PNHP

Facts disappoint both sides of the reform debate

Facts disappoint both sides of the reform debate

Survey of Non-Group Health Insurance Enrollees

By Liz Hamel, Mira Rao, Larry Levitt, Gary Claxton, Cynthia Cox, Karen Pollitz and Mollyann Brodie
Kaiser Family Foundation, June 19, 2014

The Kaiser Family Foundation Survey of Non-Group Health Insurance Enrollees is the first in a series of surveys taking a closer look at the entire non-group market. This first survey was conducted from early April to early May 2014, after the close of the first ACA open enrollment period. It reports the views and experience of all non-group enrollees, including those with coverage obtained both inside and outside the Exchanges, and those who were uninsured prior to the ACA as well as those who had a previous source of coverage (non-group or otherwise).

  • The ACA motivated many non-group enrollees to get coverage, and nearly six in ten Exchange enrollees were previously uninsured
  • Enrollees in ACA-compliant plans report somewhat worse health than those in pre-ACA plans
  • Majority gives positive ratings to their new insurance plans and says they are a good value, though four in ten find it difficult to afford their monthly premium
  • Among plan switchers, as many report paying less as paying more for their new plans, but survey shows some signs of a trend toward narrower provider networks
  • Plan switchers are less likely to be satisfied with plan costs, maybe because half of them report having their previous plan cancelled
  • Half got help with enrollment; most say the shopping process was easy, but a third say it was difficult to set up a Marketplace account
  • In the non-group market, those most likely to feel they have benefited from the ACA are people getting subsidies, those most likely to feel negatively impacted are those who had their plans cancelled

As a whole, non-group enrollees are more likely than the public overall to have a favorable view of the ACA – they are roughly evenly split between positive and negative views (47 percent favorable, 43 percent unfavorable), while views among 18-64 year-olds nationally are more negative than positive (38 percent favorable, 46 percent unfavorable1. Like it is nationally, opinion of the ACA among non-group enrollees is strongly divided along party lines. About equal shares of non-group enrollees feel their families have benefited (34 percent) and been negatively affected (29 percent) by the ACA. However, these averages mask substantial differences within the non-group market. Those who are most likely to feel they have benefited from the law are people receiving government financial assistance for Exchange plan premiums (60 percent benefited), while those most likely to feel they have been negatively affected by the law are people who experienced a plan cancellation in the past year (57 percent negatively affected).

http://kff.org/private-insurance/report/survey-of-non-group-health-insur…

Does the Affordable Care Act Cover the Uninsured?

By Drew Altman
The Wall Street Journal, June 19, 2014

Among the facts: 57% of those who bought coverage from the new marketplaces during the first ACA open-enrollment period were previously uninsured, and seven out of 10 of them had been uninsured for two years or more.

The number of uninsured people covered through the exchanges is far higher than critics of the ACA have suggested. On the other hand, the number is probably a little lower than supporters of the health-care law would like. As is typical in the highly polarized debate about the ACA, the facts are not what either side would want them to be.

http://blogs.wsj.com/washwire/2014/06/19/does-the-affordable-care-act-co…

It is ironic that we have a health reform program that satisfies neither proponents nor opponents. On the question of how effective has the Affordable Care Act been in insuring those who were previously uninsured, supporters are concerned that it was not enough and critics are disappointed to see that more people became insured under the program than had been insured under prior plans (since that refutes their argument that the exchanges are ineffective because it only shifted previously insured individuals into the exchanges).

WSJ’s Drew Altman makes the point that “in the highly polarized debate about the ACA, the facts are not what either side would want them to be.”

So is this a balanced debate between two sides with legitimate views? Opponents would like to see much of the Act repealed, but the few recommendations they do have, they can’t even agree on. Besides, most of their recommendations would not repair the flaws in our health care system, and some would make them worse.

Supporters at least want to see improvements in coverage, access and affordability, not to mention quality, but they realize that ACA is falling far short of goals (though they may not want to admit it) and has actually had a negative impact in lowering the actuarial value of plans – making health care less affordable for many by increasing out-of-pocket costs – while also reducing access by paring down the numbers of physicians and hospitals in the insurers’ provider networks.

We can reject the views of those polarized against reform as not being responsive to our overpriced and underperforming health care system.

Although we support the views of those who would repair the flaws, we can reject the policies they have selected as being cruelly inadequate. Those who really do want reform should join us in supporting single payer – a model that would be truly universal, accessible, affordable, and, properly designed, would improve the quality of health care in the United States. In fact, many of the current opponents might consider supporting a program that actually would work, especially if they see that it would not increase overall spending. We should tell them about it.

Why Medicare Advantage costs taxpayers billions more than it should

Regulators have kept problems secret, and there’s no fix in sight

By Fred Schulte, David Donald, Erin Durkin
The Center for Public Integrity, June 4, 2014

PNHP note: This is the first of a series of articles on the Medicare Advantage program published by The Center for Public Integrity this month. Links to other articles in the series are provided at the end.

In South Florida, one of the nation’s top privately-run Medicare insurance plans faces a federal investigation into allegations that it overbilled the government by exaggerating how sick some of its patients were.

In the Las Vegas area, private health care plans for seniors ran up more than $100 million in added Medicare charges after asserting patients they signed up also were much sicker than normal — a claim many experts have challenged.

In Rochester, New York, a Medicare plan was paid $41 million to treat people with serious diseases — even though the plan couldn’t prove the patients in fact had those diseases.

These health plans and hundreds of others are part of Medicare Advantage, a program created by Congress in 2003 to help stabilize health care spending on the elderly. But the plans have sharply driven up costs in many parts of the United States — larding on tens of billions of dollars in overcharges and other suspect billings based in part on inflated assessments of how sick patients are, an investigation by the Center for Public Integrity has found.

Dominated by private insurers, Medicare Advantage now covers nearly 16 million Americans at a cost expected to top $150 billion this year. Many seniors choose the managed-care Medicare Advantage option instead of the traditional government-run Medicare program because it fills gaps in coverage, can cost less in out-of-pocket expenses and offers extra benefits, such as dental and eye care.

But billions of tax dollars are misspent every year through billing errors linked to a payment tool called a “risk score,” which is supposed to pay Medicare Advantage plans higher rates for sicker patients and less for those in good health.

Government officials have struggled for years to halt health plans from running up patient risk scores and, in many cases, wresting higher Medicare payments than they deserve, records show.

The Center’s findings are based on an analysis of Medicare Advantage enrollment data from 2007 through 2011, as well as thousands of pages of government audits, research papers and other documents.

Federal officials who run the Medicare program repeatedly refused to be interviewed or answer written questions.

Among the findings:

  • Risk score errors triggered nearly $70 billion in “improper” payments to Medicare Advantage plans from 2008 through 2013 — mostly overbillings, according to government estimates. Federal officials refused to identify health plans suspected of overcharging Medicare, citing agency policy that keeps many business records confidential. The Center is suing to make these records public.
  • Risk scores of Medicare Advantage patients rose sharply in plans in at least 1,000 counties nationwide between 2007 and 2011, boosting taxpayer costs by more than $36 billion over estimated costs for caring for patients in standard Medicare.
  • In more than 200 of these counties, the cost of some Medicare Advantage plans was at least 25 percent higher than the cost of providing standard Medicare coverage. The wide swing in costs was most evident in five states: South Dakota, New Mexico, Colorado, Texas and Arkansas.

