Report: Health Law Ups Taxes On Insurers With Big Pay Packages

By Julie Appleby
Kaiser Health News, August 27, 2014

While average compensation for top health insurance executives hit $5.4 million each last year (up from $5.1 million in 2012), a little-noticed provision in the federal health law sharply reduced insurers’ ability to shield much of that pay from corporate taxes.

As a result, insurers owed at least $72 million more to the U.S. Treasury last year, said the Institute for Policy Studies, a liberal think tank in Washington D.C.

Researchers analyzed the compensation of 57 executives at the 10 largest publicly traded health plans, finding they earned a combined $300 million in 2013. Insurers were able to deduct 27 percent of that from their taxes as a business expense, estimates the report. Before the health law, 96 percent would have been deductible.

UnitedHealth Group, which paid CEO and President Stephen Hemsley about $28 million in pay and stock options in 2013, had the biggest tax bill among the 10 companies, the report found. Hemsley’s compensation accounted for nearly $6 million of the firm’s estimated $19 million in taxes that the report says it owed on  pay packages for five executives under the health law.

“They’re paying more in taxes just to protect these pay packages,” said Sarah Anderson, global economy project director at the institute.

Under the 2010 law, insurers can deduct only the first $500,000 of annual compensation per employee from corporate taxes, down from $1 million allowed before the law’s passage.  The law also requires insurers to include so-called “performance pay,” such as stock options, which often represent a hefty portion of an executive’s pay.

http://capsules.kaiserhealthnews.org/index.php/2014/08/report-health-law-ups-taxes-on-insurers-with-big-pay-packages/

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Covered California’s Peter Lee nets bonus, Obamacare site nets 1.2 million enrollees

By Chris Rauber
San Francisco Business Times, August 22, 2014

Covered California’s executive director, Peter Lee, has won a one-time $52,528 bonus for his role in launching the Obamacare exchange in the Golden State, which apparently netted 1.2 million enrollees all told during its first open enrollment period.

Lee’s one-time bonus is his first pay increase in three years… “excepting general state increases,” and represents a 20 percent “incentive award” based on his annual $262,644 salary.

http://www.bizjournals.com/sanfrancisco/blog/2014/08/covered-californias-peter-lee-nets-bonus.html?page=all

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Comment:

By Don McCanne, MD

There are a great many reasons that health care reform activists believe that private, investor-owned insurers should be eliminated from our health care financing, but one reason that is particularly offensive is the outrageous compensation packages for their executives. For that reason, the Affordable Care Act (ACA) included a provision prohibiting insurers from writing off for tax purposes more than $500,000 per executive, as a means to discourage the excessive executive pay.

Well, it didn’t work. Instead of taking those taxes out of the excessive salaries, executives were given pay increases averaging $300,000, raising their incomes to an average of $5.4 million. Although more corporate taxes were paid, those funds were recovered through higher premiums charged to the purchasers of health plans.

Compare the executive pay of the private insurers to that of Peter Lee, the head of California’s ACA insurance exchange – by far the largest and most successful ACA exchange in the nation. With his performance bonus, his income was only about one-twentieth of the average income of the executives of the largest publicly-traded health plans. In fact, Stephen Hemsley of UnitedHealth Group received almost 100 times as much as Lee.

These differences reflect the priorities of invested-owned corporations as opposed to quasi-public agencies. One is about making the most money possible, and the other is about serving the needs of the people.

Make no mistake. The ACA exchanges are still the wrong model because they contract with these same private insurers that perpetuate their abusive practices, such as overpaying their executives. Under a single payer system, administrators such as Peter Lee would be providing us with much greater value for their services since single payer systems eliminate much of the administrative waste while spending appropriate amounts for health care, and, yes, spending appropriate amounts for our public administrators.

Operator? Business, Insurer Take On End-of-Life Issues By Phone

By Elana Gordon, WHYY
Kaiser Health News, August 27, 2014

Kate Schleicher, 27,  is a licensed clinical social worker, who knows almost as little about you as you do about her. Except she knows your phone number, your insurance provider and that you are pretty sick.

Schleicher is one of 50 social workers at a company called Vital Decisions. After sending a letter (people rarely respond) counselors essentially cold-call to offer what they describe as “nondirected” end-of-life counseling.

The hope of this program, she says, is to build a relationship over the phone, so (the patient) might be comfortable discussing his situation and his goals. Then he’ll be empowered to communicate those things with others, including his family and his doctors. He could also choose to allow the counselor to talk to his doctors or family directly. It’s paid for by insurers and federal privacy rules permit this for business purposes.

