Government should not rely on private insurers

By The Editorial Board
The Des Moines Register, August 22, 2016

Aetna announced last week that it was reducing participation in health insurance exchanges created by the Affordable Care Act. It will sell plans in only four states next year, including Iowa, down from 15 this year. This follows similar market exits from UnitedHealth Group and Humana.

This is yet another reminder of why government should not rely on private companies to deliver health insurance to Americans. History has repeatedly shown this is a costly, dangerous and unsustainable idea. Yet politicians refuse to listen to history.

When Medicare was created in 1965, the goal was to insure seniors through a program administered by the government. In traditional Medicare, Uncle Sam directly pays providers for health services. The program is reliable, predictable and has low administrative costs. But politicians saw an opportunity to funnel public money to for-profit insurers to take over the job of administering benefits.

In the 1990s, private “Medicare+Choice” plans saved taxpayers no money while insurers demanded more and more money from the government. The companies failed to turn a healthy profit and disappeared. Fortunately, seniors could return to traditional, government-run Medicare.

Instead of learning from that experience, Congress embraced private insurers again in 2003. Medicare Advantage plans resulted in taxpayers paying 14 percent more per senior than the cost of care in traditional Medicare. Yet these plans are popular with seniors, who pay lower monthly premiums — and vote. Earlier this year, the GAO reported the feds improperly paid Medicare Advantage companies $14.1 billion in 2013. That’s billion with a “b.”

Lucky private insurers. Unlucky taxpayers. Reckless politicians.

Then there are governors, including Terry Branstad, who insist on handing over Medicaid administration to for-profit companies. Let’s take a look at how this has worked in Florida, where former Gov. Jeb Bush pushed the idea, arguing the cost of Medicaid operated by the state was “unsustainable.”

Privatization was rolled out statewide in 2014. Almost immediately, insurers complained they were losing money. They asked the state for a $400 million raise and a 12 percent increase in rates. This, of course, jeopardized any savings taxpayers may have realized. Two months ago Florida received a surprise Medicaid bill: It owed $433 million in unpaid reimbursements to insurers.

Then there is the Affordable Care Act.

One of the law’s fundamental flaws is its reliance on private insurers to provide coverage to millions of Americans through exchanges. With no “public option” safety net to offer government coverage if companies jump ship, the insurers have incredible political and financial power. They can, in fact, try to hold the government hostage. Pay higher reimbursements, don’t dispute our business decisions, do what we say or we are dropping out of exchanges.

Enter Aetna.

In a July 5 letter, Chief Executive Mark Bertolini informed the Justice Department that if it sued to block Aetna’s dealt to acquire Humana Inc., the insurer would reduce its presence in exchanges. The Obama administration says such a merger would increase consumer costs.

“If the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses,” he wrote.

Is that a warning? A threat? And how is the Obama administration supposed to respond?

The Justice Department sued to block the merger. Then Aetna announced it was scaling back its offerings in exchanges.

Americans’ access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.

http://www.desmoinesregister.com/story/opinion/editorials/2016/08/22/editorial-government-should-not-rely-private-insurers/89107404/

There is much discussion today about moving forward with reform by introducing a public option – a competing government insurance plan – into the ACA insurance exchanges. Yet that would leave in place the current health care financing system, including the multitude of private insurers. As this editorial explains, the government “should not rely on private companies to deliver health insurance to Americans” as “this is a costly, dangerous and unsustainable idea.”

Under our current system, the design of a public option would be very similar to existing private plans. That would perpetuate the flaws of the individual insurance model when what we need is a universal, prepaid health care system. Also, a public option designed as an individual plan to compete with private plans would fail to capture almost all of the efficiencies of a single payer national health program, leaving in place our dysfunctional, fragmented system of a multitude of public and private plans.

The editorial provides a very powerful message on why private insurers should be excluded from our health care financing. Once the public clearly understands that then we can explain to them why we should not accept even a fragmented system of public programs, even if dominated by a “public option” individual insurance plan. We need one single, efficient government financing program like Medicare, except even better.

Without a subsidy, couple faces higher insurance premiums

By Carla K. Johnson
Associated Press, August 20, 2016

With a household income too high for a federal subsidy, Bruce Mainzer and Beth Shadur are bracing for higher health insurance premiums in 2017.

As in other states, many insurers in Illinois have requested double-digit rate increases. Americans ineligible for the government subsidies that help cover their premiums will be hit hardest.

Health insurance already takes a hefty bite out of the couple’s budget. They pay $1,200 a month for a bronze plan with high deductibles, which means they pay $13,000 annually out of pocket before their coverage even kicks in.

“It has been a challenge, and it causes us to dip into our retirement savings and increase our debts,” Mainzer said.

