PNHP

More evidence of squishy risk adjustment for Medicare Advantage

More evidence of squishy risk adjustment for Medicare Advantage

Upcoding: Evidence from Medicare on Squishy Risk Adjustment

By Michael Geruso, Timothy Layton
The National Bureau of Economic Research, NBER Working Paper No. 21222, May 2015

Diagnosis-based subsidies, also known as risk adjustment, are widely used in US health insurance markets to deal with problems of adverse selection and cream-skimming. The widespread use of these subsidies has generated broad policy, research, and popular interest in the idea of upcoding — the notion that diagnosed medical conditions may reflect behaviors of health plans and providers to game the payment system, rather than solely characteristics of patients. We introduce a model showing that coding differences across health plans have important consequences for public finances and consumer choices, whether or not such differences arise from gaming. We then develop and implement a novel strategy for identifying coding differences across insurers in equilibrium in the presence of selection. Empirically, we examine how coding intensity in Medicare differs between the traditional fee-for-service option, in which coding incentives are weak, and Medicare Advantage, in which insurers receive diagnosis-based subsidies. Our estimates imply that enrollees in private Medicare Advantage plans generate 6% to 16% higher diagnosis-based risk scores than the same enrollees would generate under fee-for-service Medicare. Consistent with a principal-agent problem faced by insurers attempting to induce their providers to upcode, we find that coding intensity increases with the level of vertical integration between insurers and the physicians with whom they contract. Absent a coding inflation correction, our findings imply excess public payments to Medicare Advantage plans of around $10 billion annually. This differential subsidy also distorts consumers’ choices toward private Medicare plans and away from fee-for-service Medicare.

http://www.nber.org/papers/w21222

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Does Privatized Health Insurance Benefit Patients or Producers? Evidence from Medicare Advantage

By Marika Cabral, Michael Geruso, and Neale Mahoney
Social Science Research Network, January 28, 2015

The debate over privatizing Medicare stems from a fundamental disagreement about whether privatization would primarily generate consumer surplus for individuals or producer surplus for insurance companies and health care providers. This paper investigates this question by studying an existing form of privatized Medicare called Medicare Advantage (MA). Using difference-in-differences variation brought about by payment floors established by the 2000 Benefits Improvement and Protection Act, we find that for each dollar in increased capitation payments, MA insurers reduced premiums to individuals by 45 cents and increased the actuarial value of benefits by 8 cents. Using administrative data on the near-universe of Medicare beneficiaries, we show that advantageous selection into MA cannot explain this incomplete pass-through. Instead, our evidence suggests that insurer market power is an important determinant of the division of surplus, with premium pass-through rates of 13% in the least competitive markets and 74% in the markets with the most competition.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489999

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McCaskill: Medicare Advantage billing fraud ‘must be investigated’

By Fred Schulte
The Center for Public Integrity, May 29, 2015

U.S. Senator Claire McCaskill wants federal officials to step up oversight of privately-run Medicare Advantage health plans treating the elderly, citing allegations by whistleblowers that some health plans are overcharging the government for their services.

It is the second recent call by a U.S. Senator for enhanced scrutiny of billing practices in the popular private health plans, which treat more than 16 million seniors.

Last week, Senate Judiciary Committee Chairman Charles E. Grassley asked Attorney General Loretta Lynch to tighten scrutiny of Medicare Advantage health plans suspected of overcharging the government, saying billions of tax dollars are at risk as the senior care program grows.

Both McCaskill, a Missouri Democrat, and Grassley, an Iowa Republican, cited concerns over the accuracy of a billing tool called a “risk score,” which is intended to pay Medicare Advantage insurers higher rates for taking sicker people and less for those with few medical needs.

McCaskill: Medicare Advantage billing fraud ‘must be investigated’

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Comment:

By Don McCanne, MD

By now there can be absolutely no lingering doubt that the Medicare Advantage plans are ripping off the taxpayers. The NBER paper by Geruso and Layton confirms that the “private Medicare Advantage plans generate 6% to 16% higher diagnosis-based risk scores than the same enrollees would generate under fee-for-service Medicare.”

Their paper also shows that the extra subsidy gained by upcoding “distorts consumers’ choices toward private Medicare plans and away from fee-for-service Medicare.” Also, the paper by Cabral, Geruso and Mahoney shows that about 45 percent of the increased capitation is passed through to the Medicare Advantage enrollees in the form of lower premiums – the most important reason that increasing numbers of Medicare beneficiaries are moving from the traditional Medicare program into the private Medicare Advantage plans.

This investment of their fraudulent gains into reducing plan premiums advances their goal of privatizing Medicare. Once they have drawn a critical threshold of Medicare beneficiaries into their private plans, their co-conspirators in Congress can ratchet down funding of the traditional Medicare program, causing providers to bail out. What would be left of the traditional Medicare program would likely be a chronically underfunded welfare program that could be rolled into the Medicaid program, now that Medicaid has expanded into a massive bottom-tiered program that serves the poor.

Sen. Charles Grassley and Sen. Claire McCaskill have requested investigation of these abuses. Of course they will be confirmed, but what will be the response? It is likely that not much more will happen other than an attempt made to close this loophole. But the insurers are masters at innovation and will surely find many other loopholes through which they can pursue their goal of complete privatization of Medicare.

Instead, we should be converting our health care financing system into a program based on the principles of Canada’s Medicare – a single payer national health program – that is if we want equitable care for everyone.