Some academic experts and researchers believe the increase in risk scores is more likely to reflect aggressive billing than a rapid deterioration in patients’ health.

Industry executives don’t dispute that billing errors occur. But they deny that they charge too much, arguing they only want to be paid fairly for their services.

Clare Krusing, director of communications for America’s Health Insurance Plans, said that the industry trade group is “working together” with federal health officials to improve reporting of risk score data.

In the South Florida case, government lawyers have been investigating Humana, Inc. for several years as they try to determine if the company and some of its medical clinics manipulated the complex Medicare Advantage billing system. Humana says it is cooperating with the investigation.

In a separate civil case, a former Bush administration health official alleges in a whistleblower lawsuit unsealed earlier this year that two Puerto Rico health plans cheated Medicare out of as much as $1 billion by inflating patient risk scores. The plans, which at the time were owned by a subsidiary of New-Jersey based Aveta, Inc., denied the allegations.

Government audits and research reports have warned for years that Medicare’s risk scoring formula breeds overbilling, but efforts to hold the industry accountable have met with little success. Federal officials have yet to recoup hundreds of millions of dollars in suspected overpayments to health plans that date back as far as 2007.

Excellus Health Plan, the Rochester, New York, health plan that federal auditors said may have overbilled by as much as $41 million in 2007 for treating patients with serious diseases, paid but a fraction of that amount back years later. A company spokesman said the plan settled the matter by paying the government $157,777 in December 2013.

Some critics expect little to change unless federal officials disclose Medicare Advantage plans’ full service and billing histories — as they have recently done with Medicare fees paid to more than 880,000 individual doctors and others.

“The [Medicare Advantage] plans don’t want the data out,” said Dr. Brian Biles, a professor in the Department of Health Policy at George Washington University, whose Freedom of Information Act lawsuits shook loose limited enrollment records used in this project. (Biles assisted Center for Public Integrity reporters with the analysis.)

Dr. David Wennberg, a Dartmouth Institute researcher who has studied the payment issue, said that with billions of tax dollars at stake federal officials need to hit the “reset button” on risk scoring.

Wennberg said Medicare Advantage “is a very large program with lots of money flowing through it. There are always vested interests in protecting the status quo.”

Health care politics

The Affordable Care Act, or Obamacare, orders deep rate cuts in Medicare Advantage, partly to cover millions of uninsured people. That’s consistent with an early Obama administration promise to reduce payments to the health insurers.

But support for Medicare Advantage in Congress has snowballed as it has attracted more and more seniors who are happy with their care and the price they pay for it. Earlier this year, the insurance industry mounted a fierce media campaign to block the rate cuts, enlisting support from more than 200 members of Congress and forcing the administration to partially back off.

The debate over how best to pay Medicare Advantage health plans — and how to curb overcharging — has been contentious for years.

As far back as the 1980s, Congress hoped that carving a bigger role for managed care plans like Medicare Advantage would help curtail overall Medicare spending and ward off waste and fraud that can pop up when doctors and hospitals are paid for each and every service they perform.

To that end, Medicare decided to pay health plans a set monthly rate for patients regardless of how much care they needed. But some health plans stacked the deck by signing up people who were healthier than average, a marketing ploy known in insurance circles as “cherry picking.”

That led to a “lot of game playing” and “dumping patients who were ill,” said Laurence Bishoff, a Boston health care consultant.

Congress thought it saw a remedy in the Medicare Modernization Act of 2003. The law created Medicare Advantage and phased in “risk adjusted” payments starting a year later.

Thomas Scully, who helped get the program running under President George W. Bush, said rates were generous in hopes of enticing insurers to expand their Medicare business and not shy away from people in poor health.

“We very intentionally tried to overpay them a little bit,” said Scully, now a Washington lobbyist with numerous health care industry clients.

Health status was added to other factors such as sex, race and age in setting rates. Plans that took on the greatest risk by accepting the sickest patients were paid the most.

But turning to risk scores as the way to adjust payments ushered in a new form of Medicare billing abuse: Some health plans misstated how sick their patients were or failed to document they had treated illnesses Medicare paid them to treat, the Center’s investigation found.

By 2009, government officials were estimating that just over 15 percent of total Medicare Advantage payments were inaccurate, about $12 billion that year.

By the end of 2013, officials reported the error rate had dropped to nine percent, which still added up to $11.8 billion for the year. Nearly 80 percent of that — $9.3 billion — was overcharges, records show.

The Medicare Advantage billing error rate has averaged 12 percent over the past six years, at times outpacing that of standard government-run Medicare, which federal officials assert is highly vulnerable to billing fraud and abuse.

Medicare Advantage has faced much less scrutiny. The federal Centers for Medicare and Medicaid Services didn’t try to recoup overpayments until 2012, eight years after phasing in risk scoring. And when it did, it won back only $3.4 million — a tiny fraction of the estimated losses, according to government records. Though the agency is beefing up collection efforts starting this year, most health plans won’t see federal auditors for years.

Malcolm Sparrow, a professor at Harvard University’s John F. Kennedy School of Government and health fraud expert, said officials are “asking for trouble” by allowing health plans to generate the data on which risk scores and their revenues are based.

“You want to make sure this is audited rigorously,” Sparrow said. “It’s much more expensive [to taxpayers] not to.”

Federal probe

Four of the ten major Medicare Advantage plans with the highest average risk scores nationally are in Puerto Rico.

Medicare Advantage plans, which control 70 percent of the island market, argue their patients are poorer and sicker than average. They also say that cuts required under the Affordable Care Act have hit them hard, prompting cuts in benefits and higher premiums for patients who can ill afford to pay more.

Risk scores at the two Aveta-related health plans, MMM Healthcare and Preferred Medical Choice, shot up by an average of 11 percent from 2007 through 2011. Nationwide, the growth rate averaged three percent over the same period. The company had no comment.

San Juan-based Medical Card System, known by the initials MCS, reported a 5 percent rise in the scores over the same time — nearly twice the national average.

The billing practices also have attracted legal scrutiny. The whistleblower lawsuit filed against Aveta by former executive Jose R. “Josh” Valdez alleges that the company overbilled Medicare by as much as $1 billion by inflating risk scores.

Valdez alleges that Aveta paid its stockholders a $100 million dividend during the time that it was overcharging Medicare.

MCS has faced its troubles over risk scores, too.

Federal agents searched the MCS tower headquarters on Oct. 13, 2011. MCS said in a 2012 financial statement that it had received four grand jury subpoenas as part of a U.S. Attorney’s Office investigation of its “risk adjustment data reporting.”

MCS said the company conducted an “internal review” that found no wrongdoing, but prompted it to return an “immaterial” amount of money to Medicare.

In an April interview inside the MCS tower in San Juan’s Hato Rey financial district, Chief Executive Officer Jim O’Drobinak said the federal probe has ended and MCS has been cleared.

“Nothing came of it,” he said, blaming the investigation on a “disgruntled former employee.” Law enforcement sources confirmed that the investigation has been closed.

Dr. Inés Hernández, MCS chief medical officer, said that the health plan has moved aggressively to treat patients in their homes and identify diseases so they can be treated in the early stages.

“We’re not just getting information for risk scores,” she said.