And when these conversations do happen, there’s can be another byproduct: reduced costs. Research is finding that when patients fully understand aggressive care, many choose less of it.

But some people are wary of the company’s approach. Dr. Lauris Kaldjian, professor of bioethics at the University of Iowa, has concerns about the social worker, patient and family never actually meeting. “Because if you don’t have enough knowledge about what’s actually going on with the patient, it would actually be irresponsible to pretend to have discussion that depends upon such knowledge.” 

http://www.kaiserhealthnews.org/Stories/2014/August/27/insurers-new-business-end-of-life-conversations.aspx

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Vital Decisions

Vital Decisions is an innovative organization that assists patients and families dealing with advanced illness. We help patients clarify their values and preferences and then communicate with their family and care team to actualize those preferences. Our clients include several leading national, regional, and local health care plans which offer our service free of charge to appropriate individuals within their member populations.

We are a privately held company located in the Metropark business complex in Edison, NJ. The Company is profitable, and cash flow-positive, and is a leader in the growing field of advanced illness counseling.

The Company is a portfolio company of MTS Health Investors, the New York-based healthcare private equity firm.

http://www.vitaldecisions.net/careers.asp

HHS.gov: Health Information Privacy: “Business Associates”: http://www.hhs.gov/ocr/privacy/hipaa/understanding/coveredentities/businessassociates.html

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Comment:

By Don McCanne, MD

When you are faced with advanced illness, perhaps nearing the end of life, where would you want to turn for medical advice on how to get through this difficult time? Your personal physician and health care team? Private health insurers, always looking for more administrative innovations to sell us, are now using high pressure tactics to force “advanced illness counselors” into the management of your care.

Who are these counselors? In the example given, they are employees of Vital Decisions, a private, for-profit corporation that sells its services to private insurance companies. They use your confidential medical diagnoses that have been provided to them by the private insurers to market to you an advisory service on negotiating the health care system. After an introductory letter that is routinely ignored, the counselors cold-call to try to convince you to accept their end-of-life counseling. Of course, this is “at no cost to you” since your insurer pays for this service. The services are provided over the phone from offices in New Jersey – a definition of personal care that only the insurers can understand. The clients of Vital Decisions are the private insurers, not the patients, nor the physicians, nor any other members of the health care team.

With today’s emphasis on privacy, how could unrelated business entities gain enough information about you to make a contact? In another concession to the private insurers, HHS allows them to share this confidential information with “business associates” – basically any business entity that might interact with the insurer as the insurer carries out its business functions. It is the private insurers that sic on you these end-of-life-care marketeers just at a time that you do not want any more extrinsic intrusions since you are suffering enough already.

Although the insurers say that they are paying for these services, they are actually paid by plan enrollees in the form of higher premiums. What is worse, these services are classified as health care related services and can be included in the insurers’ medical loss ratios. They do not apply to the 15% or 20% limit on administrative costs. In fact, since they are counted as medical losses, it allows the insurers even more leeway in adding on yet more administrative services. Since the percentages are fixed, more medical losses allow more administrative services – the primary product that the private insurers are selling us.

As a portfolio company of MTS Health Investors, the New York-based healthcare private equity firm, Vital Decisions is taking very good care of Wall Street, while intruding in our most difficult time of life and then walking away with our health care dollars.

Regular readers know what a single payer national health program would do with these parasites. They’d be out the door, right now.

Loving and Hating Obamacare With One Muddled Mind

By Jonathan Bernstein
Bloomberg View, August 25, 2014

E.J. Dionne has a nice column pointing out that while “Obamacare” remains unpopular, most of the provisions are well-liked, and thus Democrats should run on the issue. As regular readers know, I certainly agree that the individual components of reform are far more popular than reform overall. Actually, support for key provisions of the law, including coverage of pre-existing conditions, health-insurance exchanges offering subsidies to middle-income policy holders and Obamacare’s Medicaid expansion, have always polled well.

Moreover caution is always in order with issue polling. When these kinds of polls show public opinion fractured, it’s tempting to believe that one side or the other represents voters’ “true” support. That’s the wrong way to interpret such polls. Yes, the ACA polls badly while most of its components poll well. But that doesn’t mean that the ACA is genuinely unpopular (as most opponents suggest) or that it’s genuinely popular (as most supporters contend). There is no underlying truth to be excavated from the results; the best we can do is say that public opinion is inconsistent.

