Health, Medicine and Justice: Designing a Fair and Equitable Healthcare System

By Joshua Freeman, M.D.

I hope that this book complements the others (by Donohoe, Geyman, Young, and others), offering a perspective that combines a physician’s knowledge of medical care and how it is delivered, a scholar’s understanding of the organization of the health system, social determinants of of health and health disparities, a caring person’s commitment to justice and equity, and an activists’s desire to change the world. I hope it is of some value.

Contents

Chapter 1:  Why Do We Have a Healthcare System?
Chapter 2:  The U.S. Healthcare System: Best in the World?
Chapter 3:  The Social Determinants of Health and Health Inequities
Chapter 4:  Impact of the U.S. Health System on the Health of the Public
Chapter 5:  Primary Care: The Essential Basis for an Effective Healthcare System
Chapter 6:  The Role of Medical Education in Perpetuating the Health System
Chapter 7:  Graduate Medical Education
Chapter 8:  Assessing Appropriate Healthcare: Sometimes the Best Thing to Do Is Nothing
Chapter 9:  The Role of Profit in U.S. Health Care
Chapter 10:  Solutions and Projected Outcomes

Health, Medicine and Justice, by Joshua Freeman: http://www.amazon.com/Medicine-Justice-Designing-Equitable-Healthcare/dp/0988799685

Josh Freeman’s Blog: Medicine and Social Justice: http://www.medicinesocialjustice.blogspot.com

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Comment:

By Don McCanne, MD

Many books have been written about the problems and potential solutions for our health care system. This one stands out because it represents the informed views of a noted physician educator who is also a health and social justice activist. He hopes the book is “of some value,” and it assuredly is.

Joshua Freeman is a leader in primary care, both as a practitioner and as an academic, being the Chair of the Department of Family Medicine at the University of Kansas Medical Center. He has an excellent understanding of our disorganized health care system and of the social determinants of health and health inequities. He has studied extensively medicine and social justice, and shares his views through his blog. This book brings to print the basis of his passionate activism in support of equitable health care for all.

As the nation meanders on with implementation of the well-meaning but intolerably deficient policies of the Affordable Care Act, this book can give us renewal in our efforts to educate the nation on the policies that actually would work to bring affordable and equitable health care to all.

Overkill: An avalanche of unnecessary medical care is harming patients physically and financially. What can we do about it?

By Atul Gawande
The New Yorker, May 11, 2015

Could pointless medical care really be that widespread? Six years ago, I wrote an article for this magazine, titled “The Cost Conundrum,” which explored the problem of unnecessary care in McAllen, Texas, a community with some of the highest per-capita costs for Medicare in the nation. But was McAllen an anomaly or did it represent an emerging norm? In 2010, the Institute of Medicine issued a report stating that waste accounted for thirty per cent of health-care spending, or some seven hundred and fifty billion dollars a year, which was more than our nation’s entire budget for K-12 education. The report found that higher prices, administrative expenses, and fraud accounted for almost half of this waste. Bigger than any of those, however, was the amount spent on unnecessary health-care services. Now a far more detailed study confirmed that such waste was pervasive.

I decided to do a crude check. I am a general surgeon with a specialty in tumors of the thyroid and other endocrine organs. In my clinic that afternoon, I saw eight new patients with records complete enough that I could review their past medical history in detail. One saw me about a hernia, one about a fatty lump growing in her arm, one about a hormone-secreting mass in her chest, and five about thyroid cancer. To my surprise, it appeared that seven of those eight had received unnecessary care.

Virtually every family in the country, the research indicates, has been subject to overtesting and overtreatment in one form or another. 

Another powerful force toward unnecessary care…: the phenomenon of overtesting, which is a by-product of all the new technologies we have for peering into the human body.

Overtesting has also created a new, unanticipated problem: overdiagnosis. This isn’t misdiagnosis—the erroneous diagnosis of a disease. This is the correct diagnosis of a disease that is never going to bother you in your lifetime.

My last patient in clinic that day, Mrs. E., a woman in her fifties, had been found to have a thyroid lump. A surgeon removed it, and a biopsy was done. The lump was benign. But, under the microscope, the pathologist found a pinpoint “microcarcinoma” next to it, just five millimetres in size. Anything with the term “carcinoma” in it is bound to be alarming—“carcinoma” means cancer, however “micro” it might be. So when the surgeon told Mrs. E. that a cancer had been found in her thyroid, which was not exactly wrong, she believed he’d saved her life, which was not exactly right. More than a third of the population turns out to have these tiny cancers in their thyroid, but fewer than one in a hundred thousand people die from thyroid cancer a year. Only the rare microcarcinoma develops the capacity to behave like a dangerous, invasive cancer. (Indeed, some experts argue that we should stop calling them “cancers” at all.) That’s why expert guidelines recommend no further treatment when microcarcinomas are found.