But CMS officials have been concerned that home visits and other health assessments by health plans can contribute to higher risk scores — and drive up costs without benefiting patients by providing them with more care.

Over/under

Congressional auditors and some lawmakers have asserted for years that overpayments to Medicare Advantage plans may be much higher than federal officials have acknowledged.

Among the most steadfast critics is Rep. Henry Waxman, D-Calif. In a March 6, 2009, letter to an agency official, he argued that Medicare Advantage plans were a bad deal for taxpayers because each illness they discover, “whether it is treated or not can increase the payment the plan receives from CMS.”

Waxman, who then chaired the House Energy and Commerce Committee, criticized health plans for figuring out how to “manipulate” risk scores to wrest money they didn’t deserve from Medicare.

CMS officials have conceded that risk scores rose much faster for Medicare Advantage patients than for those in standard Medicare and that the rise couldn’t be explained away by saying that the health plan members were sicker.

Starting in 2010, they stepped in and cut payments to Medicare Advantage plans to offset rising risk scores.

Yet in January 2012 the Government Accountability Office, the watchdog arm of Congress, said that the cuts weren’t deep enough and opined that Medicare could have saved as much as $3 billion a year by reducing risk scores further.

A year later, the GAO went a step further. A January 2013 report said CMS made “excess payments” to Medicare Advantage plans of between $3.2 billion and $5.1 billion between 2010 and the end of 2012 because risk scores were higher than justified.

The Center for Public Integrity data analysis found that Medicare Advantage can cost the government as much as 25 percent more than standard Medicare in some areas.

The data analysis also found that seemingly tiny variations in risk scores can boost taxpayer costs enormously — especially in health plans that are growing fast.

Industry officials have a different take.

They argue that their members tend to have lower incomes than the elderly population as a whole and have a higher risk of needing expensive medical care.

“They have looked healthier because of incompleteness of this data,” said John Gorman, a former federal health official who is now a prominent Medicare Advantage consultant.

Others blame the sheer complexity of risk-scoring for causing confusion about billing.

Jim Redmond, a vice president at Excellus Health Plan, which federal auditors in 2012 said couldn’t always document illnesses it was paid to treat, denied any impropriety. He said the billing system was “established with good intentions” but “didn’t fully recognize” how difficult it would be for health plans to oversee.

“We have more than 18,000 physicians submitting claims to us every day. We audit a portion of the claims and medical records for accuracy, completeness and consistency,” Redmond wrote in an email.

“However, the medical delivery system would grind to a halt if we made every provider submit all of the documentation for each and every claim they file on behalf of members.”

Court records show that the billing system’s complexity has stymied government investigators reviewing a whistleblower lawsuit filed in 2010 by physician Olivia Graves against Humana.

Graves, who has practiced in South Florida for more than three decades, alleges that a Humana-owned clinic diagnosed patients with conditions such as diabetes with complications, which boosted Medicare payments. She alleged that those diagnoses were “not supported by the medical records.” Her suit alleges that Humana knew about the alleged overcharging and did nothing to stop it..

The U.S. Attorney’s Office declined to join the South Florida case even though a federal judge granted it 11 requests for more time to investigate. They argued lawyers and other government personnel “had little or no experience in the applicable regulations and operations of the [Medicare Advantage] program” However, government lawyers said their investigation is continuing.

The case was unsealed in May and is pending.

Humana also faces other investigations into allegations that it overbilled the government, including a criminal investigation by the Department of Justice in Washington and a criminal case involving the U.S. Attorney’s branch office in West Palm Beach, Florida, according to court records. Humana spokesman Tom Noland said “Humana to our knowledge is not the subject of a criminal investigation.”

‘Black box’

Many researchers are hoping that CMS will make public detailed Medicare Advantage billing and service data that might allow them to assess how well risk scoring is doing in predicting costs. They also want to study industry claims that they are treating lower income and sicker patients.

But that’s not yet possible because CMS has shown little interest in making Medicare Advantage data public.

That’s quite a different stance than the agency took in April, when it released detailed information about how much individual doctors were paid by Medicare. The decision drew criticism from the American Medical Association, which has argued that it violated the privacy of doctors. CMS principal deputy administrator Jonathan Blum, who left the agency in May, previously announced on his blog that data “can shine a light on how care is delivered in the Medicare program.”

Sparrow, the fraud expert from Harvard, said that it should be easier for the government to cough up information about huge health care corporations than about individual physicians. The doctor billing data covers about $77 billion in taxpayer spending for 2012, about half the Medicare Advantage price tag.

“Anything that starts with a ‘b’ seems like a lot of money to me,” Sparrow said, adding that Medicare Advantage financial data and other records “ought to be a matter of ordinary public record.”

Medicare Advantage is a “black box,” added James Cosgrove, who heads health investigations for the GAO, the audit arm of Congress.

“We know what services they say they will provide … but we never know exactly what services are being provided,” Cosgrove said.

http://www.publicintegrity.org/2014/06/04/14840/why-medicare-advantage-costs-taxpayers-billions-more-it-should

Other articles in the series:

“Health insurers have their way with regulators,” by Fred Schulte
“Home is where the money is for Medicare Advantage plans,” by Fred Schulte
“Medicare Advantage lobbying machine steamrolls Congress,” by Fred Schulte

Aetna’s Bertolini assures us that premium increases will be less than 20%

Premiums Rise at Big Insurers, Fall at Small Rivals Under Health Law

By Louise Radnofsky
The Wall Street Journal, June 18, 2014

Hundreds of thousands of consumers nationwide who bought insurance plans under the Affordable Care Act will face a choice this fall: swallow higher premiums to stay in their plan, or save money by switching.

That is the picture emerging from proposed 2015 insurance rates in the 10 states that have completed their filings, which stretch from Rhode Island to Washington state. In all but one of them, the largest health insurer in the state is proposing to increase premiums between 8.5% and 22.8% for next year, according to a Wall Street Journal review of the filings. That percentage represents the average rate increases for all individual health plans offered by that carrier.

At the same time, insurers with the smallest enrollments are proposing to cut rates so they can lure customers as the cheapest plans in their markets.

The rate proposals reflect a combination of big carriers stepping back from initial aggressive pricing, rising medical costs and increased competition during the second year of President Barack Obama’s health law.

With dominant market share now, analysts say, carriers feel they have room to raise rates. Nine of the carriers are proposing average increases for 2015 that range from 8.5% by Anthem Inc. in Virginia to 22.8% from CareFirst for its BlueChoice plans in Maryland. Most of these large carriers’ proposed rate increases hover around 10%.

Erin Shields Britt, a spokeswoman for the Department of Health and Human Services, said the new exchange system “drives competition among plans, requiring issuers to be more conscious of how they stack up to their competitors, which is a trend we are already seeing accelerate in a number of states, with new plans entering the market.”

http://online.wsj.com/articles/premiums-rise-at-big-insurers-fall-at-small-rivals-under-health-law-1403135040

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Aetna CEO says 2015 Obamacare rates increase less than 20 pct

By Caroline Humer
Reuters, June 11, 2014

Health insurer Aetna Inc is submitting premium rates to regulators for 2015 Obamacare insurance plans that generally increase less than 20 percent from 2014, Chief Executive Officer Mark Bertolini said on Wednesday.