Well, that’s the best we observers can do. Campaign operatives, in contrast, can counsel their candidates to stress whatever is popular. What those operatives shouldn’t do is to fall for their own spin, or let their candidates fall for it.

The broader point: We can measure public opinion, but sometimes – actually, quite often – public opinion is an incoherent mess. Voters have plenty of things other than politics going on in their lives; it’s not surprising that they should find the strongest selling points from both sides quite appealing and let it go at that. For those of us who pay close attention, it may seem weird that someone could hate Obamacare while loving almost every part of it. There must be one overriding opinion hidden in there — pro or con — that good research can isolate, no? Well, no. Sometimes, incoherence in the polls simply reflects incoherence among voters. We just have to live with that.

http://www.bloombergview.com/articles/2014-08-25/loving-and-hating-obamacare-with-one-muddled-mind

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Comment:

By Don McCanne, MD

The public reaction to the Affordable Care Act (ACA) is very instructive as far as understanding public attitudes toward single payer reform.

Most of the specific policies in ACA have been supported for many years by those who are relatively well informed on the issues – a minority of our population. The negative views of the public have been formed in the hollow echo chamber filled with empty political rhetoric devoid of illuminating explanations – a message chamber that reaches most of our people. The political attack has been aimed at President Obama and the Democratic Party, but not at ACA’s beneficial policies. Thus many in the media have correctly reported that “Obamacare” continues to poll poorly – as a political construct – whereas the specific improvements in health care coverage – the health policies – have support of the majority.

Although the situation with the public attitude towards single payer is similar, it has not had nearly the same intensity of exposure has had ACA. More Americans have now heard the term “single payer,” but the majority still have a poor understanding of what a tremendous improvement it would be over our highly dysfunctional, wasteful, inefficient, and inequitable multi-payer system. That is, the public at large is still very poorly informed on single payer policies.

The hollow echo chamber of empty political rhetoric targeting single payer has been around much longer but has been maintaining a lower profile. As long as single payer reform does not seem to be imminent, the effort of opponents has been directed to building anti-government memes that can be rapidly brought to the front should a single payer reform effort gain traction.

Examples of this latter phenomenon include Proposition 186 in California and Measure 23 in Oregon. Both of these single payer measures polled favorably until close to the elections. In both instances, it took only a couple of weeks of mindless trashing of the measures to result in a tidal wave of opposition. They were defeated by empty rhetoric and not by opposition to beneficial health policies.

In today’s article, Jonathan Bernstein makes the important point that “quite often public opinion is an incoherent mess.” Look how much difficulty the supporters of ACA are having in getting the message out about the genuine benefits of ACA when the listeners are exposed to a background of meaningless cacophony generated in the hollow echo chamber.

When single payer is ready for its day, the cacophony will be almost unbearable. That is why it is so important now to pull all stops in educating the public on single payer benefits. They will need a much better understanding of the concept so that they can sort out the facts from the noise.

Bernstein says, “Sometimes, incoherence in the polls simply reflects incoherence among voters. We just have to live with that.” No, we don’t have to live with that. We simply need to build our own colossal echo chamber spewing out the facts. Education. Education. Education.

By Don McCanne
August 25, 2014

This weekend numerous organizations dedicated to single payer reform assembled in Oakland, California for the 2014 National Strategy Conference. Participating organizations included Healthcare NOW!, Labor Campaign for Single-Payer Healthcare, One Payer States, National Nurses United, Physicians for a National Health Program, Progressive Democrats of America, and many others. So what was accomplished?

Above all, just gathering dedicated single payer supporters together in a single weekend meeting provided renewed energy and passion amongst the attendees, confirming that the single payer movement is not only still alive, it is thriving. We have a future.

Did we develop a national strategy that will culminate in enactment of single payer reform with the installation of a new government after the 2016 elections? Well, not exactly, but nobody expected that. What we did accomplish was the sharing of ideas on strategy, policy, politics, single payer education, state and federal legislation, and innumerable other components of a social movement that would lead to single payer.

In both the formal sessions and in informal conversations there was a very broad spectrum of ideas discussed, though not all of the ideas mesh well. And this is from a solid core of single payer activists. But all views were expressed with the intent of advancing health care justice.

Others attending will certainly have different take-home points, but mine was that we each should continue to do what we are doing while helping to open new avenues in advancing the cause. Especially helpful would be efforts to educate others, expand grassroots efforts, and work to form coalitions with other social justice organizations.

There was a consensus that we should not waste time and squander energy by becoming divided over process. We need to direct that energy to making progress towards our goal of a single payer national health program – an improved Medicare for all.