HHS announces “effectuated” enrollment in ACA plans

March Effectuated Enrollment Consistent with Department’s 2015 Goal

HHS.gov, June 2, 2015

The Centers for Medicare & Medicaid Services today released a data snapshot providing a detailed look at how many consumers paid their premiums in 2015 and had “effectuated” coverage in March 2015. During Open Enrollment for 2015 Marketplace coverage, through February 22, about 11.7 million Americans selected plans through the Marketplaces. On March 31, 2015, about 10.2 million consumers had “effectuated” coverage which means those individuals paid for Marketplace coverage and still have an active policy on that date.

Nearly 8.7 million (85 percent) consumers nationwide and 6.4 million consumers in the 34 states with Federally-facilitated Marketplaces received an average premium tax credit of $272 per month to make their premiums more affordable throughout the year.

In November 2014, the Department set a goal of 9.1 million effectuated enrollees at the end of calendar year 2015.  The March 2015 effectuated enrollment number is consistent with meeting the Department’s goal for 2015 effectuated enrollment.

The Marketplace effectuated enrollment snapshot provides point-in-time estimates of individuals who effectuated their enrollment and have an active policy on that date; it does not measure the rate at which consumers pay their first month’s premium. As is the case in other well-functioning insurance markets, CMS expects these numbers to change over time in response to changes in consumer needs and life circumstances such as employment status or marriage, which may cause consumers to newly enroll in, change, or cancel their plans.

http://www.hhs.gov/news/press/2015pres/06/20150602a.html

March 31, 2015 Effectuated Enrollment: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-06-02.html

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Comment:

By Don McCanne, MD

“Effectuated” enrollment in the ACA exchange plans is an evasive term to obscure the fact that 13 percent of those enrolled for 2015 had already dropped out by the end of the first quarter. Also, when they decided that previous anticipated levels of enrollment were unrealistic, they set a lower goal which they now report that were able to meet. Surprise!

They do concede that exchange plan enrollment is inherently unstable, as with “other well-functioning insurance markets,” they state. Not only do large numbers of eligible individuals fail to attempt to enroll, but changing circumstances and eligibility cause attrition in enrollment, especially for those who find that they are unable to pay their share of the premium.

If we really want everyone insured, this clearly is not the way to do it. “Well functioning insurance markets” that leave tens of millions uninsured is not a standard that we should accept. Enrollment should be automatic for everyone, for life. Single payer is what we need.

American Society of Clinical Oncology on astronomical drug prices

This Cancer Doctor Is Leading the Attack on Astronomical Drug Prices

By Robert Langreth and Cynthia Koons
Bloomberg Business, June 1, 2015

As the one-year cost of cancer drugs edges up to $200,000 per patient, a top doctor from Memorial Sloan Kettering Cancer Center used his speech before a massive gathering of colleagues to call for limits on the cost of cancer therapies. “These drugs cost too much,” Dr. Leonard Saltz, a gastrointestinal oncologist, said in an unusual speech at the American Society of Clinical Oncology meeting on Sunday.

“We need to first accept that there has to be some upper limit as to what we as a society are going to be willing to spend on a patient, and we have to be willing to engage in that discussion,” Saltz told Bloomberg in an interview from the meeting in Chicago. “It’s a very uncomfortable discussion. We should be willing to have it. Because we’re not having the conversation, only the people selling the drugs are weighing in on what they should cost.”

Alan Venook, an oncologist at the University of California at San Francisco and the scientific program chair for the American Society of Clinical Oncology this year, says he picked Saltz to discuss cancer costs even before he knew that the melanoma combination would be on the program. The problem of rising cancer drug costs “needed to be front and center,” Venook says, and Saltz “is somebody who will really come out there and put it on the table.”

Saltz has been among an outspoken group of physicians at Memorial Sloan Kettering that has railed against high-priced cancer drugs. In his latest broadside he lit into the cost of a melanoma drug combination from Bristol-Myers Squibb, just hours after another physician from his hospital presented data showing the combination could delay the progression of advanced melanoma by months.

The cocktail combining two existing Bristol-Myers Squibb drugs, Opdivo and Yervoy, would cost the average patient $295,000 for a little less than a year of therapy, Saltz calculated. An experimental high-dose regimen of another new drug highlighted in Saltz’s speech could cost patients as much as $1 million a year.

Anthem has implemented a program that incentivizes oncologists to use the most effective — and most cost-effective — drug by offering a bonus to doctors who put patients on the drugs the insurer deems to fit that criteria. Anthem estimates drug spending represents about a third of the cost of cancer care for the insurer, Jennifer Malin, Anthem’s medical director for oncology, said in an interview at the American Society of Clinical Oncology meeting. As for the newest cancer drugs coming to market, Malin said Anthem will look at the effectiveness and side-effect profile when making coverage decisions.

http://www.bloomberg.com/news/articles/2015-06-01/this-cancer-doctor-is-leading-the-attack-on-astronomical-drug-prices

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Dr Jennifer Malin on the Patient as the Payer in Oncology

AJMC TV, May 30, 2015

The move to have patients shoulder greater share of their cost of care is particularly challenging in cancer care, according to Jennifer Malin, MD, medical director for oncology at Anthem.

Does the patient becoming the payer have a different impact in oncology compared with other specialties?