Bertolini said that customers are disenrolling from exchange plans on a regular basis but that the company still expects to have 450,000 exchange customers at year end. He said that while he did not know the reason for these customers leaving, he suspected that it was due to the out-of-pocket costs before members reach their deductibles.

http://www.reuters.com/article/2014/06/11/aetna-insurance-idUSL2N0OS1CF20140611

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Comment:

By Don McCanne, MD

Because of uncertainty of claims experience and instability in enrollment, it is difficult for insurers to set their 2015 premiums to match market conditions. But what is projected so far is that the dominant insurers intend to raise their premiums about 10 percent, ranging between 8.5 and 22.8 percent, according to this WSJ report. Aetna’s Mark Bertolini assures us that increases will be “less than 20 percent.” What a relief.

Our Department of Health and Human Services is thoroughly sold on the concept of using markets to price insurance products. As their spokeswoman, Erin Britt, says, the new exchange system “drives competition among plans, requiring issuers to be more conscious of how they stack up to their competitors.” Let’s look a little bit closer at what this market competition means.

The insurance underwriting cycle is a phenomenon in which insurers enter the market with low premiums in an effort to gain a larger share of the market. Once they have that share, they increase their premiums to the maximum tolerated. In the meantime, competitors with a smaller share of the market lower their premiums in an attempt to increase their share. Because their premiums are too low and their volume is too small, they fail and shut down. That leaves the dominant insurers in a position to charge even higher premiums than their costs would warrant. Patient/consumers end up being the losers.

That is precisely what is happening now, according to this report. The dominant insurers are raising their rates significantly (but “under 20%”) and “insurers with the smallest enrollments are proposing to cut rates so they can lure customers as the cheapest plans in their markets.”

These sick market dynamics are part of the reason that we have the least effective health care financing system in the world. Nobel laureate Kenneth Arrow explained to us decades ago why markets do not work in health care. While it is true that they do not work for the patient/consumer, market distortions work very well in moving our financial resources into the hands of those controlling the markets.

Mark Bertolini, who is keeping Aetna’s premium increases below 20 percent, for 2013 received an executive compensation of $30,712,565. Works pretty well for him.

Each day I write these comments, this is the point at which my blood pressure goes up and I have to restrain myself from using inappropriate language. I don’t know how much longer I can do that. Using the democratic process, we need to take over our government by electing representatives who serve us, the people, rather than serving those whose “r” is greater than our “g.”

At the following link, Paul Krugman explains Thomas Piketty’s r>g. It is very wonkish, but skim on through to the end and you’ll get the point.

http://krugman.blogs.nytimes.com/2014/03/14/notes-on-piketty-wonkish/

Expand Medicare to serve all veterans

By Philip Caper, M.D.
Bangor (Maine) Daily News, June 19, 2014

The problem of long wait times for veterans seeking care at some (but not all) Veterans Health Administration facilities has been front-page news for the past several weeks, and seems to be resulting in an unusually prompt response from a normally gridlocked Congress. The wait times and the consequent attempts to cover them up seem to have multiple causes.

First, there is the uneven but growing demand for some types of services, resulting from casualties suffered in the recent Iraq and Afghanistan wars. Then there are predictable increases in the demand for services due to the aging of veterans from past military conflicts. This increased demand has been somewhat but not completely offset by the attrition in the number of veterans from past wars due to normal mortality as they age.

Then there are problems on the supply side, as the number of primary care physicians and other caregivers relative to the number of specialists dwindles in the American health care system as a whole. (I have written about this more extensively in past columns.) Like everywhere else, the VA cannot keep up with the demand for primary care physicians.

Finally, it’s clear that some VA administrators, wanting to make their performance numbers look good so they would qualify for bonuses, manipulated the waitlists and their reports about wait times. Of course politics has magnified and distorted the nature of these problems.

As a way of relieving the pressure on some VA centers and providing quicker access to services by veterans facing a long wait to get into the system, both the Senate and the House are processing legislation that would require the VA to pay for services in the private sector. (Maine 2nd District Rep. Mike Michaud, a candidate for governor this year, is the ranking minority member of the House Committee on Veterans Affairs.)

In a June 2 letter to the New York Times, Dr. Philip Lee, a two-time assistant secretary for health in the federal government, and I wrote the following:

“If Congress is serious about helping to alleviate the problem and showing our gratitude to and support for our veterans, it will expand Medicare coverage to include all veterans. If that is done, our veterans could choose between the VA system and any doctor who participates in Medicare.

“Medicare is approaching its 50th anniversary as one of the most durable, successful and popular federal programs ever created. Do our veterans deserve any less?”

We believe that simply making every veteran eligible for Medicare following discharge from military service would provide a technically (if not politically) quick and simple means of providing them with access to additional resources as a supplement to those available to them through the VA. And it would eliminate the need to create a new bureaucracy within the VA to deal with private-sector doctors and other providers.

There are precedents for expanding Medicare to those under the normal eligibility age of 65. Starting in 1972, Congress opened up Medicare to all patients who otherwise met Medicare’s eligibility requirements and have chronic renal failure and other disabilities regardless of age. In 2009, Sen. Max Baucus, almost on a whim, inserted a provision into the Affordable Care Act thatmade Medicare available to all of his constituents with pulmonary disease living in Libby, Montana.

Making every veteran eligible for Medicare would provide them with more choice of doctors, hospitals and other providers, and relieve some of the short- and long-term pressure on the VA for some routine, non-combat-related services, allowing the VA to focus more on those services only it can provide.

Even more important, it would move us toward the ultimate goal of universal coverage for all residents of the U.S. I agree with those who point out that you can’t leap across a giant chasm, such as the one between where our dysfunctional health care system is now and where it should be, in two jumps. But we can take steps to narrow that chasm so as to make the inevitable final jump easier. This could be an important one of those steps.

In doing this, we should avoid sanctioning the “voucherization” of veterans’ health benefits. We should rebuff those who would cast vets into the dog-eat-dog private insurance market, dismantling or radically weakening the VA in the process.

The vast majority of Americans fervently believe that our veterans deserve this kind of help. It’s a shame more of us don’t feel that way about everybody.

Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be reached at pcpcaper21@gmail.com.

http://bangordailynews.com/2014/06/19/health/expand-medicare-to-serve-all-veterans/print/

Aetna’s Bertolini assures us that premium increases will be less than 20%

Premiums Rise at Big Insurers, Fall at Small Rivals Under Health Law

By Louise Radnofsky
The Wall Street Journal, June 18, 2014

Hundreds of thousands of consumers nationwide who bought insurance plans under the Affordable Care Act will face a choice this fall: swallow higher premiums to stay in their plan, or save money by switching.

That is the picture emerging from proposed 2015 insurance rates in the 10 states that have completed their filings, which stretch from Rhode Island to Washington state. In all but one of them, the largest health insurer in the state is proposing to increase premiums between 8.5% and 22.8% for next year, according to a Wall Street Journal review of the filings. That percentage represents the average rate increases for all individual health plans offered by that carrier.

At the same time, insurers with the smallest enrollments are proposing to cut rates so they can lure customers as the cheapest plans in their markets.

The rate proposals reflect a combination of big carriers stepping back from initial aggressive pricing, rising medical costs and increased competition during the second year of President Barack Obama’s health law.