On top of the cost, they’ve experienced the hassles of major disruptions in the Illinois insurance market. For one, their insurance company recently folded. It was one of the struggling co-ops set up under the federal health care law.

They are switching to Aetna in October but will start shopping again for another insurer a month later because Aetna recently said it is bailing out of the Illinois exchange-based marketplace.

They are in good health, but Mainzer has a blood disorder, a pre-existing condition that led insurers to reject him before the Affordable Care Act took effect. He was able to get coverage only through Illinois’ high-risk pool, at about the same price he pays today.

Mainzer rejects the “repeal and replace” Republican solution, in part because getting rid of the law would mean that insurance companies could go back to denying coverage for people with pre-existing conditions.

“Ultimately, it’s clear that health care is not something that can be efficiently provided by the private sector,” he said. “The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

http://bigstory.ap.org/article/900bafbce1e44be2a0f2f9c30a76f634/without-subsidy-couple-faces-higher-insurance-premiums

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Experts Predict Sharp Decline in Competition across the ACA Exchanges

By Dan Mendelson
Avalere, August 19, 2016

A new analysis from Avalere finds that nearly 36 percent of exchange market rating regions may have only one participating insurance carrier offering plans for the 2017 plan year and there may be some sub-region counties where no plans are available. Nearly 55 percent of exchange market rating regions may have two or fewer carriers.

“Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017,” said Dan Mendelson, president of Avalere.

http://avalere.com/expertise/life-sciences/insights/experts-predict-sharp-decline-in-competition-across-the-aca-exchanges

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Comment:

By Don McCanne, M.D.

An important measure of the success of the Affordable Care Act is how well it is working for middle and upper middle income working families who are not eligible for employer-sponsored health plans. The experience of the two-income couple described in this AP article demonstrates that it is not working so well for some.

Bruce Mainzer and Beth Shadur received their coverage through the ACA exchange in Illinois, but it was with one of the co-ops that failed (giving us a hint of what might happen to a “public option” once the private insurers provide their input into the design of such an option).

They had then applied for coverage with Aetna, but now it is pulling out of the Illinois exchange. Fewer plans will be available. In fact, according to the Avalere report, over one-third of exchange market rating regions throughout the United States will have only one plan available, eliminating competition as a means of holding down premiums (not that it was particularly effective anyway).

Because insurers in the exchanges have been experiencing losses, typical premium increases are expected to be in the double digits for 2017. For their bottom-tier bronze plan which has high deductibles, this couple has been paying $1,200 per month for coverage. Next year it will certainly be higher. Also the instability of plan coverage destabilizes access to health care because of the incongruity of the narrow provider networks.

In rejecting single payer, progressive politicians say that we should build on the success of ACA. What changes would you make in the system so that it would work well for Bruce and Beth? When you think about it, it is obvious that mere tweaks will not work. The changes that they need would require comprehensive reconstruction of the health care financing infrastructure.

Well, Bruce Mainzer has figured it out. As he says, “Ultimately, it’s clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

Without a subsidy, couple faces higher insurance premiums

By Carla K. Johnson
Associated Press, August 20, 2016

With a household income too high for a federal subsidy, Bruce Mainzer and Beth Shadur are bracing for higher health insurance premiums in 2017.

As in other states, many insurers in Illinois have requested double-digit rate increases. Americans ineligible for the government subsidies that help cover their premiums will be hit hardest.

Health insurance already takes a hefty bite out of the couple’s budget. They pay $1,200 a month for a bronze plan with high deductibles, which means they pay $13,000 annually out of pocket before their coverage even kicks in.

“It has been a challenge, and it causes us to dip into our retirement savings and increase our debts,” Mainzer said.

On top of the cost, they’ve experienced the hassles of major disruptions in the Illinois insurance market. For one, their insurance company recently folded. It was one of the struggling co-ops set up under the federal health care law.

They are switching to Aetna in October but will start shopping again for another insurer a month later because Aetna recently said it is bailing out of the Illinois exchange-based marketplace.

They are in good health, but Mainzer has a blood disorder, a pre-existing condition that led insurers to reject him before the Affordable Care Act took effect. He was able to get coverage only through Illinois’ high-risk pool, at about the same price he pays today.

Mainzer rejects the “repeal and replace” Republican solution, in part because getting rid of the law would mean that insurance companies could go back to denying coverage for people with pre-existing conditions.