Dr. Jennifer Malin:  “So I think having patients have to bear a greater share of their costs is a particular challenge in cancer care because the care is so expensive they reach their out-of-pocket maximum very quickly. So it’s overwhelming to have to come up with several thousand dollars, if you’re on a bronze plan on the exchange, you reach your six thousand dollar out-of-pocket maximum within a month or two. The data suggest that only twenty percent of people in the U.S. can be able to access a thousand dollars in savings in a course of thirty days. So it’s overwhelming when you have a major illness that’s going to be so costly. On the other hand, once you reach that out-of-pocket maximum though, then the cost of treatment doesn’t really impact you as a patient, until the next year comes around and you have to start all over again.”

http://www.ajmc.com/conferences/ASCO2015/Dr-Jennifer-Malin-on-the-Patient-as-the-Payer-in-Oncology?utm_source=Informz&utm_medium=AJMC&utm_campaign=ASCO_Day_1_5-30-15

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Comment:

By Don McCanne, MD

The outrageous price of drugs has been a topic of a plethora of news reports, and for very good reason. Thus it is encouraging that the nation’s cancer specialists, at their recent national meeting, brought the topic of rising cancer drug costs front and center.

We need to do something about it, but what options do we have? According to Dr. Saltz, “only the people selling the drugs are weighing in on what they should cost.” Oncologists have the option of simply not using the expensive drugs, but that may not be in the bests interests of the patients. And what other real option do they have?

The insurers can play a role, but that may simply be excluding expensive drugs from their formularies. Again, that may not be in the best interests of the patients. Anthem’s medical director of oncology, Jennifer Malin, clearly recognizes the burden of patient cost-sharing for these expensive drugs. So what do they recommend? They are offering bonuses to physicians who use drugs that the insurer has decided are the most effective and most cost-effective. Does anyone else see a potential conflict here that also may not be in the best interests of the patients?

Our current public policies not only allow, but specifically encourage, price gouging by the drug firms, through measures such as prohibiting Medicare from negotiating drug prices. Yet it is the government that has the responsibility to step in when the private sector tramples the marketplace with abusive, anti-consumer (anti-patient) practices.

We need more than just price controls. We need to protect patients from cost sharing that erects financial barriers to care. We need to make funding of health care more equitable. We need to be sure that everyone has affordable access to care. The obvious solution is a single payer national health program that is truly universal, that eliminates cost barriers, that is funded equitably through the tax system, and that ensures optimum value through monopsonistic purchasing which pays enough to support the health care system while avoiding excess payments that would not provide optimum value for our tax dollars.

The current Medicare program won’t quite do that, but if we improved it and then expanded it to cover everyone, then we would no longer be victims of gouging by the drug companies nor by any of the rest of the health care industry.

Obamacare beats GOP’s nothing, expanding Medicare would be even better

By Tom Gates, M.D.
Lancaster (Pa.) Online, June 1, 2015

I was astonished to read U.S. Rep. Joe Pitts’ criticism that Obamacare does not do enough to cover the uninsured, leaving 30 million without coverage, and that it “achieves too little at too high a cost.” Astonished, because for the last five years Pitts and his congressional colleagues have to all appearances been concerned not with covering the uninsured, but rolling back the modest progress we have made.

Since I graduated from medical school 35 years ago, the number of uninsured in this country has risen inexorably year after year, more than doubling over the course of my career. The number of uninsured peaked at around 50 million in 2010, with a modest decrease of about 2 million from 2011 to 2013 as the initial provisions of the Affordable Care Act took effect.

Then in 2014, when Medicaid expansion and the new insurance exchanges kicked in, the number of uninsured fell by 15 million — far and away the biggest decrease in uninsured since Medicare was passed. The ACA has performed better than predicted, at a lower cost than projected, and, contrary to congressional critics like Pitts that it would be a “job killer,” its full implementation in 2014 coincided with the biggest net gain in employment in 15 years.

Pitts says that “Republicans in Congress have many ideas that are more practical than the ACA,” but doesn’t divulge to us, his constituents, what those ideas might be. So here is a suggestion for Pitts and his colleagues: If you are really concerned about the 30 million Americans who remain without health insurance, and you don’t like the ACA because it “achieves too little at too high a cost,” then support the proposal of Rep. John Conyers, D-Mich., HR 676, the Expanded and Improved Medicare for All Act.

Medicare is arguably the most valuable and popular government program of the last half-century. Together with Social Security, it has lifted tens of millions of older Americans out of poverty. It has consistently out-performed the private sector, with lower inflation and much lower administrative costs than private health insurance.

Conyers’ proposal would build on Medicare’s success, extending it to cover not just the elderly and disabled, but all Americans. Like traditional Medicare, this “single payer” system would allow patients complete freedom to choose their preferred physicians and hospitals (no more “out-of-network” denials). Providers would remain private entities competing for our business, but would be paid out of a government fund rather than the myriad of competing and profit-driven insurance companies. By eliminating $400 billion a year in private insurers’ administrative costs, there would be enough savings to cover those 30 million uninsured, plus eliminate all deductibles and co-pays.

How is this possible? According to the Institute of Medicine, as much as 30 percent of our current health care expenditure is pure waste, amounting to some $700 billion per year. Much of this waste comes from the high cost of administering our needlessly complex system. Insurance companies, ultimately beholden to their stockholders, make money by providing insurance to the healthy while finding ways to avoid covering the sick. Private, for-profit insurance companies have overhead and administrative costs of 12 percent to 20 percent, compared to 1.6 percent for Medicare (according to the 2013 Medicare trustees report).

If expanded and improved Medicare for all, with no deductibles and co-pays, sounds too good to be true, remember that every other advanced country in the world has been able to provide universal coverage at a much lower per-capita cost than the U.S., with health outcomes often better than our own. Why do we settle for less?

As we approach the 50th anniversary of the passage of Medicare in July 1965, let us urge Pitts and his colleagues not to cut or further privatize Medicare, but protect it, improve it, and most importantly, expand it to cover everyone. Urge Congress to pass HR 676. That would be real health care reform.