With dominant market share now, analysts say, carriers feel they have room to raise rates. Nine of the carriers are proposing average increases for 2015 that range from 8.5% by Anthem Inc. in Virginia to 22.8% from CareFirst for its BlueChoice plans in Maryland. Most of these large carriers’ proposed rate increases hover around 10%.

Erin Shields Britt, a spokeswoman for the Department of Health and Human Services, said the new exchange system “drives competition among plans, requiring issuers to be more conscious of how they stack up to their competitors, which is a trend we are already seeing accelerate in a number of states, with new plans entering the market.”

http://online.wsj.com/articles/premiums-rise-at-big-insurers-fall-at-sma…

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Aetna CEO says 2015 Obamacare rates increase less than 20 pct

By Caroline Humer
Reuters, June 11, 2014

Health insurer Aetna Inc is submitting premium rates to regulators for 2015 Obamacare insurance plans that generally increase less than 20 percent from 2014, Chief Executive Officer Mark Bertolini said on Wednesday.

Bertolini said that customers are disenrolling from exchange plans on a regular basis but that the company still expects to have 450,000 exchange customers at year end. He said that while he did not know the reason for these customers leaving, he suspected that it was due to the out-of-pocket costs before members reach their deductibles.

http://www.reuters.com/article/2014/06/11/aetna-insurance-idUSL2N0OS1CF2…

Because of uncertainty of claims experience and instability in enrollment, it is difficult for insurers to set their 2015 premiums to match market conditions. But what is projected so far is that the dominant insurers intend to raise their premiums about 10 percent, ranging between 8.5 and 22.8 percent, according to this WSJ report. Aetna’s Mark Bertolini assures us that increases will be “less than 20 percent.” What a relief.

Our Department of Health and Human Services is thoroughly sold on the concept of using markets to price insurance products. As their spokeswoman, Erin Britt, says, the new exchange system “drives competition among plans, requiring issuers to be more conscious of how they stack up to their competitors.” Let’s look a little bit closer at what this market competition means.

The insurance underwriting cycle is a phenomenon in which insurers enter the market with low premiums in an effort to gain a larger share of the market. Once they have that share, they increase their premiums to the maximum tolerated. In the meantime, competitors with a smaller share of the market lower their premiums in an attempt to increase their share. Because their premiums are too low and their volume is too small, they fail and shut down. That leaves the dominant insurers in a position to charge even higher premiums than their costs would warrant. Patient/consumers end up being the losers.

That is precisely what is happening now, according to this report. The dominant insurers are raising their rates significantly (but “under 20%”) and “insurers with the smallest enrollments are proposing to cut rates so they can lure customers as the cheapest plans in their markets.”

These sick market dynamics are part of the reason that we have the least effective health care financing system in the world. Nobel laureate Kenneth Arrow explained to us decades ago why markets do not work in health care. While it is true that they do not work for the patient/consumer, market distortions work very well in moving our financial resources into the hands of those controlling the markets.

Mark Bertolini, who is keeping Aetna’s premium increases below 20 percent, for 2013 received an executive compensation of $30,712,565. Works pretty well for him.

Each day I write these comments, this is the point at which my blood pressure goes up and I have to restrain myself from using inappropriate language. I don’t know how much longer I can do that. Using the democratic process, we need to take over our government by electing representatives who serve us, the people, rather than serving those whose “r” is greater than our “g.”

At the following link, Paul Krugman explains Thomas Piketty’s r>g. It is very wonkish, but skim on through to the end and you’ll get the point.

http://krugman.blogs.nytimes.com/2014/03/14/notes-on-piketty-wonkish/

Should private insurers be allowed to dictate rates to non-contracted hospitals?

Calif. Court Rules Insurer Payments Should Reflect Value of Care

California Healthline, June 16, 2014

An appellate court ruling in Fresno last week could change the way California hospitals and health insurers enter into contracts and negotiate payments for services, the Sacramento Business Journal reports.

Background on Case

The lawsuit between Children’s Hospital Central California and Anthem Blue Cross involved a dispute over insurer reimbursement rates for hospital services.

In 2007, the hospital and insurer for about 10 months were unable to reach an agreement to renew a contract setting reimbursement rates for hospital services. During that time, federal and state laws required that Children’s Hospital continue to provide emergency care to Anthem beneficiaries.

The hospital later billed Anthem for post-stabilization emergency medical care that took place during the 10-month contract gap. In the billing, the hospital listed the full rate of services included in its “chargemaster” document instead of the usual discounted rate based on volume. In total, the hospital charged Anthem $10.8 million for care provided to 896 beneficiaries.

Anthem paid the hospital about $4.2 million based on Medi-Cal rates. Medi-Cal is California’s Medicaid program.

Children’s Hospital filed a lawsuit over the difference, and a jury awarded the hospital $6.6 million. Anthem then filed an appeal.

Details of Ruling

On Tuesday, the Fifth District Court of Appeals ruled that insurers are not required to reimburse hospitals for amounts that are more than the actual value of services.

The ruling states that the hospital “rarely received payment based on [their] published chargemaster rates.” Therefore, the trial court should have allowed Anthem to present evidence of the value of post-stabilization emergency services.

The appeals court ordered a new trial between Children’s Hospital and Anthem to establish damages that reflect the “reasonable value” of services, as opposed to the higher costs included on hospital’s bill to the insurer.

Implications

Dan Baxter, an attorney representing Anthem, said, “This ruling will absolutely change the landscape between hospitals and health plans in litigation going forward.” He added, “It’s a clear-cut California case we didn’t have until now — finally — that says in no uncertain terms you can consider a full body of information, not just billed charges.”

However, Glenn Solomon, an attorney representing Children’s Hospital, said the ruling could result in insurers paying contract rates for health care services without actually establishing a contract.

Solomon said, “If a health plan can get the benefit of contracted rates without actually engaging in a contract themselves, there’s less incentive for them to enter into a contract in the first place,” adding, “That’s not just bad for hospitals. It’s bad for all of California” (Robertson, Sacramento Business Journal, 6/13).

http://www.californiahealthline.org/articles/2014/6/16/calif-court-rules-insurer-payments-should-reflect-value-of-care

****

Comment:

By Don McCanne, MD

This case centers around a dispute on whether an insurer pays list rates (chargemaster prices) or prior contracted rates during an interval in which the insurer/hospital contract had lapsed. But there is a much more important issue here: Should an insurer be able to dictate unilaterally to a hospital what rates will be paid during a time in which there is no contract with the hospital?

Regarding the particulars of this case, hospital chargemaster rates are usually pie-in-the-sky rates that nobody pays. The insurer, Anthem Blue Cross Medi-Cal managed care, should be able to negotiate rates down. On the other hand, Medicaid (Medi-Cal) rates in California are the lowest in the nation and result in a loss for most providers, so Children’s Hospital Central California should be able to negotiate up the rates for “post-stabilization emergency services” when it has no contract with the insurer. It appears that the intent of this court ruling was to prevent unreasonably high, binding rates from being set arbitrarily by hospital chargemaster programmers.

Although other laws apply, this ruling seems to be a step towards allowing private insurers to dictate rates when no contract is in force. It would be untenable if private insurers could enforce provisions of a contract that they would like to have without the necessity of formally contracting with the providers.