“Ultimately, it’s clear that health care is not something that can be efficiently provided by the private sector,” he said. “The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

http://bigstory.ap.org/article/900bafbce1e44be2a0f2f9c30a76f634/without-subsidy-couple-faces-higher-insurance-premiums

***

Experts Predict Sharp Decline in Competition across the ACA Exchanges

By Dan Mendelson
Avalere, August 19, 2016

A new analysis from Avalere finds that nearly 36 percent of exchange market rating regions may have only one participating insurance carrier offering plans for the 2017 plan year and there may be some sub-region counties where no plans are available. Nearly 55 percent of exchange market rating regions may have two or fewer carriers.

“Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017,” said Dan Mendelson, president of Avalere.

http://avalere.com/expertise/life-sciences/insights/experts-predict-sharp-decline-in-competition-across-the-aca-exchanges

An important measure of the success of the Affordable Care Act is how well it is working for middle and upper middle income working families who are not eligible for employer-sponsored health plans. The experience of the two-income couple described in this AP article demonstrates that it is not working so well for some.

Bruce Mainzer and Beth Shadur received their coverage through the ACA exchange in Illinois, but it was with one of the co-ops that failed (giving us a hint of what might happen to a “public option” once the private insurers provide their input into the design of such an option).

They had then applied for coverage with Aetna, but now it is pulling out of the Illinois exchange. Fewer plans will be available. In fact, according to the Avalere report, over one-third of exchange market rating regions throughout the United States will have only one plan available, eliminating competition as a means of holding down premiums (not that it was particularly effective anyway).

Because insurers in the exchanges have been experiencing losses, typical premium increases are expected to be in the double digits for 2017. For their bottom-tier bronze plan which has high deductibles, this couple has been paying $1,200 per month for coverage. Next year it will certainly be higher. Also the instability of plan coverage destabilizes access to health care because of the incongruity of the narrow provider networks.

In rejecting single payer, progressive politicians say that we should build on the success of ACA. What changes would you make in the system so that it would work well for Bruce and Beth? When you think about it, it is obvious that mere tweaks will not work. The changes that they need would require comprehensive reconstruction of the health care financing infrastructure.

Well, Bruce Mainzer has figured it out. As he says, “Ultimately, it’s clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

CMS examines inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans

Centers for Medicare and Medicaid Services, August 18, 2016

The Centers for Medicare & Medicaid Services (CMS) today issued a request for information seeking public comment on concerns that some health care providers and provider-affiliated organizations may be steering people eligible for, or receiving, Medicare and/or Medicaid benefits into Affordable Care Act-compliant individual market plans, including Health Insurance Marketplace plans, for the purpose of obtaining higher reimbursement rates. CMS also sent letters to all Medicare-enrolled dialysis facilities and centers informing them of this announcement.

The request for information and letters to providers focus on situations where patients may be steered away from Medicare or Medicaid benefits, which can among other concerns, result in beneficiaries experiencing a disruption in the continuity and coordination of their care as a result of changes to their network of providers.

In addition to asking for more information on instances of problematic steering of consumers to individual market plans, CMS is also considering potential regulatory and operational options to prohibit or limit premium payments and routine waiver of cost-sharing for qualified health plans by health care providers, revisions to Medicare and Medicaid provider enrollment rules, the imposition of civil monetary penalties for individuals that fail to provide correct information about consumers enrolling in a plan, and potential changes that would allow issuers to limit their payment to health care providers to Medicare-based amounts for particular services and items of care.

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-08-18-2.html

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Comment:

By Don McCanne, M.D.

In a previous message we described how some dialysis centers were steering patients away from Medicare and Medicaid and into private plans which have much higher payment rates. CMS is now assessing this problem and considering various measures to address it.

CMS’s primary concern seems to be that they want to protect the private insurers from high cost patients, especially in light of the fact that the nation’s largest private insurers are withdrawing from the ACA exchanges because of their exposure to high needs patients. The punitive interventions they suggest are aimed at the providers rather than the insurers. Particularly noteworthy is the recommendation to allow private insurers to reduce their provider payments down to Medicare rates.

If CMS established the principle that they can have recourse to price controls for privately insured patients, then why should we have to continue to pay the private plans extra for their superfluous administrative excesses and investor returns?  For that matter, why should we continue with an inefficient, fragmented health care financing system wherein our public administrators are bending over backwards to cater to the private insurers at an extra cost to those of us paying the bills?

In these thousands of daily messages on the heaps of rotten policies in health care financing it seems like there must be a pony in here somewhere. Single payer, perhaps?

CMS examines inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans

Centers for Medicare and Medicaid Services, August 18, 2016

The Centers for Medicare & Medicaid Services (CMS) today issued a request for information seeking public comment on concerns that some health care providers and provider-affiliated organizations may be steering people eligible for, or receiving, Medicare and/or Medicaid benefits into Affordable Care Act-compliant individual market plans, including Health Insurance Marketplace plans, for the purpose of obtaining higher reimbursement rates. CMS also sent letters to all Medicare-enrolled dialysis facilities and centers informing them of this announcement.