Dr. Tom Gates is a family physician who lives in Manheim Township and has practiced in downtown Lancaster for 20 years.

http://lancasteronline.com/opinion/columnists/obamacare-beats-gop-s-nothing-expanding-medicare-would-be-even/article_c7dcf356-08a4-11e5-aa8d-37beba707cad.html

Health care cost cure: single payer

By Ewell G. Scott, M.D.
Lexington (Ky.) Herald-Leader, Letters, June 2, 2015

Dr. Kevin Kavanagh, a leading Kentucky advocate for transparency in health-care costs and outcomes, writes in a recent commentary that Medicare-for-all might be the solution to our financing woes.

I support going to a single-not-for-profit payer system and eliminating for-profit health insurance companies. These unneeded middlemen must be eliminated if health care costs are to be controlled.

Twenty percent to 30 percent of the premium dollar goes for their profits and overhead.

A single-payer system could do it for 3 percent overhead — what our single-payer system for seniors does now. The Affordable Care Act (a misnomer if there ever was one) merely forces us to buy a private, inefficient, expensive product.

I am thankful for Gov. Steve Beshear’s Medicaid expansion, but his reliance on private (for the most part) companies to “manage” (read: “deny”) health care is robbing hospitals and other providers of rightful compensation and merely increasing the private companies’ profits.

Anthem, an Indiana-based insurer, recently announced record profits, which leave our rural facilities teetering on the brink of insolvency.

One only has to look at Auditor Adam Edelen’s recent in-depth report for verification of their poor financial health. Our people deserve better. It can be done. Medicare for all. Easy.

Dr. Ewell G. Scott resides in Morehead.

Read more here: http://www.kentucky.com/2015/06/01/3879845/june-2-letters-to-the-editor.html#storylink=cpy

2015 Milliman Medical Index

2015 Milliman Medical Index

Milliman, May 2015

In 2015, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $24,671 according to the Milliman Medical Index (MMI). The amount will almost certainly surpass $25,000 in 2016.

  • This year, the growth rate has again climbed, increasing to 6.3% in 2015, largely due to increases in prescription drug costs. Even at last year’s low-water mark of 5.4%, the annual rate of increase is still well above growth in the consumer price index (CPI) for medical services.
  • Costs for our typical family have more than doubled over the past decade.
  • A family of four with the MMI plan is likely to reach the Cadillac tax much sooner if the plan is provided by a smaller employer and if trends exceed recent levels.
  • Prescription drug costs spiked significantly, growing by 13.6% from 2014 to 2015.
  • The total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 43% from 2010 to 2015, while employer costs increased by 32%.
  • Over the 10-year period ending March 2015, medical CPI has increased by approximately 3.3% per year, while the MMI has increased by 7.3% per year.

The family of four represented by the MMI has total annual healthcare expenditures of $24,671, of which $10,473 is paid by the family, $6,408 through payroll deductions, and $4,065 in out-of-pocket expenses incurred at point of care. These figures represent significant (and increasing) percentages of family income, particularly for middle-income families. The U.S. median annual household income in 2015 is approximately $53,800.

With income growth at slightly less than 2% per year and healthcare expense growth over 6%, health insurance will likely become even less affordable for many working families and for employers.

http://www.milliman.com/MMI/

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Comment:

By Don McCanne, MD

Health care for a typical family of four with an employer-sponsored PPO health plan now costs about $24,671, according to this update of the Milliman Medical Index. This has increased 6.3% since last year, well in excess of the rate of increase in the CPI. The claim that we have controlled health care costs rests on very tenuous grounds.

For perspective, in 2013 the median family household income was $65,587. Obviously, if there were no government programs to help pay for heath care, the typical American family could not afford the average costs of health care nor could they afford an insurance policy that would cover most of those costs.

We do have a multitude of programs that result in transfers of income that make it possible for a large majority to have some sort of coverage. Examples are Medicaid for low income individuals funded by progressive taxes, Medicare for the elderly and individuals with long-term disabilities partially funded by payroll taxes on workers and by general revenues, government supported safety net institutions, subsidies for lower income individuals and families enrolled in ACA exchange plans, and a multitude of other transparent and opaque forms of income transfer.

These programs and the income transfers – especially taxes – that make them possible are complex and administratively burdensome and are not always equitable. For instance, the tax expenditures that help pay for the largest sector of health care coverage – employer-sponsored health plans – are regressive since the tax benefit increases with an increase in income, leaving lower income individuals and families with little or no tax benefit. Also, the very high administrative costs of the most common method of administering health care payments – private health plans – are relatively fixed and thus the percentage of income consumed is inversely related to the amount of income, with lower income individuals paying a higher percentage of their incomes for these wasteful services.

The complexity of this highly fragmented system of paying for health care is unique in the United States and is a primary contributor to the dysfunctions of our system that result in its very high costs and in its inequities that leave tens of millions underinsured and tens of millions more with no insurance at all.

These high health care costs will result in greater financial hardship for workers and their families. Either the premiums will exceed the threshold for excise taxes (“Cadillac tax”) which would be paid either directly or indirectly by the employee, or the employer will reduce benefits to avoid the excise tax, thereby increasing out-of-pocket costs for the employee, or perhaps a combination of the two.

If we had a single payer national health program we could more effectively slow the rate of increase in health care spending without compromising health care access and quality, we could dramatically reduce the profound administrative waste in our system, and we could fund the entire system with much more equitable transfers through the tax system that would make health care affordable for everyone.

