed this, because it’s been going on in black communities.”

I think it should bring us all pause and really to begin to bring solutions to neighborhoods that are actually quite straightforward. It’s redistribution of our wealth into investments, into good-paying jobs, free education, and health care for all without co-pays and deductibles. And it will benefit folks in Appalachia and rural California as well as Chicago.

You mention examples of scientific racism, such as the discredited theories about slavery and hypertension, and that researchers rely on so-called racial and ethnic evidence to excuse health disparities. Can you explain how those findings might distract people from acknowledging and doing something about these death gaps?

There is scientific racism because we use race in this country as as a biological category. We need to distinguish race from racism. Racism is a form of structural violence that actually harms people of color and black people in particular, disadvantaging them in so many different ways from economic exclusion, to exclusion from neighborhoods, educational opportunities, and from jobs. And it’s important we distinguish that.

But of course, the medical community has been all too happy to conflate race and racism, and then ascribe biological phenomena that are really results of exploitative conditions to the melanin concentration in skin. And it doesn’t make any sense. Human beings are 99.9 percent alike. That isn’t minimizing that diseases have biological manifestations, but to ascribe a condition to race is inherently racist in my opinion, and it deflects from solving the real problem.

Because if the problem is within the individual, we need to fix the individual. But if the problem is the way we design and structure society, concentrating wealth into the hands of people in certain communities to the exclusion of others, then we need to reorganize the world through taxing and other processes to create opportunities for those who are systematically exploited.

Since you cited research showing that doctors have given different medical workups to patients of color — such as black people getting less angiograms to evaluate chest pain symptoms — I’m wondering what you think the medical establishment should do to reduce racial bias.

One, people’s reaction to black patients is different, and they’ve done tests on bias in nurses and doctors, so we have to acknowledge implicit bias in health care. Two, as a result of implicit bias, differential care is provided, so the way one deals with that is to check in within oneself, to make sure reactions are not out of bias, and to look at data through a race and gender and age lens to identify areas where there is differential care. If there is differential care, if we want to improve it, we have to measure it and put it out in front of quality boards in institutions and design projects to mitigate this.

What is necessary is for health care institutions to look at their performance on quality measures through an equity lens — by race, age, gender, and insurance for example — to ensure that care is being provided equitably to all. The only way to improve is to measure and share the data within the hospital quality structure, up to and including the [hospital’s governing] board.

But the biggest gap on top of all this is that health care institutions supporting minority patients are different than institutions serving white patients, in terms of overarching quality. The health care system we have is almost the opposite of equitable, because those who have more — and this tends to weigh in our society by skin color and gender — have better insurance cards and have better hospitals that tend to be in white communities.

[These hospitals] have higher star ratings by Centers for Medicare and Medicaid Services, and those hospitals serving black and brown people have lower quality. This correlates with mortality rates, so on three different levels, people can get bad care based on race.

One is implicit bias, two is people not looking at quality overall through an equity lens, so you could be providing worse care. We know black people are less likely to receive angiograms, and breast cancer treatment varies. The third part is the structure of the health care system, which allows those who have more to get better insurance cards, and they get their care in better organized hospitals and health systems.

How does the neighborhood of the hospital affect the care patients receive?

Every city has a street like Ogden Avenue in Chicago, where you have great life expectancy gaps. A hospital in a poor community tends to be taking care of more uninsured patients and patients on Medicaid. I worked at Mount Sinai, which dedicated itself to serving Lawndale and poor communities on West Side. Because there were fewer people who could pay the bills, you couldn’t buy equipment or hire a specialist. After 17 years at [Hospital of Cook County] and 10 years at Mount Sinai, not once did a patient that I had who needed a transplant ever get one, and yet there were two trauma centers. There was a transplant center literally down the street.

But it also has to do with how capital is needed to improve care, so if you want to build a new facility or if you need fancy diagnostic equipment, hospitals that serve poor minority communities are under-capitalized, and therefore patients don’t have access to the best technology. As a doctor, I thought all I had to do was show up in a safety net setting and take care of patients. When I got to Rush University Medical Center, a shiny new medical center, I found that it wasn’t enough if the if availability for patients wasn’t there for me.

But when I showed up, what I found was that there wasn’t enough equipment, and the availability of patients wasn’t there for me. It is really an apartheid medical system. We can fix if we want to, but we haven’t yet, and all this debate about health care in DC is missing the point when it comes to equality and equity.

You say you want a single-payer system because there is a lot the ACA can’t achieve, particularly after the Supreme Court allowed states to opt out of Medicaid expansion. Do you think that under the current conditions, with Republicans pushing their own health care bill, we will get to return to a conversation about a single-payer system?

The ACA did some tremendous things, and 20 million people are insured who were uninsured. For every million uninsured, that is 1,000 additional deaths each year, so that means there are 20,000 fewer people dying each year. That is a wonderful thing, but the downside is that people were still left uninsured. And most of all, it propped up a flawed health insurance system that depends on profit-making health insurance companies and pharmaceutical companies that have basically raised rates for people — not only those buying health care on health care marketplaces but for those getting insurance as employees.

Those buying on the marketplaces, most of it is subsidized, but they’re also facing high co-pays and deductibles. And that actually deters people from seeking the care they need, so it is inherently flawed when you use insurance companies. Premiums have have not gone up under the ACA as fast as they were going before, but they’re still going up faster than wages … If you’re poor and uninsured, there is no worse thing than not having a Medicaid card, but the next less worse thing is having a Medicaid card, because one out of three doctors does not take Medicaid. It’s much harder for people with Medicaid to get specialty care and not all doctors take Medicaid plans.

So the ACA was good, but not good enough from a health equity perspective. The best and cheapest way is to take insurance companies out of it, get rid of co-pays under Medicare, and expand it for all.

I think Republican attempts to repeal are getting into the dilemma that the ACA was essentially a Republican conservative idea. Let the free market solve it. What they’re running into is that they can’t solve the problem without throwing 20 million people off of insurance, so they’re going to face opposition from both Republicans and Democrats. But the opportunity now is to do what other developed countries have done and have a single payer system.

How do you think activism is playing a role in forcing people to take notice of these death gaps?

We haven’t gotten rights in this country without being publicly vocal and being part of larger social movements. I gave examples of local things in Chicago, but it’s also true nationally. It’s not enough just to resist. We need to present a vision of what the world should be and get the political power to make it happen, and this will only happen with larger social movements.

This interview has been edited and condensed for clarity.

https://thinkprogress.org…