Project Evaluation Activity in Support of Partnership for Patients: Task 2 Evaluation Progress Report

Center for Medicare and Medicaid Innovation (CMMI)Submitted 7/10/2014

The Partnership for Patients (PfP) campaign was launched in April 2011 with the ambitious goals of reducing preventable hospital-acquired conditions (HACs) by 40 percent and 30-day hospital readmissions by 20 percent. To reduce harm at this level of magnitude, the campaign implemented a strategy to align all health care stakeholders, including federal and other public and private health care payors, providers, and patients, to focus on this issue concurrently. By influencing everyone to move in the same direction at the same time, the program strove to overcome the inherently limited reach of any single initiative operating in a complex environment. The three major components of the campaign, conceptualized as “engines,” are the Centers for Medicare & Medicaid Innovation (CMMI) investment engine, the federal partner alignment engine, and the outside partner engine. The program is national in scope, due to its level of implementation. For example, over 70 percent of general acute care hospitals in the United States (U.S.), representing over 80 percent of admissions, worked with PfP-funded Hospital Engagement Networks (HENs) during 2012-2013.

Findings

The PfP campaign focuses on 11 areas of patient harm. To date, the evaluation has found clear evidence for decreased rates of harms in five of the eleven areas, meaning the decreases are statistically significant, and/or meet statistical process control criteria for a special cause decrease, and/or (in cases where only aggregated data are available) are large in magnitude. These areas include obstetrical early elective deliveries (OB-EED), readmissions, adverse drug events (ADE), ventilator-associated pneumonia (VAP), and central line-associated bloodstream infection (CLABSI). In the other six areas, to date, the evaluation has found mixed evidence, meaning some datasets show decreases, while others show no change, or even worsening, including venous thromboembolism (VTE), catheter-associated urinary tract infection (CAUTI), other OB adverse events (OB-Other), pressure ulcers, surgical site infections (SSI), and falls.

The cost estimates available to date suggest cumulative savings of between $3.1 to $4 billion as a result of the decreases in harms since the baseline of 2010. Additionally, AHRQ has estimated 15,5001 deaths averted since 2010, based on mortality rate estimates associated with targeted harms. Tables 1 and 2 synthesize the evidence available to date for improvement in the rate of adverse events in each of the 11 areas, and Table 3 provides cost reduction estimates from the two available sources of estimates to date. Since hospital payment policies and other U.S. Department of Health & Human Services (HHS) programs that played an important role as part of the PfP campaign were in place and making changes over time, it is not possible at this time for the evaluation to identify the portion of these harm reductions and savings attributable to the PfP campaign’s direct work with hospitals versus alignment of forces for harm reduction versus other harm reduction work that would have continued with or without PfP.

http://innovation.cms.gov/Files/reports/PFPEvalProgRpt.pdf

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About the CMS Innovation Center

The Innovation Center was established by section 1115A of the Social Security Act (as added by section 3021 of the Affordable Care Act). Congress created the Innovation Center for the purpose of testing “innovative payment and service delivery models to reduce program expenditures …while preserving or enhancing the quality of care” for those individuals who receive Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) benefits.

http://innovation.cms.gov/about/index.html

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Did Hospital Engagement Networks Actually Improve Care?

By Peter Pronovost, M.D., Ph.D., and Ashish K. Jha, M.D., M.P.H.
The New England Journal of Medicine, August 21, 2014

Everyone with a role in health care wants to improve the quality and safety of our delivery system. Recently, the Centers for Medicare and Medicaid Services (CMS) released results of its Partnership for Patients Program (PPP) and celebrated large improvements in patient outcomes. But the PPP’s weak study design and methods, combined with a lack of transparency and rigor in evaluation, make it difficult to determine whether the program improved care. Such deficiencies result in a failure to learn from improvement efforts and stifle progress toward a safer, more effective health care system.

CMS launched the PPP in December 2011 as a collaborative comprising 26 “hospital engagement networks” (HENs) representing more than 3700 hospitals, in an effort to reduce the rates of 10 types of harms and readmissions. The HENs work to identify and disseminate effective quality-improvement and patient-safety initiatives by developing learning collaboratives for their member facilities, and they direct training programs to teach hospitals how to improve patient safety. In a February 2013 webcast, CMS announced that the rates of early elective deliveries had dropped 48% among 681 hospitals in 20 HENs and that the national rate of all-cause readmissions had decreased from 19% to 17.8%, though it is unclear which HENs were included for each measure and what time periods were the pre- and post-intervention periods.