Nonetheless, it’s difficult to do nothing. The patient’s surgeon ordered a series of ultrasounds, every few months, to monitor the remainder of her thyroid. When the imaging revealed another five-millimetre nodule, he recommended removing the rest of her thyroid, out of an abundance of caution. The patient was seeing me only because the surgeon had to cancel her operation, owing to his own medical issues. She simply wanted me to fill in for the job—but it was a job, I advised her, that didn’t need doing in the first place. The surgery posed a greater risk of causing harm than any microcarcinoma we might find, I explained. There was a risk of vocal-cord paralysis and life-threatening bleeding. Removing the thyroid would require that she take a daily hormone-replacement pill for the rest of her life. We were better off just checking her nodules in a year and acting only if there was significant enlargement.

H. Gilbert Welch, a Dartmouth Medical School professor, is an expert on overdiagnosis, and in his excellent new book, “Less Medicine, More Health,” he explains the phenomenon this way: we’ve assumed, he says, that cancers are all like rabbits that you want to catch before they escape the barnyard pen. But some are more like birds—the most aggressive cancers have already taken flight before you can discover them, which is why some people still die from cancer, despite early detection. And lots are more like turtles. They aren’t going anywhere. Removing them won’t make any difference.

We’ve learned these lessons the hard way. Over the past two decades, we’ve tripled the number of thyroid cancers we detect and remove in the United States, but we haven’t reduced the death rate at all. In South Korea, widespread ultrasound screening has led to a fifteen-fold increase in detection of small thyroid cancers. Thyroid cancer is now the No. 1 cancer diagnosed and treated in that country. But, as Welch points out, the death rate hasn’t dropped one iota there, either. (Meanwhile, the number of people with permanent complications from thyroid surgery has skyrocketed.) It’s all over-diagnosis. We’re just catching turtles.

What if I recommend not operating on a tiny tumor, saying that it is just a turtle, and it turns out to be a rabbit that bounds out of control?

Mrs. E., my patient with a five-millimetre thyroid nodule that I recommended leaving alone, feared doing too little. So one morning I took her to the operating room, opened her neck, and, in the course of an hour, removed her thyroid gland from its delicate nest of arteries and veins and critical nerves. Given that the surgery posed a greater likelihood of harm than of benefit, some people would argue that I shouldn’t have done it. I took her thyroid out because the idea of tracking a cancer over time filled her with dread, as it does many people. A decade from now, that may change. The idea that we are overdiagnosing and overtreating many diseases, including cancer, will surely become less contentious. That will make it easier to calm people’s worries. But the worries cannot be dismissed. Right now, even doctors are still coming to terms with the evidence.

Two hours after the surgery, Mrs. E.’s nurse called me urgently to see her in the recovery room. Her neck was swelling rapidly; she was bleeding. We rushed her back to the operating room and reopened her neck before accumulating blood cut off her airway. A small pumping artery had opened up in a thin band of muscle I’d cauterized. I tied the vessel off, washed the blood away, and took her back to the recovery room.

I saw her in my office a few weeks later, and was relieved to see she’d suffered no permanent harm. The black and blue of her neck was fading. Her voice was normal. And she hadn’t needed the pain medication I’d prescribed. I arranged for a blood test to check the level of her thyroid hormone, which she now had to take by pill for the rest of her life. Then I showed her the pathology report. She did have a thyroid cancer, a microcarcinoma about the size of this “O,” with no signs of unusual invasion or spread. I wished we had a better word for this than “cancer”—because what she had was not a danger to her life, and would almost certainly never have bothered her if it had not been caught on a scan.

http://www.newyorker.com/magazine/2015/05/11/overkill-atul-gawande

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Comment:

By Don McCanne, MD

Yesterday’s Quote of the Day discussed the harm done by our health care reform agenda that overemphasizes attacking overutilization while neglecting more compelling goals of reform. Atul Gawande has been one of the more credible and outspoken voices in raising the alarm on overutilization, especially with his widely referenced 2009 New Yorker article on the excessive use of health care services in McAllen, Texas. But where does Dr. Gawande stand when he is faced with health care utilization questions regarding his own patients?