This is no way to set payment rates. Control should be completely removed from the private insurers. They should be dismissed from the health care financing scene anyway since they waste resources diverted to their intrusive exploitations. We also know that providers should not be allowed to set their own rates. During the implementation of Medicare, physicians were paid based on usual, customary and reasonable fees, and they responded by driving fees up exponentially. No, we know from the experience of other countries that the government must be involved if we expect fair pricing.

Under a single payer system, whether setting global budgets for hospitals or negotiating rates for professional services or health care products, including pharmaceuticals, our own government stewards would be there to represent us as patients and as taxpayers. As public servants, they would not be representing their own personal interests. Payments would be based on legitimate costs and fair margins.

Besides receiving greater value, we would be eliminating the costs and grief of the profound administrative waste of our current fragmented, dysfunctional financing system. That alone should be enough for us to decide to make the change.

Data Update – Summer 2014 newsletter

UNINSURED AND UNDERINSURED

• 8 million people signed up for private coverage on the federal and state health exchanges during the open enrollment period that ended March 31, according to a report from the Department of Health and Human Services.  Since as many as two-thirds of enrollees had prior coverage and 10-20 percent of people have yet to pay their first month’s premiums, the net impact of the ACA’s exchanges and federal subsidies on the number of uninsured won’t be clear for several months (Pear, “Late rush to sign up for insurance,” New York Times, 5/2/14).

In its most recent release, the Congressional Budget Office estimates that 42 million Americans will remain uninsured in 2014, 36 million in 2015, and 29-31 million between 2016 and 2024 (CBO, “Insurance Coverage Provisions of the Affordable Care Act,” April 2014).

• In 2012, 31.7 million Americans under age 65 were underinsured, according to a conservative estimate by The Commonwealth Fund. The estimate was based on new Census Bureau data on household medical expenditures. An additional 47.3 million Americans were uninsured that year. “Underinsurance” in the study was defined as spending 10 percent or more of household income for medical care or, if under 200 percent of the federal poverty line, greater than 5 percent of household income. The estimate didn’t include people who were insured but went without care due to cost, or were healthy but whose insurance was so skimpy they would have faced high costs in the event of illness (Schoen et al., “America’s Underinsured,” Commonwealth Fund, 3/14).

• Nearly 3.7 million low-income, uninsured people with a serious mental illness, serious psychological distress, or a substance use disorder will not receive coverage under the Affordable Care Act because they live in one of the 24 states that have refused to expand their Medicaid programs to people with incomes up to 138 percent of poverty. Three-quarters of these individuals (2.7 million) live in 11 Southern states, and over 1.1 million live in just two states – Texas (625,000) and Florida (535,000) (American Mental Health Counselors Association, 2/27/14).

Of an estimated 115,000 uninsured and low-income people with HIV/AIDS living in the U.S., over half (about 60,000 people) live in states that are not expanding Medicaid, according to an analysis of HIV surveillance data and data from the National Health Interview Survey (Snider et al., Health Affairs, March 2014).

• Many insurance plans – including both employer-based plans and those purchased through the health exchanges – include “source-of-injury” exclusions that preclude coverage of medical bills arising from suicide or attempted suicide, even when it stems from a mental illness. Despite the federal mental health parity law (2008), insurers still discriminate in the fine print, claiming that parity only requires them to cover mental health benefits, not medical bills arising from an intentional overdose or injury (Andrews, “Some plans refuse to cover medical costs related to suicide despite federal rules,” Kaiser Health News, 2/18/14).

SOCIOECONOMIC INEQUALITY

• Women’s life expectancy in McDowell County, W.Va., where average household income is around $22,000, has fallen by two years since 1985, to 73 years. In contrast, women’s life expectancy in Fairfax County, Va., where average household income is $107,000, has risen over the same period by five years, to 85 (“Income Gap, Meet the Longevity Gap,” New York Times, 3/16/14).

• Income inequality is rising around the world, not just in the U.S. The rate of return to capital has historically been higher than the rate of economic growth and wages, according to a new analysis of centuries of data by Thomas Piketty of the Paris School of Economics. The first half of the 20th century was an aberration due to the destruction of a huge amount of capital in two world wars. In 1913, at the end of the Gilded Age, the stock of the world’s privately held capital amounted to about five years’ worth of global income. In 1950 it had fallen to three, by 2010 risen to four, and will rise to seven by the end of the century. Future inequality in the U.S. will be driven by two forces: a rising share of income going to corporate profits and the owners of capital, and of the remaining labor income, a rising share going to top executives (Porter, “A relentless widening of disparity in wealth,” New York Times, 3/12/14). 

• The U.S. middle class is no longer the richest in the world, according to an analysis of data from the Luxembourg Income Study.  After-tax median income in Canada is now higher than in the U.S., and Britain, the Netherlands, and Sweden are closing in.  Also, poor U.S. families, at the 20th percentile of the income distribution, make significantly less than similar families in Canada, Sweden, Norway, Finland or the Netherlands.  The findings are due to U.S. firms distributing a higher share of pay to top executives and lower top tax rates, and to Canadian and European government policies that redistribute income and subsidize health care, college, day care, paid maternity leave, and other benefits for their residents (Leonhardt, “U.S. middle class no longer world’s richest,” New York Times, 4/23/14).

COSTS

• The cost of employer-sponsored health care among large employers (>1,000 employees) is expected to rise 4.4 percent, to $9,560 per employee, in 2014, despite another round of benefit cuts (without this year’s cuts the increase would have been 7 percent). Employees’ share of premiums will increase an estimated 7 percent, to $2,975. Employees will pay an estimated 37 percent of total health costs (premiums and out-of-pocket costs) in 2014, up from 34.4 percent in 2011. Nearly two-thirds of large (>1,000 employees) companies with employer-sponsored health coverage say they are likely to eliminate coverage in the next few years and steer their workers to public exchanges. They have already started with their under-age-65 retirees (Towers Watson, “Survey for the National Business Group on Health,” 3/6/14).

• Maryland has received a waiver from CMS to transition its “all payer” hospital payment system, under which all insurers pay the same fees, to a global budget system, effective January 1, 2014. The goal is to reduce overutilization of inpatient care and shift resources to more appropriate settings. Whether it will control costs or just, in the absence of a single payer that can slash bureaucracy, restrict access to care, is unclear. The effort, led by the Maryland Health Services Cost Review Commission, is just getting under way. Details may be found at www.hscrc.maryland.gov. 

‘Medicare for all’ given to more victims of asbestos poisoning

Sen. Max Baucus, D-Mont., who as chair of the Senate Finance Committee relied heavily on staffer Liz Fowler, a former WellPoint VP, to craft the private-insurance-based ACA, created an exception from his own bill and gave Medicare and supplementary benefits to residents of all ages in Libby, Mont., with asbestos-related disease caused by the operations of the W.R. Grace mining company. Instead of being required to buy private insurance on the health exchange, affected Libby residents received lifelong Medicare coverage and access to a new, permanent “Libby Pilot Program,” which covers services “tailored to specific health needs resulting from asbestos exposure” not covered by Medicare, like long-term care, medications, and transportation. Now, affected residents of Libby who have moved to any of 18 other counties (including six counties in Idaho and seven in Washington state) will be able to access those services without charge under an expansion of the program approved by CMS (Gerstenecker, “Libby Montana program expands,” The Western News, 2/4/14).