These numbers appear impressive, but given the publicly available data and the approach CMS used, it’s nearly impossible to tell whether the PPP actually led to better care. Three problems with the agency’s evaluation and reporting of results raise concerns about the validity of its inferences: a weak design, a lack of valid metrics, and a lack of external peer review for its evaluation. Though the evaluation of many other CMS programs also lacks this basic level of rigor, given the large public investment in the PPP, estimated at $1 billion, and the strong public inferences about its impact, the lack of valid information about its effects is particularly troubling.

The design of a quality-improvement program influences our ability to make reasonable inferences about its benefits to patients. Although individual HENs may have used more rigorous methods, the overall PPP evaluation had three important weaknesses: it used a pre–post design with only single points in the pre and post periods, did not have concurrent controls, and did not specify the pre and post periods a priori. Such an approach is highly subject to bias.

There are alternatives available, including a randomized or even a cluster-randomized trial. If such trials were not feasible, CMS could have used other robust design approaches, such as an interrupted time-series study with concurrent controls. Rather than having a single pre time period and a single post time period, this design entails repeated measurements of the safety indicators before and after the intervention in both HEN and non-HEN hospitals. Such an approach would have provided more valid inferences about the effects of the program, with few additional costs.

Beyond using a poor design, CMS did not use standardized and validated performance measures across all participating hospitals — further hampering inferences about the program’s effects. To support engagement, CMS allowed each HEN to define its own performance measures, with little focus on data quality control.

CMS also required HENs and participating hospitals to submit a large number of process measures of unknown validity. It is essential to use validated measures — ideally those endorsed by the National Quality Forum — unless there is a compelling reason not to. In instances where validated measures are unavailable, instead of using poor quality metrics, CMS can have an agency such as the Agency for Healthcare Research and Quality (AHRQ) or the CDC develop measures rapidly.

Finally, CMS made — and presented publicly — inferences about its program’s benefits without having subjected its work to independent evaluation or peer review. Peer review, though imperfect, is a powerful quality control.

The PPP involved an investment of nearly $1 billion to improve care — three times the annual budget of the AHRQ, the lead federal funding agency for implementation science, which often lacks resources for promising projects. With such a sizable investment, CMS could have supported a better evaluation. It could have randomized HENs or hospitals to receive interventions earlier or later; used standardized, validated measures across the HENs; built in basic data quality controls; and independently collected qualitative information alongside quantitative data to learn not just whether the interventions worked but also how and why they did, thereby advancing our understanding of the mechanisms and context of improvement science. These changes would have allowed the country to learn so much more.

The lack of a careful evaluation is symptomatic of a broader problem: some members of the quality-improvement community eschew even modestly rigorous methods, believing that one can simply “know” if an intervention worked. Though maintaining hope and optimism among clinicians is important, when untested interventions are implemented widely, they often fail to improve care. The confidence we can have in an intervention’s efficacy is directly related to the rigor with which it is designed, implemented, and evaluated. Given the strong desire to improve care and the conflicts of interest we all face in evaluating our own work, subjecting all evaluations to external examination is critical.

The field of improvement science is still in its infancy. Given the magnitude of the quality and cost problems in health care and the amount of money invested in mitigating these problems, the public, providers, and policymakers need to have confidence that money used to improve care is being well spent. It’s true that improvement science requires mixed methods and is difficult, but all good science is difficult. Failing to attend closely to issues of design, methods, and metrics leaves us with little confidence in an intervention. For the PPP, which required thousands of hours of clinicians’ time and large sums of money, that lack of confidence is particularly unfortunate. More important, the failure to generate valid, reliable information hampers our ability to improve future interventions, because we are no closer to understanding how to improve care than we were before the PPP. And that is the biggest cost of all.

http://www.nejm.org/doi/full/10.1056/NEJMp1405800?query=TOC#t=article

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Comment:

By Don McCanne, MD

Another creation of the Affordable Care Act (ACA) is the Center for Medicare and Medicaid Innovation (CMMI) – an entity established to test innovations in payment and service delivery models designed to reduce costs and improve quality. How is it doing?

After spending almost a billion dollars on a study designed to reduce hospital-acquired conditions – a budget three times the total annual budget of AHRQ (Agency for Healthcare Research and Quality) – we have almost nothing to show for that effort and expense. As the CMMI report states, “Since hospital payment policies and other U.S. Department of Health & Human Services (HHS) programs that played an important role as part of the PfP campaign were in place and making changes over time, it is not possible at this time for the evaluation to identify the portion of these harm reductions and savings attributable to the PfP campaign’s direct work with hospitals versus alignment of forces for harm reduction versus other harm reduction work that would have continued with or without PfP.”