In his current New Yorker article, “Overkill,” he describes the overtesting and overdiagnosis of thyroid carcinoma, which, in turn, results in overtreatment – all manifestations of overutilization of health care. For his own patient with a very small thyroid nodule, he recommended leaving it alone – a recommendation that is well supported in the medical literature.

Yet, apparently because the patient wanted something done, he elected to remove her thyroid gland. She did turn out to have a microcarcinoma, but he reports that it “was not a danger to her life, and would almost certainly never have bothered her.” She manifested two common problems of overutilization: 1) a post-operative complication (hemorrhage requiring a second operation), and 2) significant costs that were unnecessary but added to the very high costs of health care paid by all of us through taxes or insurance premiums.

Thus Dr. Gawande is himself an overutilizer while preaching the evils of overutilization. Our current policy priorities are to combat overutilization. What should be done in Dr. Gawande’s case? Should he and the hospital be denied payment for the thyroidectomy? Should he be assigned low quality scores that will reduce future payments for his health care services? Should he be disciplined by the appropriate medical staff committee? Was his violation serious enough to report him to the state medical licensing board for consideration of disciplinary action?

No to all of these. He is a highly respected, ethical surgeon who certainly tries to do the right thing. He did make a clinical decision that could be challenged, especially in today’s environment where overutilization is the primary target in health care reform.

Most cases of supposed overutilization as reported in many studies, such as those from Dartmouth, represent similar judgmental decisions in which opinion as to the optimal way to proceed would vary amongst the best of authorities, and Dr. Gawande’s judgement in this case falls within the realm of acceptable medical practices (she did have cancer!).

We do not have and likely never will have processes through which we can identify, with certainty, medical care that should be aborted in advance because it clearly would constitute overutilization. Complex clinical settings defy clarity in health care utilization. (There are exceptions in which clear guidelines can be established, and those guidelines certainly should be enforced.)

As mentioned yesterday, designing health policy based on overutilization has been detrimental because it results in concepts such as patient-driven health care, especially high deductibles, that have impaired patient access to beneficial medical care and have exposed patients to financial hardship. It also has generated concepts such as accountable care organizations that, to this date, have not accomplished much more than to increase the profound administrative waste that permeates the U.S. system.

Our efforts should not be directed to trying to ferret out reputable physicians such as Dr. Gawande, accuse them of overutilization, and chase them out of the profession. That could be all of us, and who then would be left to care for patients? (This is not to say that we shouldn’t rein in blatant abusers.)

Instead we should turn our attention to policies that would would make health care truly universal, comprehensive, equitable, accessible, and priced appropriately, while increasing efficiencies through policies that would actually be effective in recovering waste – the prime example being the replacement of our expensive, fragmented system of financing care with an efficient single payer national health program.

Overutilization, Overutilized

By Deborah Levine and Jessica Mulligan
Journal of Health Politics, Policy and Law, April 2015

Abstract

Overutilization is commonly blamed for escalating costs, compromising quality, and limiting access to the US health care system. Recent estimates suggest that nearly one-third of health care spending in the United States is a result of unnecessary care. Despite the surge of exposés that purport to uncover this “new” problem, narratives about overutilization have been circulating in health policy debates since the beginnings of the health insurance industry. This article traces how the term overutilization has spread in popularity from a relatively small community of mid-twentieth-century insurance experts to economists, physicians, epidemiologists, and eventually the news media of the early twenty-first century. A quick glimpse at the history of the term reveals that there has been constant disagreement and debate over the meaning and impact of overutilization. Moreover, the term has been put to very different uses, from keeping socialism at bay to preserving the fiscal integrity of Medicare to protecting the health of patients. The overutilization narrative, seductive in its promise of cutting costs without sacrificing access to quality care, too often drowns out other difficult conversations about social welfare, health equity, prices, and universal coverage.

Conclusion: Overutilization Has Overreached

For sixty years, overutilization has been a key term in health policy debates. The term emerged in literature about the potential demise of voluntary insurance and then spread to new domains: first with inpatient hospital stays and then eventually with almost every other form of care. The audience for this narrative expanded as well: from industry insiders to economists, physicians, public health researchers, the media, and finally, patients.

Utilization review and other techniques for curbing overutilization like requiring prior authorization, capitated payments, and increasing patient cost sharing have now been employed by insurers and providers for decades. Yet the overall impact on health care costs appears negligible; costs continue to rise. Moreover, some analysts point out that the United States may be underutilizing a host of important services relative to other countries, especially primary care.