• Even a small unpaid medical debt can damage a person’s credit rating, making it harder and more expensive to get a mortgage or other loan. Medical bills account for about half of all bills reported to collection agencies and affect the credit record of about 20 percent of the population, according to Richard Cordray, director of the federal Consumer Financial Protection Bureau. About 40 percent of a sample of 5,000 mortgage applicants to a Texas firm, Supreme Lending, had medical debt in collection, with the average around $400. Most people were unaware of their debt. The problem is worsening with increasing deductibles and the rise of large physician and hospital groups, making it impossible for patients to negotiate debt with their physician (Rosenthal, “When Health Costs Harm Your Credit,” New York Times, 3/8/14).

• Massachusetts’ 2006 health reforms, the model for the ACA, did not solve the problem of unaffordable health care costs.  In 2012, more than one-third (38.7 percent) of insured Massachusetts adults reported problems with health care costs. The proportion of adults reporting problems with costs rose to 41.6 percent for people with incomes below 138 percent of poverty, and to 49.5 percent for people with incomes between 139 and 399 percent of poverty. Over 40 percent of insured, low-income people had problems with costs despite the fact that Massachusetts’ reform has stronger consumer protections against out-of-pocket costs (e.g. limited to $1,000 for people below 200 percent of poverty) than the ACA (Long, “Health insurance coverage is just the first step: Findings from Massachusetts,” Health Affairs blog, 3/26/14).

Congress boosts pay to private Medicare plans

In response to a multimillion-dollar lobbying campaign by the insurance industry, HHS reversed its plans for a 1.9 percent cut in payments (about $7 billion) to Medicare Advantage (MA) plans.  Instead, the plans will receive a 0.4 percent raise in 2014.  The plans were overpaid by 6 percent compared to the cost of taking care of similar enrollees in traditional Medicare in 2012, according to the Medicare Payment Advisory Committee.  MA plan enrollment grew by 9 percent last year, to 14.4 million.  According to a study by economists at the University of Pennsylvania, the excess payments to MA plans almost all go to marketing and profits, with only 17 percent going into benefits. Humana makes two-thirds of its total annual profit on MA plans (Hancock, “Decoding the high-stakes debate over Medicare Advantage cuts”, Kaiser Health News, 4/7/14).

CORPORATE MONEY AND CARE

For-profit hospital chains breed fraud, again

• The Justice Department is investigating the giant hospital chain Health Management Associates (HMA) for Medicare and Medicaid fraud. HMA, which recently merged with Community Health Systems (CHS) in a $7.6 billion deal to create the nation’s second largest for-profit hospital chain with over 200 hospitals, is the target of eight separate whistle-blower (qui tam) lawsuits in six states and several investigations by states’ attorneys general for using “sophisticated software systems, financial incentives, and threats” to inflate hospital admissions. HMA administrators used a customized software program called Pro-Med to monitor its physicians and drive admissions. For example, the software gave emergency department physicians daily scorecards on their progress towards meeting the firm’s target of admitting 50 percent of all ER patients over age 65, regardless of clinical necessity. Physicians and administrators who questioned HMA’s policies and procedures were threatened and fired. Former HMA CEO Gary Newsome, who received $22 million in compensation in the three years before his departure last year, was a top executive at CHS prior to being hired by HMA; CHS faces similar accusations. In 2003, HCA (the biggest for-profit hospital chain) paid the then-largest health care fraud settlement in U.S. history, $1.7 billion, for Medicare fraud (Creswell and Abelson, “Hospital Chain Said to Scheme to Inflate Bills,” New York Times, 1/23/14).

CEOs at top insurers still getting outsize pay

CEO pay at the nation’s biggest for-profit health insurers generally held firm, but in one case increased sharply between 2012 and 2013: Aetna’s CEO, Mark Bertolini, saw his compensation more than double to $30.7 million from $13.3 million. UnitedHealth Group’s Stephen Hemsley received $12.1 million in 2013, WellPoint’s Joseph Swedish received $17 million, Humana’s Bruce Broussard took in $8.8 million, and Cigna’s David Cordani received $13.5 million. In the three years since the passage of the ACA, 32 executives of the nation’s five biggest for-profit health insurance firms have received a total of $548.4 million in cash and stock options (“The Irony of Obamacare,” UNITE HERE, March 2014, and SEC schedules 14A in 2011, 2012, 2013).

CEOs at the nation’s two largest Medicaid managed care insurers received huge pay raises. Centene CEO Michael Neidorff received $14.5 million in compensation in 2013, up 71 percent from 2012. Centene runs Medicaid programs in nearly 20 states, including Missouri and Illinois. On top of his salary of $1.2 million, Neidorff got a $3 million bonus, $10 million in stock, and $82,798 of personal flights on a company plane, financial adviser fees, event tickets and security services. If Neidorff leaves Centene after a takeover, his golden parachute will be worth $31.9 million. That includes $24.2 million for unvested stock and $7.7 million in severance, bonus and incentive payments. Molina Healthcare CEO Mario Molina’s pay more than doubled, rising to $12 million from $5 million. Molina runs Medicaid programs in 11 states (David Nicklaus, “Centene CEO’s pay jumps to $14.5 million,” St. Louis Post Dispatch, 2/25/14, and SEC filings).

• Two recent studies of Patient Centered Medical Homes (PCMH) found that most quality indicators did not improve and there were no significant cost savings compared with control practices. The first study, supported by The Commonwealth Fund, was a randomized controlled trial that compared 18 small adult primary care practices in New York that were randomly chosen to receive two years of support and financial incentives to redesign their practices into PCMHs (as recognized by the National Committee of Quality Assurance), with 14 control practices. Compared to controls, PCMH physicians performed better on just 2 of 11 quality indicators (blood pressure control and breast cancer screening) and 1 of 10 efficiency indicators (care visits leading to ED visits) but there were no significant cost savings. The second study, a large three-year RAND trial comparing performance on 11 quality measures, utilization, and costs at 32 PCMH’s to 29 comparison practices in southern Pennsylvania, found significant improvement on only one quality measure (nephropathy screening in diabetes). No significant differences in utilization or costs of care were found other than a one-year increase in ambulatory care sensitive admissions in PCMH practices. Pilot practices accumulated bonuses averaging $92,000 per physician over the three-year study (which were excluded from the cost calculations). The lack of savings from PCMH’s suggests that delivery system reform alone won’t control costs (Fifield et al., JGIM, 6/1/13, and Friedberg et al., JAMA, 2/26/14).

GALLOPING TOWARD OLIGOPOLY

• Just two health insurers controlled over 50 percent of the market for private health insurance in 45 states in 2011. In 15 states, a single insurer had more than 50 percent of the private insurance market, according to the AMA’s most recent study of the lack of competition in the commercial health insurance market (AMA, “AMA Analysis Lists States Where One Private Health Insurer Rules,” 11/7/13).