In their article on the flaws in this program, Peter Pronovost and Ashish Jha make an observation that typifies what has been wrong with the entire reform process centered on ACA. They state, “some members of the quality-improvement community eschew even modestly rigorous methods, believing that one can simply “know” if an intervention worked. Though maintaining hope and optimism among clinicians is important, when untested interventions are implemented widely, they often fail to improve care.”

Think of some of the prominent personalities involved in crafting and implementing ACA and how outspoken they were and continue to be on what they simply “know” will work – accountable care organizations, bundled payments, pay for performance, competing exchange plans bringing us higher quality at lower cost, placing the empowered consumer in charge through deductibles and other cost sensitivity, and improving payment policies through the Center for Medicare and Medicaid Innovation.

The tragedy is that much of this was to avoid adopting a program that every informed person knows really would work – an improved Medicare for all. It would have been far better to have directed that billion dollars towards implementing single payer.

Medicare Advantage Is More Expensive, but It May Be Worth It

By Austin Frakt
The New York Times, August 18, 2014

Medicare Advantage plans — private plans that serve as alternatives to the traditional, public program for those that qualify for it — underperform traditional Medicare in one respect: They cost 6 percent more.

But they outperform traditional Medicare in another way: They offer higher quality. That’s according to research summarized recently by the Harvard health economists Joseph Newhouse and Thomas McGuire, and it raises a difficult question: Is the extra quality worth the extra cost?

In contrast to studies in the 1990s, more recent work finds that Medicare Advantage is superior to traditional Medicare on a variety of quality measures. For example, according to a paper in Health Affairs by John Ayanian and colleagues, women enrolled in a Medicare Advantage H.M.O. are more likely to receive mammography screenings; those with diabetes are more likely to receive blood sugar testing and retinal exams; and those with diabetes or cardiovascular disease are more likely to receive cholesterol testing.

Contemplating these more recent findings on quality alongside the higher taxpayer cost of Medicare Advantage plans invites some cognitive dissonance. On the one hand, we shouldn’t pay more than we need to in order to provide the Medicare benefit; we should demand that taxpayer-financed benefits be provided as efficiently as possible. Medicare Advantage doesn’t look so good from this perspective.

On the other hand, we want Medicare beneficiaries — which we all hope to be someday, if we’re not already — to receive the highest quality of care. Here, as far as we know from research to date, Medicare Advantage shines, at least relative to traditional Medicare.

Is Medicare Advantage worth its extra cost? A decade ago when quality appeared poor, the answer was easy: No. Today one must think harder and weigh costs against program benefits, including its higher quality. The research base is still too thin to provide an objective answer. Mr. Newhouse and Mr. McGuire hedge but lean favorably toward Medicare Advantage, saying cuts in its “plan payments may be shortsighted.”

http://www.nytimes.com/2014/08/19/upshot/medicare-advantage-is-more-expensive-but-it-may-be-worth-it.html?rref=upshot&abt=0002&abg=1

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How Successful Is Medicare Advantage?

By Joseph P. Newhouse and Thomas G. McGuire
The Milbank Quarterly, June 3, 2014 (online)

Quality of Care in TM (traditional Medicare) and MA (Medicare Advantage)

The plans’ medical management methods could, in principle, improve the quality of their care relative to that of TM. Unfortunately, it is difficult to compare the quality of care in TM and MA because the data necessary to do so are sparse (John Ayanian et al). A few comparisons can be made, however, from the data reported by beneficiaries in the Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys, although the beneficiaries’ ability to assess the technical quality of their care clearly is limited.

http://onlinelibrary.wiley.com/doi/10.1111/1468-0009.12061/full

Joseph P. Newhouse is a member of Aetna’s Board of Directors:
http://www.aetna.com/about-us/corporate-governance/board-of-directors.html

Thomas McGuire coauthored the paper, “Making Medicare advantage a middle-class program”:
http://www.hcp.med.harvard.edu/publications/making-medicare-advantage-a-middle-class-program

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Medicare Beneficiaries More Likely To Receive Appropriate Ambulatory Services In HMOs Than In Traditional Medicare

By John Z. Ayanian, Bruce E. Landon, Alan M. Zaslavsky, Robert C. Saunders, L. Gregory Pawlson and Joseph P. Newhouse
Health Affairs, July 2013

Our results suggest that the positive effects of more-integrated delivery systems on the quality of ambulatory care in Medicare HMOs may outweigh the potential incentives to restrict care under capitated payments.