The request for information and letters to providers focus on situations where patients may be steered away from Medicare or Medicaid benefits, which can among other concerns, result in beneficiaries experiencing a disruption in the continuity and coordination of their care as a result of changes to their network of providers.

In addition to asking for more information on instances of problematic steering of consumers to individual market plans, CMS is also considering potential regulatory and operational options to prohibit or limit premium payments and routine waiver of cost-sharing for qualified health plans by health care providers, revisions to Medicare and Medicaid provider enrollment rules, the imposition of civil monetary penalties for individuals that fail to provide correct information about consumers enrolling in a plan, and potential changes that would allow issuers to limit their payment to health care providers to Medicare-based amounts for particular services and items of care.

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-08-18-2.html

In a previous message we described how some dialysis centers were steering patients away from Medicare and Medicaid and into private plans which have much higher payment rates. CMS is now assessing this problem and considering various measures to address it.

CMS’s primary concern seems to be that they want to protect the private insurers from high cost patients, especially in light of the fact that the nation’s largest private insurers are withdrawing from the ACA exchanges because of their exposure to high needs patients. The punitive interventions they suggest are aimed at the providers rather than the insurers. Particularly noteworthy is the recommendation to allow private insurers to reduce their provider payments down to Medicare rates.

If CMS established the principle that they can have recourse to price controls for privately insured patients, then why should we have to continue to pay the private plans extra for their superfluous administrative excesses and investor returns?  For that matter, why should we continue with an inefficient, fragmented health care financing system wherein our public administrators are bending over backwards to cater to the private insurers at an extra cost to those of us paying the bills?

In these thousands of daily messages on the heaps of rotten policies in health care financing it seems like there must be a pony in here somewhere. Single payer, perhaps?

By Laurence C. Baker, M. Kate Bundorf, Aileen M. Devlin and Daniel P. Kessler
Health Affairs, August 2016

Abstract

There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

From the Discussion

Knowing how Medicare Advantage prices compare to those of FFS Medicare is important for public policy. Health spending is the product of price and quantity. If Medicare Advantage prices are lower than those of FFS Medicare, then Medicare can obtain the same quantity of services for less money through Medicare Advantage than through FFS Medicare.

Contrary to conventional wisdom, we found that Medicare Advantage plans paid lower prices for hospital services than FFS Medicare — around 8 percent lower in both 2009 and 2012 — once the DRG and geographic-area mix of FFS Medicare was made comparable to those of Medicare Advantage.

If differences in hospital mix are also accounted for, Medicare Advantage’s hospital prices are about 5.6 percent less than those of FFS Medicare. Thus, about a third of the 8 percent difference is attributable to the narrower hospital networks in Medicare Advantage, compared to FFS Medicare.

Our results also show how Medicare Advantage can be used to get a better deal (at least from hospitals) for the Medicare program as a whole, by adjusting administered prices across geographic areas and DRGs to better reflect the market.

Finally, consistent with previous research, we found that the rates commercial plans pay to hospitals are significantly higher than those of either Medicare Advantage or FFS Medicare and that they are rising.

http://content.healthaffairs.org/content/35/8/1444.abstract

The pro-market authors of this study have shown that the private Medicare Advantage plans pay hospitals less than traditional Medicare pays, concluding that the private plans “get a better deal for the Medicare program.” But that conclusion is not true if you look at the whole picture.

Because the private Medicare Advantage plans were being paid more than what was being paid for comparable care in the traditional Medicare program, Congress included in the Affordable Care Act adjustments to reduce the overpayments. However, the private plans have continued with their mastery of gaming the system to increase their payment rates, such as selective marketing to healthier populations and upcoding to receive greater payments through risk adjustment. This has been with the complicity of the people in HHS who have used innovative administrative tools and creative accounting to more than offset the required reductions. The private plans are still receiving greater payments than are being made for comparable patients in the traditional Medicare program.

Since the private plans are receiving larger payments, and, according to this study, are paying less for health care, the Medicare program is getting a worse deal, and it is the private insurers themselves who are getting a great deal, at a cost to taxpayers. This extra money that the insurers are siphoning out of the system is going to overpriced administrative services and, yes, to extra profits.

Although the private insurers are pulling out of the ACA exchanges because they cannot make their business model work there, they boast to their investors that their commercial accounts are highly profitable (employer-sponsored plans) and that their government accounts – especially the Medicare Advantage plans – are producing extraordinary returns for the investors (and humongous compensation packages for the corporate executives). We are paying for this through higher premiums for private plans and greater taxes for privately-managed government programs. A well designed single payer system should fix that.