Remember, the Milliman Medical Index – now close to $25,000 – shows us, that, without transfers, middle- and low-income families would not receive adequate health care. Most Americans believe that everyone should have health care, but they are more comfortable with paying a premium than with paying a tax. But if you removed all of the opacity in financing health care today, and you showed families what the premium would have to be for a plan that actually did cover an average of $25,000  and then compare that with the amount of taxes they would be paying in a transparent progressive tax system that funded health care, how many people would really want to pay significantly more in premiums than they would in taxes simply because of their aversion to government taxation?

Only high-income individuals would pay more in a single payer national health program. You say that is not fair? Then keep paying that $6,408 in payroll deductions for your family premium, plus an average of $4,065 in out-of-pocket expenses, plus $14,198 in forgone pay increases that your employer is paying towards your family premium. Maybe a better awareness of that last relatively opaque number, combined with the rest, might give you pause. $25,000 is a lot of money.

Notes from this year’s psychiatry meeting in Canada

By David Drake, D.O.
The Iowa Psychiatrist, June 2015

From a Physicians for a National Health Program (PNHP) poster board its booth at the American Psychiatric Association Annual Meeting:

“This is what we could have in the USA if we had single payer:

Psychiatrists in British Columbia get:

  • 50 min psychotherapy $162
  • 50 min inpt psychotherapy $180
  • 25 min med visit $92
  • Geriatric consult to Medicine $300

“’I collect 99.5 percent of what I bill.’” (quote by a Canadian psychiatrist in British Columbia)

So … just back from Toronto and the APA. Great city. Great time. While there I had the opportunity to sit down over lunch with a Canadian psychiatrist who practices in Toronto.

When was the last time you heard a colleague say he/she loved their practice and the health care system?

First, we have no system. And more we have to deal with co-pays, co-insurance, and deductibles. When I review this with Canadian physicians there is disbelief.

My lunch partner, S. Udaya Shankar, M.D., who goes by “Sachi,” treated me to an Indian lunch and beer. Our Canadian colleague showed me his Health Canada insurance card that looks like a credit card and is simply run by the provider’s office for billing purposes.

As a health care provider, he gets paid two weeks after the service is provided. No money exchanges hands.

Referrals to our Canadian colleagues come through a general practitioner. Some GPs have extra training in counseling and may provide the service themselves. It can take 3-6 months to see a psychiatrist for an evaluation and medication alone versus 6-9 months to see a psychiatrist like Sachi who does the medication and psychotherapy himself. His own experience is that it is not uncommon for a psychiatrist in Toronto to provide psychotherapy. He told me the long waiting times reflect an intentional move by the government to keep costs down by limiting access through a shortage of physicians.

Sachi’s malpractice is only $2,000 – $3,000 per year. He described Canadians as “not litigious.”

Physicians can opt out of the government plan and can offer some services as self-pay, e.g., some plastic surgery, if these are not covered by Health Canada.

Of course providing health care to every Canadian comes at a cost. After reaching of an income of around $79,000 and higher Canadians pay around 40 percent in taxes compared with some 30 percent in taxes that most of we physicians will pay in the U.S. at higher income brackets.

Our Canadian colleagues and Health Canada have much to teach us in the U.S. It’s not a perfect system but it is a system. Canada needs more physicians to cut down on waiting time and of course this could mean higher taxes. But the cost of providing health care coverage for every citizen should not scare us away. It’s simply the right thing to do.

David E. Drake, D.O., DFAPA, FACN, is in private practice in Des Moines, a clinical professor at Des Moines University. He can be reached at drakeoffice@gmail.com.

Universal Medicare would cut the costs of health care

By F. Douglas Stephenson, LCSW, BCD
The Gainesville (Fla.) Sun, May 31, 2015

No greater disconnect exists between the public good and private interests than in the U.S. system of for-profit health insurance.

With the Affordable Care Act, the health insurance industry successfully lobbied the U.S. Congress to enact a requirement that most non-elderly Americans become compulsory customers and approve taxpayer financing of massive subsidies for the private insurance industry. Americans have been forced to purchase the product of a particular private industry, plus fund tax-financed subsidies for the insurance industry in the amount of a half-trillion dollars per decade.

To protect profits, the private health insurance industry and their Congressional supporters oppose universal Medicare, or single-payer/public health insurance. Private health insurance companies know that with low administrative costs and no need to produce profits, a universal Medicare insurance plan would have pricing advantages for the American public.

Research in the New England Journal of Medicine showed that administration consumes a total of 31 percent of U.S. health spending, most of it waste and much of that waste attributable to private insurance company overhead and profit. If the single-payer plan pays health care professionals, hospitals and drug companies at levels comparable to Medicare’s current substantially lower rates, premiums for all individuals and families could be so low that the public plan could consume the market and end private health insurance.

Often the public is confused when they conflate the “socialized medicine” label with single-payer, Medicare-for-all “socialized health insurance.” Whatever the pros/cons of socialized medicine, national Medicare for all is not socialized medicine.

Socialized medicine is a system in which doctors and hospitals work for and draw salaries from the government. Health-care professionals in the U.S. Veterans Administration and the armed services are paid this way. The good health systems in Great Britain and in Spain are other examples.

Most European countries, Canada, Australia and Japan have socialized health insurance, not socialized medicine. The government pays for care that is delivered in the private (mostly not-for-profit) sector. This is similar to how Medicare works in this country. Doctors are in private practice and are paid on a fee-for-service basis from government funds. The government does not own or manage medical or mental health practices or hospitals.

The U.S. subscribes to a private business model for health insurance that defines insurers as commercial entities. Private health insurers maximize profits by mainly limiting benefits or by not covering people with health problems. Like all businesses, their goal is to make money. Under this business model of health insurance, the greed of casual inhumanity is built in and the common good of the citizens and nation is ignored. Excluding many in the middle class, the poor, the aged, the disabled and the mentally ill is sound business practice policy since it maximizes profit.