From the Conclusion

The Affordable Care Act authorized CMS to begin contracting with accountable care organizations that will share financial risk with CMS for the costs and quality of care received by the traditional Medicare beneficiaries they serve.23 Through the Medicare Pioneer Accountable Care Organizations and Shared Savings Programs, these organizations are eligible to receive bonus payments, initially related to reporting quality measures and subsequently to achieving higher quality of care.

These recent parallel expansions of financial incentives for achieving better quality of care in Medicare Advantage and traditional Medicare heighten the need for performance measures that can be compared between these two major components of the Medicare program. Such measures will enable policy makers, health care providers, and Medicare beneficiaries to assess whether the quality of care in Medicare Advantage health plans differs from that provided within accountable care organizations and from that provided outside these organizations in the traditional Medicare program.

http://content.healthaffairs.org/content/32/7/1228.full

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Pioneer Accountable Care Organizations disappoint

By Don McCanne
PNHP Blog, July 17, 2013

The Pioneer Accountable Care Organizations (ACOs) were already existing health care organizations that were selected as potentially exemplary models that could show the rest of the nation how well ACOs can work to achieve higher quality at lower costs. We now have a report from CMS of the initial “successes” of this model.

Considering the added administrative hassle, the savings were negligible, with only 13 of the 32 organizations saving enough to receive “shared savings” from CMS, and 2 actually lost money.

Even the supposed quality gains were unimpressive since they represented only 15 measurements which the organizations were told in advance would be used to determine whether or not they met quality standards. These teach-to-the-test gains can hardly represent the overall quality status of each organization.

https://pnhp.org/blog/2013/07/17/pioneer-accountable-care-organizations-disappoint/

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Comment:

By Don McCanne, M.D.

The private Medicare Advantage plans promised higher quality at lower cost. They clearly have failed on the promise of lower costs, but are they actually providing improved quality that is worth the extra cost?

Austin Frakt cites the Milbank Quarterly article by Joseph Newhouse and Thomas McGuire as providing the evidence for higher quality. In their article they state, “it is difficult to compare the quality of care in TM (traditional Medicare) and MA (Medicare Advantage) because the data necessary to do so are sparse.” They cite as their source a Health Affairs article by John Ayanian et al (Joseph Newhouse being a coauthor) which states, “These recent parallel expansions of financial incentives for achieving better quality of care in Medicare Advantage and traditional Medicare heighten the need for performance measures that can be compared between these two major components of the Medicare program.” Yes, performance measures that we do not have.

The ideological preferences of Newhouse and McGuire can be gleaned from the links above – a bias which shines through in their Milbank Quarterly article.

The point is that, other than for a few primitive teach-to-the-test measurements, measurement of quality is still in the dark ages. The Medicare Advantage plans would be expected to do better on these few measurements since they use them for marketing purposes (Medicare star ratings) and to gain bonuses. Even Austin Frakt writes, “The research base is still too thin to provide an objective answer.”

The case for higher quality in Medicare Advantage plans has not been made.

An excellent article that concurs with this view: “No, We Still Don’t Have Proof That Private Medicare Plans Are Better,” by Thomas Huelskoetter:

http://thinkprogress.org/health/2014/08/20/3473823/medicare-advantage-costs/

Study Shows “Copper Plan” Would Lower Premiums by 18 Percent

Bill by Sen. Mark Begich (D-AK) would expand employer health coverage
Council for Affordable Health Coverage, August 18, 2014

The Council for Affordable Health Coverage today released an estimate by Avalere Health LLC showing that legislation to permit a new, less expensive tier of insurance coverage under the Affordable Care Act would lead to an additional 350,000 Americans keeping their employer sponsored health insurance in 2016. Because fewer people would lose their coverage, taxpayers would spend $5.8 billion less on exchange subsidies, while employers would pay about $5.5 billion less in penalties under the employer mandate.

http://cahc.net/press-release-study-shows-copper-plan-would-lower-premiums-by-18-percent/

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Estimated Impact on the Federal Deficit and Insurance Premiums from Creating a New Health Plan Tier with an Actuarial Value Level of 50 Percent

Avalere, June 6, 2014

Summary

The Council for Affordable Health Coverage requested Avalere Health to estimate the impact on the federal deficit of a legislative proposal that would allow a new type of plan tier for consumers in the new health insurance marketplace as well as small employers. Plans on this new tier would have an actuarial value (AV) of 50 percent. As originally passed in the Affordable Care Cat (ACA), commercial health insurance plans in the individual and small group markets must cover at least 60 percent of the estimated health costs of enrollees starting in 2014.