Overutilization of certain services probably is one of the many problems in our health care system. But there are grave consequences to considering overutilization the central problem. For one, the increased patient cost sharing that is supposed to rein in overutilization has contributed to a situation in which 31.7 million people with insurance are considered underinsured because they dedicate such a high proportion of their household income to medical bills. And as to the sizable uninsured population, the prospect of expanding coverage has too often been cast as a menace to the system rather than a laudable and socially responsible achievement.

There is a need for a more critical conversation about who wins and loses thanks to the present system setup. Some work is already happening in this regard, but it has yet to reach the wide popular audiences and become “common sense” in the way that overuse has. Academic researchers have called attention to how much we pay for services and pointed out that our high prices are largely to blame for runaway health care costs. Others have argued that risk-pooling techniques need to be resocialized by turning away from the highly segmented, experience-rated pools that currently dominate insurance marketplaces. But it is too difficult for these counternarratives to be heard above the seductive din about overutilization and the attendant need for individual consumer restraint that continues to dominate discussions of health care costs in the United States.

Overutilization is a management neologism that has become an economistic health policy fairy tale where costs can be cut, services denied, and hospital days reduced with no harm — financial, physical, or otherwise — to patients, providers, or payers. Curbing overutilization alone will not redeem our health care system. And real people stand to lose when reducing utilization and increasing efficiency is seen as the primary goal of health policies.

http://jhppl.dukejournals.org/content/40/2/421.full

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Comment:

By Don McCanne, MD

Yesterday’s Quote of the Day message on the prevalence of underinsurance and its consequences, largely caused by the increased use of high deductibles designed to decrease utilization of health care, is a prime example of the pervasiveness of the misguided concept that “overutilization” needs to be the primary target of reform.

Hopefully this article, “Overutilization, Overutilized,” will become a landmark paper in the chronology of health care reform. The concept of overutilization of health care has driven much of the political and policy decisions in our reform efforts. This is tragic because it “too often drowns out other difficult conversations about social welfare, health equity, prices, and universal coverage,” according to the authors.

The policies designed to correct alleged overutilization have not only been relatively ineffective in reducing spending to a meaningful degree, often they have also been harmful, impairing access to health care and frequently creating financial hardships for those with health care needs.

This is particularly shameful when there remains disagreement on which particular applications of health care are clearly excessive, and whether they are truly as pervasive as is often claimed. Further, if this waste is as common as is often claimed, most of it is not recoverable because of the difficulty of establishing precise guidelines that can be applied reliably to complex clinical settings.

We have a much greater problem with health care underutilization and its adverse consequences which are compounded by policies designed to curtail utilization.

The Abstract and Conclusion above describe the general theme of the article, but the details are important if we are to turn the reform process into one that aims to provide health care for everyone, and away from our current processes that are blunt instruments designed to reduce utilization while ignoring harm to the patient.

For those who do not have access to the current issue of the Journal of Health Politics, Policy and Law, this article can be downloaded at the link above for a fee of $15. It is unfortunate that this article is behind a paywall, because it does need to be distributed widely.

We need to do all that we can to change the dialogue on reform. Instead of imperiling our health care system with misguided policies to haphazardly reduce utilization, we need to advance policies that would make health care truly universal, comprehensive, equitable, accessible, and priced appropriately, while increasing efficiencies through policies that would actually be effective in recovering waste – the prime example being the replacement of our expensive, fragmented system of financing care with an efficient single payer national health program.

Let’s change the narrative.

The Problem of Underinsurance and How Rising Deductibles Will Make It Worse

By Sara R. Collins, Petra W. Rasmussen, Sophie Beutel, Michelle M. Doty
The Commonwealth Fund, May 20, 2015

Abstract

New estimates from the Commonwealth Fund Biennial Health Insurance Survey, 2014, indicate that 23 percent of 19-to-64-year-old adults who were insured all year — or 31 million people — had such high out-of-pocket costs or deductibles relative to their incomes that they were underinsured. These estimates are statistically unchanged from 2010 and 2012, but nearly double those found in 2003 when the measure was first introduced in the survey. The share of continuously insured adults with high deductibles has tripled, rising from 3 percent in 2003 to 11 percent in 2014. Half (51%) of underinsured adults reported problems with medical bills or debt and more than two of five (44%) reported not getting needed care because of cost. Among adults who were paying off medical bills, half of underinsured adults and 41 percent of privately insured adults with high deductibles had debt loads of $4,000 or more.