Today we still have tens of millions of individuals without insurance, many more who are underinsured, many who have impaired access to their physicians because of insurer network restrictions, many who face financial hardship when health needs arise, and an outrageously expensive system due to the profound administrative waste of the insurers and the burden they place on the health care delivery system when profit is required.

Almost none of these problems would exist if the government instead of the private insurers served us as the health care financing authority. It is inhumane to allow consumer-directed, moral-hazard based private health policies to erect barriers to health care for millions of citizens with minimal or modest resources.

Universal Medicare is a solid investment in our country and all of its citizens. This investment simply promotes a social service for universal access to affordable health care for all.

Aren’t we a society that cares enough to see that everyone receive the health care they need? That’s the basic point of universal Medicare, and it’s the right thing to do now. You can help by asking your congressman to support the new “Expanded and Improved Medicare for All Act,” H.R. 676 now in Congress.

F. Douglas Stephenson is former president of the Florida Society for Clinical Social Work. He lives in Inglis.

http://www.gainesville.com/article/20150531/OPINION03/150539993

Obamacare’s big overhead costs to top $270B

By Dan Mangan
CNBC, May 27, 2015

That sure is a lot of paper clips.

Obamacare is set to add more than a quarter-of-a-trillion—that’s trillion—dollars in extra insurance administrative costs to the U.S. health-care system, according to a new report out Wednesday.

The $273.6 billion in additional insurance overhead represents an average of of $1,375 per newly insured person, per year, from 2012 through 2022.

The overhead cost equals a whopping 22.5 percent of the total estimated $2.76 trillion in all federal government spending for the Affordable Care Act programs during that time, the authors of the report in the journal Health Affairs noted.

In contrast, the federal government’s traditional Medicare program has overhead of just 2 percent, according to the report.

“Insuring 25 million additional Americans, as the [Congressional Budget Office] projects the ACA will do, is surely worthwhile,” the authors of the Health Affairs blog post write. “But the administrative cost of doing so seems awfully steep, particularly when much cheaper alternatives are available.”

The eye-popping Obamacare overhead tally cited by the Health Affairs comes from calculations based on data posted online in July 2014 by the federal Centers for Medicare and Medicaid Services’ Office of the Actuary.

Dr. Steffie Woolhandler told CNBC that she and her blog co-author Dr. David Himmelstein only became aware of the projected spending data earlier this year. Their blog said this data allowed “calculation of the incremental insurance overhead costs directly attributable the reform.”

But subsequent postings of National Health Expenditure Projections by CMS no longer include separate tables projecting costs with and without the ACA, the blog post noted.

“I am pretty sure we’re the first we’re bringing it to light,” said Woolhandler, who like Himmelstein is a City University of New York School of Public Health professor as well as a lecturer in medicine at Harvard Medical School. “This is the first time there’s been a number, and it’s a pretty shocking number.”

“We’re seeing 22 percent of federal spending on the program is actually going to be eaten up by bureaucracy,” she said.

A CMS spokesman had no comment when CNBC asked about the blog post.

The large amount of spending devoted to administrative costs both in dollar terms and as a percentage of total ACA spending is a reflection of Obamacare’s “use of private health insurance for most of the coverage expansion,” said Woolhandler. Private insurance, she said, is “associated with high overhead costs.”

“The national average is about 13 percent,” Woolhandler said.

Her blog post noted that $172.2 billion, nearly two-thirds of total new ACA overhead spending, “will go for increased private insurance overhead,” in the form of insurers’ administrative costs and profits.

The remaining administrative overhead is due mainly to government programs, primarily from the cost of expanding Medicaid benefit coverage to previously ineligible poor adults, the blog post said.

“But even the added dollars to administer Medicaid will flow mostly to private Medicaid HMOs [health maintenance organizations],” the blog said.

“Traditional Medicare is a bargain compared to the ACA strategy of filtering most of the new dollars through private insurers and private HMOs that subcontract for much of the new Medicaid coverage,” the blog said. “Indeed, dropping the overhead figure from 22.5 percent to traditional Medicare’s 2 percent would save $249.3 billion by 2022.”

Obamacare is designed to expand health coverage in three primary ways: the sale of private insurance plans on government-run marketplaces, with federal financial assistance available to most customers; allowing more poor adults to qualify for Medicaid than before; and allowing people under age 26 to stay on their parents’private insurance plans.

Woolhandler, like Himmelstein, is a proponent of a single-payer health system that would have the federal government insure all Americans. Both are co-founders of a leading advocacy group for that goal, Physicians for a National Health Program.

A single-payer system was not seriously debated in Congress before the implementation of the ACA. But advocates for such a scheme had argued that it would give “a bigger bang for your buck” than expanding coverage primarily through the use of private insurance, Woolhandler noted.

But until the CMS data came to light, she said, advocates could not point to official estimates of how much Obamacare would actually cost in terms of administrative overhead. If such an estimate had been available, it might have helped sway Congress to save the so-called public option for the ACA, she said.

The public option would have involved the government offering its own insurance coverage as one of the options for customers of government-run Obamacare exchanges, which currently offer only private insurance plans. The public option ended up being removed from the final ACA bill voted upon by Congress. 

Woolhandler said she expects the public option, like Medicare, would have had much lower overhead costs than private insurance.

She also said that the massive amount of money that will be spent on administrative overhead in Obamacare hobbles the law’s stated goal of providing expanded, affordable coverage to uninsured Americans.