We estimate that creating a new tier with an AV of 50 percent would reduce the federal deficit by $0.3 billion between FY 2015 and FY 2024. This estimate assumes that the new tier would be available to consumers starting in plan year 2016. The reduction is due to a net $5.8 billion decrease in subsidies paid by the federal government for individuals in the new health insurance marketplace, primarily due to an increase in the estimated number of employers who will offer affordable coverage to employees. Counteracting this reduction in federal spending is an estimated $5.5 billion decrease in revenues collected by the federal government, again primarily due to fewer employers paying the employer mandate penalty.

We also estimate that the premium for the new plan with a 50 percent AV would be nearly 18 percent lower than the premium for an average bronze tier plan in 2016. The lower premium would result in a slight increase in estimated enrollment in the new marketplace.

http://cahc.net/wp-content/uploads/2014/08/20140605-CAHC-New-50-AV-Tier-Score.pdf

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‘Copper plans’ could cut subsidies, lower deficit, but would consumers bite?

By Paul Demko
Modern Healthcare, August 19, 2014

Allowing cheaper health plans designed to cover just half of medical costs to be sold on the exchanges would result in 350,000 additional individuals enrolling in coverage in the next decade, according to an analysis by Avalere Health.

The lower actuarial threshold also would convince some employers to maintain coverage, according to the Avalere analysis. The Society of Actuaries has predicted that 3% of employers will stop providing coverage under the ACA. But if the copper plan option existed, Avalere estimates that 4% of that group would continue offering coverage to workers. That increase represents just 0.1% of the current employer-sponsored market.

America’s Health Insurance Plans, the primary industry group, supports allowing what are often referred to as “copper plans” to be sold on the exchanges. The organization has argued that it would entice more people—particularly younger, healthier individuals – into the marketplaces.

http://www.modernhealthcare.com/article/20140819/BLOG/308199995

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Comment:

By Don McCanne, MD

One of the major problems with the Affordable Care Act is that it has established underinsurance as a new standard. It was bad enough when the decision was made to allow insurers to offer products that covered an average of only 60 percent of estimated health care costs, but now there is a serious proposal to reduce that to 50 percent. What does this do?

From the insured’s perspective, it would fulfill the requirement to purchase insurance, while keeping premiums as low as possible, with a tradeoff that you must accept the risk of paying on average the other half of health care costs that the insurer does not pay for (plus all costs for services not covered and for the balance of charges for out-of-network services). For the majority, such costs would create a financial hardship should significant medical problems develop – the reason this is labeled underinsurance.

From the insurers’ perspective, while discounting the premium by only 18 percent below that of a 60 percent actuarial value bronze plan, they can attract healthier individuals who are more likely to be willing to gamble that they may not need much health care. This would be a great deal for the insurers.

A 50 percent actuarial value copper plan would be appealing to libertarian conservatives for a few reasons. It uses a consumer-directed approach to health care purchasing by exposing the patient to significant out-of-pocket costs, requiring the patient to became an informed price shopper (even though the out-of-pocket expenses may not be affordable). It also allows consumers to exercise choice over market originated insurance products, rather than defaulting to a more comprehensive single payer program administered by the government that would actually work. Furthermore, the Avalere study shows that adding a copper level choice would reduce the federal deficit by about 30 million dollars a year. Little does it matter that 30 million dollars would not even qualify as a footnote in our federal budget, it is fulfilling an ideological goal of reducing federal spending that is compelling to conservatives.

What about fulfilling the goal of advocates of health care justice? Obviously this proposal was not written for them. Creating a plan that exposes the sick to financial hardship is the opposite of what insurance should be doing.

Rather than talking about insurance, we should be talking about prepaid health care – removing the financial barriers to the health care that you need, when you need it. This is precisely what a single payer national health program would do.

I can’t wait to see their proposal for a health plan with a 10 percent actuarial value. You doubt it? If AHIP can get clearance for private insurers to produce such a plan and have it count as fulfilling the insurance requirement thereby avoiding the penalties for being uninsured, I guarantee you that they will find a market for it. It would be ideal for insurers since it would eliminate 90 percent of their risk while allowing them to continue to sell us a profusion of wasteful administrative services. And our bureaucrats? “If that’s a product that the people want…”