Exhibit 2. Underinsured rates among adults ages 19-64 who were insured all year, by source of coverage at the time of the 2014 survey
20% – Employer-provided coverage
37% – Individual coverage
22% – Medicaid
42% – Medicare (under age 65, disabled)

Conclusion

The rate of growth in medical costs and insurance premiums has slowed in recent years. However, millions of consumers continue to be saddled with high out-of-pocket health care costs. While the number of underinsured people in the United States held constant in 2014, the steady growth in the proliferation and size of deductibles threatens to increase underinsurance in the years ahead.

The Affordable Care Act’s coverage expansions and protections have greatly improved the quality of insurance coverage available to people who lack job-based health benefits. In addition, cost-sharing subsidies significantly reduce deductibles for people with low incomes who buy plans in the marketplaces. But those subsidies phase out quickly, leaving families with deductibles that may be high relative to their incomes. In addition, the law has only limited ability to improve the cost protection of employer plans, which is the source of most American’s health insurance.

Reforms and new approaches are needed to improve the cost protection of health plans. These could include innovations in benefit design that slow growth in deductibles and emphasize incentives that encourage people to utilize, rather than delay, timely health care. In addition, policymakers should identify and address holes in health plans — like out-of-network physicians in in-network hospitals — which are surprising many families with unexpected costs. Finally, systemwide efforts to lower the underlying rate of medical cost growth and share those savings with consumers will be critical.

http://www.commonwealthfund.org/publications/issue-briefs/2015/may/problem-of-underinsurance

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Comment:

By Don McCanne, MD

This update of The Commonwealth Fund’s continuing study of the rate of underinsurance confirms that the problem persists, and the trend of increasing deductibles may well make it worse.

It is alarming that, since 2003, the category with the most comprehensive coverage – employer-provided coverage – has doubled the rate of underinsurance increasing from 10% to 20%. The greatest contributing factor has been the increase in the use of high deductibles.

Because this study was of individuals insured for a full year, and it was completed before the end of 2014 – the first year of the ACA exchanges – the underinsurance rate of enrollees in the exchanges could not be separated out, and they were included in the category of individual coverage. In total, 37% of those with individual coverage were underinsured. This is no surprise since high deductibles have been used in the individual market in an attempt to prevent premiums from becoming even less affordable, but this has been at the cost of more than doubling the rate of underinsurance.

Although we do not have the data yet, we can make some assumptions, based on plan design, for the trends in underinsurance for those enrolled in the exchanges. Because of the subsidies for out-of-pocket expenses for those with the lowest incomes that qualify for the exchange plans, it is possible that the rate of underinsurance is slightly reduced for this group. However, for those with moderate incomes, especially for those who do not qualify for cost-sharing subsidies, the relatively low actuarial values (percent of costs that the plans cover) that most exchange enrollees select will likely perpetuate and perhaps even expand the prevalence of underinsurance. So middle-income Americans do not escape the risk of being underinsured.

Although Medicaid provides more comprehensive benefits with fewer out-of-pocket expenses, the very low incomes of Medicaid beneficiaries leave many of them underinsured since the modest cost sharing that they do have consumes an excessive percentage of their incomes.

Patients under 65 who receive Medicare do so because of major long-term disabilities. Since most of them have very limited incomes and other expenses, and Medicare’s comprehensiveness is limited, this group has the highest rates of underinsurance – 42%. Obviously, when we speak of Medicare for all, it is imperative that we clarify that we mean an improved Medicare that has much more comprehensive coverage.

Can this trend be reversed? Can we put in place policies that will result in reducing or even eliminating the deductibles?

If the plans were to maintain the same actuarial values to keep the premiums the same while reducing deductibles, the out-of-pocket costs would shift to those with greater health care needs who already have enough financial problems. That would defeat one of the most important functions of health insurance – preventing financial hardship in the face of medical need.

Another possibility would be to reduce the deductibles and shift the actuarial values upward, but that would result in sharp increases in insurance premiums. That would not be acceptable to employers, nor would it be acceptable to politicians who would have to find revenue sources to increase the premium subsidies for the exchange plans. It is easy to cut spending for employers and for the budget hawks in Congress, but it is almost impossible to reverse the cuts and restore or even expand that spending.