“You’re getting less of it if you’re covering 22 percent in overhead,” she said.

If the program had much lower administrative overhead costs, then people insured under the ACA could have lower co-payment and deductibles as part of their insurance, she said.

Those costs, which a customer must personally pay out of their pocket before their plan covers a medical service, can lead people to avoid seeking health care because of financial concerns, Woolhandler said.

http://www.cnbc.com/id/102707721

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Obamacare to add billions in insurance overhead costs, study says

Single-payer system would save on administrative costs

By Russ Britt
Marketwatch, May 27, 2015

Obamacare will cost insurers more than a quarter of a trillion dollars in additional administrative costs by 2022, a new study released Wednesday says.

The findings published in Health Affairs magazine call for a universal single-payer system because it would reduce, rather than add, to administrative costs.

The report says that over the eight years through 2022, the Affordable Care Act will tack on $273.6 billion in overhead. Some of that will be added to Medicare and Medicaid programs, but the bulk of it — $172.2 billion — will be borne by private insurance. That total increase, in both government and private insurance programs, amounts to $1,375 for each newly insured person a year, or roughly 22.5% of total government expenditures.

“Insuring 25 million additional Americans, as the [Congressional Budget Office] projects the ACA will do, is surely worthwhile. But the administrative cost of doing so seems awfully steep, particularly when much cheaper alternatives are available,” the report says.

It goes on to say: “Traditional Medicare runs for 2% overhead, somewhat higher than insurance overhead in universal single-payer systems like Taiwan’s or Canada’s. Yet traditional Medicare is a bargain compared to the ACA strategy of filtering most of the new dollars through private insurers and private HMOs that subcontract for much of the new Medicaid coverage.”

The report is written by Drs. David Himmelstein and Steffie Woolhandler, both professors at the City University of New York School of Public Health and lecturers at Harvard Medical School. They say bloated administrative costs present in Medicare Advantage plans added 13.7% in overhead in 2011, or $1,355 per enrollee.

“But rather than learn from that mistake, both Democrats and Republicans seem intent on tossing more federal dollars to private insurers. Indeed, the House Republican’s initial budget proposal would have voucherized Medicare, eventually diverting almost the entire Medicare budget to private insurers,” the report says.

A universal single-payer system for the entire health-care system would have reduced overhead by $375 billion in 2012, according to one recent estimate.

http://www.marketwatch.com/story/obamacare-to-add-billions-in-insurance-overhead-costs-study-says-2015-05-27?link=MW_home_latest_news

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For more coverage, see the following:
“Obamacare’s $273 Billion Bonanza for Paper Pushers,” The Fiscal Times, May 28
“What’s Going on With Spending on Health Insurance Overhead?” The Wall Street Journal, Washington Wire blog, May 28.
“Overhead, administrative costs for health plans explode under the PPACA,” Becker’s Hospital Review, May 28
“Blog: Single-payer advocates tally ACA’s administrative burden,” Modern Healthcare, May 28

Is Blue Cross Blue Shield an illegal cartel?

Antitrust Lawsuits Target Blue Cross and Blue Shield

By Anna Wilde Mathews
The Wall Street Journal, May 27, 2015

Blue Cross and Blue Shield health insurers cover about a third of Americans, through a national network that dates back decades. Now, antitrust lawsuits advancing in a federal court in Alabama allege that the 37 independently owned companies are functioning as an illegal cartel.

A federal judicial panel has consolidated the claims against the insurers into two lawsuits that represent plaintiffs from around the country. One is on behalf of health-care providers and the other is for individual and small-employer customers.

The antitrust suits allege that the insurers are conspiring to divvy up markets and avoid competing against one another, driving up customers’ prices and pushing down the amounts paid to doctors and other health-care providers.

The suits, which name all of the Blue Cross and Blue Shield companies as defendants as well as the Blue Cross Blue Shield Association, have already survived the insurers’ first major legal challenge.

The Blue Cross and Blue Shield companies trace their roots to the 1930s, when hospital and doctor groups started insurance plans to help people pay for medical care. Hospital plans used the Blue Cross name, and the physician plans were sold under the Blue Shield banner. Eventually, the names were trademarked.

Today, the Blue Cross Blue Shield Association licenses the brands to the insurers that use them. Companies typically hold exclusive rights to the Blue Cross and Blue Shield names within a certain territory.

Most of the 37 Blue Cross and Blue Shield companies are not-for-profit. Many do business in a single state. The biggest Blue Cross and Blue Shield company is publicly traded Anthem Inc., which operates the plans in 14 states. In a few places, Blue-branded plans compete directly against one another, as in California, where Anthem Blue Cross battles Blue Shield of California.

“This is a model that has withstood scrutiny over our entire history,” said Scott Nehs, general counsel of the Blue association. “There’s no smoky room involved, there’s no dividing up.” Also, he said, the insurers’ rates are closely watched by state regulators.

The plaintiffs, however, allege that the Blue association is controlled by its members, who use it to engage in “illegal market division.” The customer suit says the association also limits the amount of insurance business insurers can do under non-Blue brands. The suit also alleges that the Blue agreements result in “inflated premiums.”

“You have less competition in a market, so prices are higher,” said William Isaacson, an attorney with Boies, Schiller & Flexner LLP, which represents the customer plaintiffs. “That’s one of the basics of antitrust law.”