Suppose we leave the higher deductibles in place, but provide enough subsidies to eliminate underinsurance for everyone. The administrative complexity alone would make this a very foolish idea. Also when you look at who is underinsured, you would have to increase the amounts of the subsidies and expand eligibility to cover many more of the moderate income individuals in the exchanges, and you would also have to provide subsidies for those enrolled in employer-provided plans to cover the increase in deductibles and other cost sharing in those plans. This would further compound the wasteful administrative excesses that already characterize our health care financing system.

Do we really need to say it again? A well designed single payer system would fix this.

Health Plans Poised to Ask for Higher Premiums for 2016, Blue Cross Executive Warns

By Sara Hansard
Bloomberg BNA, Health Care Blog, May 14, 2015

Look for health plans to request higher rates for 2016, a Blue Cross and Blue Shield Association (BCBSA) executive warned May 13.

Costs for health plans in 2014 were higher than expected due to fewer young enrollees signing up for Affordable Care Act plans during the first year that the major provisions of the law took effect requiring people to have coverage or pay a fine, Kim Holland, BCBSA director for state affairs, said at a conference on ACA health insurance exchanges.

That left health plans sold on the ACA exchanges with a high portion of enrollees who had previously unmet medical needs, such as costly transplants, Holland said. “Those plan costs were higher and those are expected to play out in higher rates,” she said. “We’re starting to see that now as plan filings are becoming public, and that is likely to continue.”

Moreover, she added, it’s unlikely that plans will receive much of the money they had expected from the ACA’s risk corridors program, which was intended to help cover insurers’ losses in the event they ended up with a sicker-than-average population. Too many plans had to cover high medical bills, leaving too few plans to pay into the fund for the program, she said.

Holland also warned that there are “unrealistic pressures” on insurers to keep premiums down. “You cannot have every doctor in your network, very low copays, broad benefits and lower costs. It just can’t work that way,” she said.

http://www.bna.com/health-plans-poised-b17179926525/

Health Insurance Exchange Summit, May 11-13 2015, Washington, DC, Health Plan Strategic Response Roundtable, with Kim Holland (Video, fee $59.95): http://www.healthinsuranceexchangesummitportal.com/view_media.php?mid=122

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Affordable Care Act is wrong framework to fix adverse selection

Quote of the Day, August 25, 2010

Any health care financing system that divides health care funds into separate risk pools inevitably experiences adverse selection. In fact, private insurers do all that they can to see that their own risk pools contain low-cost healthier individuals while shifting higher-cost individuals into other public or private risk pools.

Adverse selection was not simply an inconvenient policy problem that the legislators had to fiddle with merely because they rejected the concept of a single universal risk pool that eliminates the problem of adverse selection. Far worse, it was a deliberate policy decision supported by the leadership of the private insurance industry.

https://www.pnhp.org/news/2010/august/affordable-care-act-is-wrong-framework-to-fix-adverse-selection

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Analysis Finds No Nationwide Increase in Health Insurance Marketplace Premiums

The Commonwealth Fund Blog, December 22, 2014

A new analysis of the Affordable Care Act’s health insurance marketplace costs finds that, nationwide, marketplace premiums did not increase at all from 2014 to 2015, though there were substantial average premium increases in some states and declines in others.

While average premiums nationwide did not change from 2014 to 2015, there were wide differences across states.

The risk stabilization programs, which include risk adjustment, risk corridors, and reinsurance, diminish insurers’ risk of financial losses and allow them to price their plans more aggressively.

An outstanding question, however, is the long-term sustainability of current trends in premiums.

http://www.commonwealthfund.org/publications/blog/2014/dec/zero-inflation-nationwide-for-marketplace-premiums

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Comment:

By Don Mccanne, MD

Supporters of the Affordable Care Act (ACA) tout the fact that premiums for plans offered in the ACA exchanges did not increase in the second year, showing that ACA has been effective in slowing the cost of health care. Yet Kim Holland, Blue Cross Blue Shield Association director for state affairs, warns that private insurers will be requesting higher rates for 2016. How can we explain this?

We warned long ago that ACA would not eliminate adverse selection – the concentration into insurance risk pools of patients with more expensive medical problems.

According to Kim Holland, “costs for health plans in 2014 were higher than expected due to fewer young enrollees signing up for Affordable Care Act plans,” and “that left health plans sold on the ACA exchanges with a high portion of enrollees who had previously unmet medical needs, such as costly transplants.” Although private insurers have been masters at gaming adverse selection, they have now become victims of it.

A couple things happened to cause this. First, although HHS claims that healthier, younger individuals did sign up in large numbers, the insurers’ numbers show that this enrollment was inadequate to dilute the ACA risk pools. Another factor is that there was a surge in enrollees who had major unmet medical needs requiring expensive procedures such as joint replacements or organ transplants. In addition, the risk corridor program set up to compensate for these greater losses appears to be inadequate since the the profits in the risk pools insuring healthier individuals were not large enough to offset the greater losses in the more expensive pools.

If this is the case, then why didn’t the premiums increase for 2015? That’s simple. The insurers had only a few months of experience with their first year enrollees when they had to submit their premium requests for 2015. So they had to rely primarily on claims experiences prior to 2014. Now they are in the process of submitting their requests for 2016, and they now have a full year’s experience demonstrating that costs actually were higher, at least partly due to adverse selection.

The Commonwealth Fund’s report showing that premium increases for 2015 were insignificant should not have been interpreted as showing that costs did not go up. Costs did go up, but the premiums were based primarily on the same data used to establish premiums for 2014.

Five years into ACA we now have the right to be in a “we told you so” mode. We were not prescient. Health policy science is advanced enough to predict quite accurately the consequences of these policy decisions. Just think of the multitude of other adverse consequences we have predicted, and we have not been wrong yet.

We have also predicted the benefits of a properly designed single payer national health program. We cannot see the results of such a program here in the United States since we don’t have a single payer system (and Medicare is not single payer because it is only one player in an administratively inefficient, fragmented system). But other nations do have single payer systems, and their beneficial results were fully predictable.

Ignore health policy science at your own risk, or maybe we should say at the nation’s risk.

Money matters: Billing and payment for a New Health Economy

PricewaterhouseCoopers (PwC), Health Research Institute, May 2015

At a glance

The nation’s healthcare billing and payment system is an artifact of an earlier age. Much can be done to improve the system in the short term, but in the long term, structural change is needed to compete in the New Health Economy

Key findings include:

• Patients and affluent consumers are most dissatisfied with the healthcare billing and payment system.
• Cost-conscious millennials are more likely than the general population to judge healthcare organizations based on their billing practices.
• Consumers and new entrants are beginning to circumvent the claims-based healthcare payment system, especially in primary care services and chronic disease management.
• Four in five adults with commercial insurance paid less than $1,000 in out-of-pocket expenses in a year, according to an HRI analysis.

What this means for your business

• Accelerate the move to digital.
• Embrace simplicity.
• Sidestep claims. The growth of high-deductible plans means more consumers will pay for care out-of-pocket. New entrants are reconsidering whether these cash payments require claims. Consumers are interested, even though receiving credit toward deductibles is more important than ever.
• Multiply payment options. Offering choices for payment, making payment easy and helping consumers plan for costs can reduce bad debt and days in accounts receivable.

Strategy: Sidestep claims

An HRI analysis of commercial claims for over 34 million Americans in 2012 found that 80% paid less than $1,000 in out-of-pocket expenses. That year, the average annual deductible for an individual was about $1,000. Nearly half of consumers with commercial insurance incurred less than $1,000 in medical bills in a year. These consumers are ripe for poaching by new entrants from the emerging claims-free healthcare economy.

Marcee Chmait, CEO of SpendWell, a new entrant direct-pay marketplace for healthcare services, said she foresees a future when “cash is king” in healthcare. Higher deductibles, real-time adjudication of claims and transparency will phase-out negotiated rates and discounts.

These changes create a true retail shopping experience between buyer and supplier (consumer and provider). When third party pricing arrangements are eliminated, pricing falls as suppliers costs fall as suppliers set their prices directly to their end buyers.

Even as companies targeting consumers with low annual medical expenses forge a direct-pay economy, the majority of medical costs are borne by a small percentage of people with serious and chronic illnesses. These costs require different fixes.