The plaintiffs have “some surprisingly strong claims,” said Mark Hall, a professor at Wake Forest University School of Law. “It’s sort of antitrust law 101 that direct competitors can’t agree to divvy up their territory.”

http://www.wsj.com/articles/antitrust-lawsuits-target-blue-cross-and-blue-shield-1432750106

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Comment:

By Don McCanne, MD

Although this lawsuit is basically over whether or not the Blue Cross Blue Shield Association and its 37 licensees are functioning as an illegal cartel, its significance for those of us interested in health care reform is much deeper. Even the best of the private insurers can become corrupted when they operate under the rules of the free marketplace, which is quite a contrast to the rules under which a public program such as Medicare operates, or should operate.

This is not to say that government bureaucrats are never corrupt. Rather the point is that, whereas corrupt bureaucrats would be ferreted out and prosecuted for their illegal acts, the business world thrives on manipulating markets to serve their own interests. A government bureaucrat whose function it is to help citizens obtain and finance their health care is guided by an ethic that places the patient first, whereas an intermediary that creates a business entity designed to manage the money that flows within the health care system functions under an amoral business ethic.

The executives of the Blue Cross Blue Shield entities are not crooks. But look at the largest one of all – Anthem Blue Cross. Read any of its annual reports and the emphasis is primarily on enhancing investor value. Though most Blue Cross Blue Shield plans are nonprofit, they adopt the same innovations as the for-profits that are trying to gain an advantage in the competitive markets. In California, it is difficult to see any differences between the innovative leader – for-profit Anthem Blue Cross – and nonprofit Blue Shield of California that has adopted the same business innovations.

What about Medicare? The traditional Medicare program is subject to abuses by the health care providers – abuses which occur with private plans as well – but these abuses are prosecuted in the public sector whereas the private sector seems to consider them to be business as usual.

An example is the approach to current outrageous drug prices. Public programs such as Medicaid and the VA demand fair pricing in contrast to the modest marketplace discounts that protect the excessive profits of not only the pharmaceutical firms but also the intermediary pharmacy benefit managers. The latter is good business whereas the former is good governance. There is a difference.

Yet there is a serious problem that has crept into our Medicare program, and that is the expanding privatization of Medicare through the private Medicare Advantage plans. We have recited repeatedly the abuses of this industry stemming largely from their adherence to “good business practices” – behavior that covertly shortchanges the taxpayers who finance Medicare while enhancing profits for their passive investors.

It will be interesting to see if the courts determine the prohibition of geographic overlapping of the Blue Cross Blue Shield trademarks to be anticompetitive behavior. But do we really care? If we were to establish one uniform public program that covered everyone, this issue goes away.

Good health is a global goal

By Chiang Been Huang
Atlanta Journal Constitution, May 27, 2015

National health insurance has long been an issue of controversy among Americans. Even now, with Obamacare in place, Georgians and other U.S. citizens are divided as to its efficacy. Perhaps Taiwan’s experience with national health care can offer some perspective.

There was controversy when, in 2013, Georgia refused to expand the Medicaid program under the Affordable Care Act. The expansion would have provided an estimated 650,000 low-income Georgians with health coverage, with most of the funding provided by the federal government.

Taiwan’s single-payer National Health Insurance system enrolls more than 99 percent of the population, and around 93 percent of the country’s health care providers participate. Basic premiums, shared among the insured, employers and government, are calculated based on monthly salaries and a set premium scale.

Disadvantaged persons can have their premiums and co-payments subsidized or waived, if necessary. As the NHI has achieved universal coverage at an affordable cost, health care is not a financial burden for the public. These factors contribute to a system satisfaction rate of about 80 percent. In Georgia, by contrast, taxpayers bear the cost of care for the uninsured in public hospitals and emergency rooms.

Yet since its launch in 1995, the NHI has faced funding challenges. Rising user demand led to budgetary shortfalls, spurring the government to implement systemwide fiscal and structural reforms. In 2013, the government levied a 2 percent supplementary premium on capital gains and unearned income, a measure that contributed to the NHI’s newfound financial strength.

Another step in improving universal care was the adoption of the latest information technologies. The integrated circuit card, issued to all system users, functions as a link between patients and health care providers, giving quick, secure access to medical records. The smart card is also valuable in managing the spread of highly communicable diseases, such as SARS.

As time is of the essence when dealing with medical issues, in 2013, the NHI established PharmaCloud, a cloud-based database of patient pharmaceutical records accessible to health care providers. This undertaking has minimized the incidence of script duplication and over-prescription, as well as the risk of harmful drug interactions.

Buoyed by the cost and efficiency benefits of PharmaCloud, the NHI launched My Health Bank in 2014. In less than 10 minutes, users can access their full medical data from the past year. Designers hope easy access to personal records will help users develop an appreciation of healthier lifestyles.

An automated system for processing hospital claims and reimbursements contributes to the NHI’s administration costs of 1.07 percent of medical expenditures, the lowest in the world. The sizable database of claims, which boasts leading-edge, internationally certified information security, also allows the NHI to analyze trends and generate statistics.

Going forward, decreasing birth rates and rapidly aging populations are the order of the day. Taiwan is no exception to these global trends, and its shrinking youth demographic will have to shoulder a greater financial burden. When estimating future demand for health care, the factor of aging must be taken into account.

Looking at ways to improve public health and slow the rate of aging are two of the most important challenges facing the NHI in the 21st century and beyond.

Taiwan is committed to national and global good health. We are proud of our health care system, and we wish much future success to the Affordable Care Act and good health to the Georgians who subscribe to it.

Chiang Been Huang is minister of health and welfare for the Republic of China, Taiwan.

http://www.myajc.com/news/news/opinion/good-health-is-a-global-goal/nmPhN/#267d4b4c.3519149.735746

This article appeared in the print edition under the title “Insights from a single-payer system.”