Conclusion: A roadmap

Many improvements can be made in the near-term, from offering consumers cost and payment information before they arrive for service to aggregating their medical bills on a simple online site. In the longer term, the system will need to be re-engineered to accommodate the millions of consumers paying cash for care. Here’s a roadmap for near-term pain relievers and longer-term fixes:

CURRENT STATE CLAIMS MODEL

• Eligibility verification
• Care delivery/charge capture
• Claim submission
• Claim adjudication
• Payment/advice delivery

NEW HEALTH ECONOMY

Before arrival:

  (Near term):

• Online shopping for care
• Cost estimates/discussion during scheduling
• Payment information capture upon scheduling
• Discussion of costs and choices
• Loyalty programs enrollment
• Transparency
• Enrollment in online bill management and payment tool

  (Long term):

• Loyalty programs
• Subscriptions for primary care and chronic disease management
• Flat-fee services
• Layaway

  Claims-free model

• Flat-fee model
• Subscriptions
• Other models
• Direct-pay
• Discounts
• Loyalty program rewards

Upon arrival:

• Coverage verification through combined ID and payment card
• Estimates allow out-of-pocket collection
• Discussion of costs and choices

  (Long term):

• Menu of prices
• Out-of-pocket payment due at service

Claim acquisition and submission

• Practice management software integrated with payments/claims network
• Capture and processing of claims data

Eligibility verification

• Eligibility for specific benefits verified prior to claims adjudication

Claim pricing

• Determination of provider contract rules and fee schedules
• Capitation determination

Claim adjudication

  (Near term):

• Estimates
• Accumulators updated automatically

  (Long term):

• Real-time adjudication of claims

Consumer liability calculation

• Deductible and patient responsibility healthcare calculated at provider

Sophisticated patient payment options

• Consumer payment through multiple accounts
• Flexible payment plan options
• Financial counseling

  (Long term):

• Amortization for some treatments
• Loans
• e-wallet

Clearance

• Verification of funds availability
• Payment authorization

Payment information transmission

• Fund requests and payment transmission

Settlement

• Payment of consumer liability (next day)
• Payment of plan deductible (1–5 days)
• Real time payment

Reporting/statements

• Integrated statements for all health related transactions
• Immediate updating of online accounts, web portal or app

http://pwchealth.com/cgi-local/hregister.cgi/reg/pwc-hri-healthcare-billing-and-payments.pdf

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Comment:

By Don McCanne, MD

To better understand what this PwC report is all about, think about the recent pervasive shift to high-deductible health plans and what that means for the way the majority of us pay our health care bills, or at least the way that many in the policy community believe that we should be paying our bills.

Remember that about 20 percent of us have high health care expenses and use about 80 percent of our health care dollars. That means that the other 80 percent of us who are relatively healthy use only 20 percent of health care funds.

This report confirms what we already knew: 80 percent of individuals with commercial insurance paid less than $1000 out-of-pocket for medical expenses. That means that the insurance companies essentially are paying benefits for primarily the 20 percent with more serious medical problems. The rest of us are essentially on a cash basis, though with constraints such as provider networks and contracted provider rates.

If you read the full report, you will see that the medical-industrial complex is introducing innumerable innovations to try to capture this cash-and-carry business. Providers are attempting to circumvent contracted rates so they can collect their full charges. Third party money managers are coming out of the woodwork to sell us their various services – whether they be traditional insurers with new innovations in their products, or other third parties with innovative methods of managing cash accounts. Whatever innovations they introduce, they are clearly designed to capture as much of these cash payments as possible.

Now maybe you can make some sense out of this PwC report. Much of their report describes how unsatisfactory the current billing and payment system is, and especially the dissatisfaction of health care “consumers,” especially those who are wealthy or who are sick. So what do they suggest? We should abandon the current claims model and switch to a simplified, digital model that sidesteps the current claims process. They call their model the “New Health Economy.”

But look at the specifics of their recommendations. First they list the five simple steps of the current claims system, but label this “an artifact of an earlier age.” Then they show us their “New Health Economy” model. Are they kidding? Look at it! This is their “simplified” method of processing the cash segment of health care financing. What is ironic is that they convert the process of paying cash into expensive, complex digital processes, in the name of simplification!

As long as we continue on the path of consumer-directed health care, with its high deductibles and other cost sharing, we can anticipate many more such innovations that serve the industry well, but at a cost of shifting more of the burden onto patients. Look again at the “New Health Economy” and try to explain to yourself exactly how their scheme makes patients better health care shoppers.

Now think about how this would be handled through a single payer national health program, with first dollar coverage (a highly successful model used by several other nations). We would not need to shop for health care bargains since not only would our own public stewards have already obtained the best prices, but also we would not have to be involved in payment decisions at all since our stewards would make the payments directly through our single, equitably-funded, universal risk pool.

Really. Look again at the “New Health Economy.” Do we really want to proceed with this marketplace model of reform that works well for the industry? Or do we want a public program that works well for all of us?