• Anthem, the giant for-profit Blues plan, is the only firm selling health insurance on the exchange in New Hampshire. Nationwide, in 515 mostly rural, low-income counties across 15 states, only a single insurer is offering coverage on the health exchange. Premiums in those counties can be hundreds of dollars more per month than in nearby metropolitan areas. Overall, monthly premiums for a silver plan for a 40-year-old individual range from $154 in Minneapolis to $461 in southwest Georgia and $483 in Colorado’s mountain resort region, where many permanent residents are low-paid service workers. Insurers are not supposed to deny coverage to patients with pre-existing conditions since the passage of the ACA, and risk adjustment for sicker patients is supposed to make “cherry-picking” obsolete, but for-profit insurers have found new methods to accomplish the same thing. Aetna’s CEO, for example, admitted they were targeting areas with high employment and incomes to attract desirable customers (Martin and Weaver, “For many, few health plan choices,” Wall Street Journal, 2/12/14, and Ehley, “Ten worst places to live for Obamacare,” Fiscal Times, 2/20/14).

Corporate ‘finance people’ closely monitor patient care – for profits

“The practice of medicine is moving more rapidly than ever from decision-making by individual doctors toward control by corporate interests. The transformation is being fueled by the emergence of large hospital systems that include groups of physicians employed by hospitals and others, and new technologies that closely monitor care. While the new medicine offers significant benefits, like better coordination of a patient’s treatment and measurements of quality, critics say the same technology, size and power can be used against physicians who do not meet the measures established by companies trying to maximize profits. ‘It’s not a doctor in there watching those statistics – it’s the finance people,’” said an attorney representing whistle-blowers (Creswell and Abelson, “Hospital Chain Said to Scheme to Inflate Bills,” New York Times, 1/23/14).

• The Cleveland Clinic is contracting directly with national employers like Lowe’s to perform cardiac and orthopedic surgery on their employees. Lowe’s pays the cost of travel and waives deductibles and co-pays for its workers to have their surgery at the clinic for a set fee. While the Cleveland Clinic claims to have a lower-than-average readmission rate for cardiac patients, patients who are able to travel for care are undoubtedly younger, healthier, and more stable than the average cardiac patient. The practice raises questions about the clinic “cream skimming”  profitable patients, leaving more costly, sicker and less well-insured patients for local facilities (Daily Briefing, Advisory.com, “For Cleveland Clinic, employer deals have been a ‘win-win-win,’” 3/10/14).

PHARMA

• Gilead is marketing its new hepatitis C drug, sofosbuvir, in the U.S. for $84,000 for a three-month course ($168,000 for six months of treatment that some patients need) or about $1,000 per pill.  Gilead’s first quarter sales of $2.3 billion of sofosbuvir are the highest ever for a new drug.  During the same period, UnitedHealth Group, the nation’s largest insurer, spent over $100 million on sofosbuvir and other treatments for hepatitis C, some of which it attributed to pent-up demand for treatment by newly insured patients.  Sofosbuvir, which costs less than $1.62 per pill to produce, is sold for about $350 per pill in the U.K. Gilead says it will sell the drug to low-income countries for $2,000 for a 12-week course, but Médecins Sans Frontières says, based on their experience treating HIV, that diagnosis and comprehensive treatment costs must be limited to $500 per patient in both middle- and low- income nations to be successful (Pollack, “Gilead  revenue soars on hepatitis C drug” New York Times, 4/23/14, and “MSF responds to reports on Gilead pricing for hepatitis C drug sofosbuvir in developing countries,” Médecins Sans Frontières Access Campaign, 2/7/14).

As the price of specialty drugs soars, employers are shifting more of the cost onto patients. This year, 23 percent of employer-sponsored health plans and nearly all plans sold on the health exchanges have a separate tier with higher cost-sharing for specialty drugs, up from 5 percent of plans in 2006. Just 2.3 percent of prescriptions now account for 30 percent of all out-of-pocket costs. In 2012, U.S. regulators approved 39 drugs, the most since 1996. Of the 12 for cancer, 11 cost at least $100,000 a year (“Hard pills to swallow,” The Economist, 1/5/14, and Thomas, “Prices Soaring for Specialty Drugs, Researchers Find,” New York Times, 4/15/14).

• Questcor has raised the price of a 60-year-old immune system drug, Acthar, from $40 to more than $28,000 a vial since acquiring the rights to the drug for $100,000 in 2001. Acthar, made from the pituitary glands of pigs, was originally used to treat a rare disease in babies. Questcor has aggressively marketed the drug for more common conditions like multiple sclerosis and lupus, uses approved several decades ago when approval standards were low, and clinical trials were not needed. As a result, sales of Acthar topped $761 million last year, and the firm is being bought out by another drug maker, Mallinckrodt Pharmaceuticals, for $5.6 billion. Questcor’s promotional practices are under investigation by the Justice Department (Pollack, “Mallinckrodt pharmaceuticals to buy Questcor for $5.6 billion,” New York Times, 4/8/14).

• A federal jury in Louisiana awarded $6 billion in punitive damages against Takeda Pharmaceuticals, the manufacturer of the diabetes drug Actos, and $3 billion against Eli Lilly Inc., the U.S. distributor of Actos, for failing to disclose that the drug raises the risk of bladder cancer when used for more than one year. Regulators in France and Germany suspended sales of Actos over health concerns in 2009. (Li, Los Angeles Times, 4/8/14).

POLLS

• Nearly two-thirds (64.3 percent) of Maine physicians and medical students favor a single-payer approach to health system reform, up from 52.3 percent in 2008, according to a recent survey by the Maine Medical Association. The survey asked the following question both years: “When considering the topic of health care reform, would you prefer to make improvements to the current public/private system or a single-payer system such as a ‘Medicare for all’ approach?” Support for “improvements to the current public/private system” fell to 35.7 percent in 2014 from 47.4 percent in 2008. There was no significant difference in response to the question based upon age, geographic location, or MMA membership status. Primary care physicians and psychiatrists were more supportive of single payer than other physicians, as were physicians who did not own their own practices. More details of the survey are available on the association’s website at www.mainemed.com.

Vermont residents favor single payer 55 percent to 42 percent after being read a brief description and rationale for reform. An even greater majority, 70 percent, say they favor a system that would have the government pay medical bills directly instead of through insurance companies. The margin of support drops but remains a majority (51 percent in favor, 43 percent opposed) when told it would mean “the largest tax increase in Vermont history.” Women, younger adults, people with college or graduate degrees, and Democrats are more likely to be supportive. Three-fourths of Vermonters say they would either favor or remain neutral towards a candidate supporting single payer; only one-quarter of respondents said they would oppose such a candidate. The poll of 502 Vermonters in mid-January, at the height of problems with the rollout of the Vermont health exchange, was conducted by Boston-based Kiley and Co. with funding from the National Education Association (True, “Single-payer advocacy group gets boost from NEA, poll shows support for health reform,” Vtdigger.com, 2/21/2014).

• Despite a $27 billion investment by the federal government, nearly 70 percent of physicians think electronic health records have not been worth the effort, resources, and cost, according to a national survey of 1,000 physicians for Medical Economics. Sixty-nine percent of respondents said that coordination of care with hospitals has not improved, 67 percent dislike the functionality of their EHR system, and 66 percent of internists would not buy their current system. A qualitative study of 30 physician practices in six states by RAND found that a number of problems with EHR’s significantly worsened physician satisfaction. “Aspects of current EHRs that were particularly common sources of dissatisfaction included poor usability, time-consuming data entry, interference with face-to-face patient care, inefficient and less fulfilling work content, inability to exchange health information, and degradation of clinical documentation” (Verdon, “Physician outcry on EHR functionality, cost,” Medical Economics, 2/10/14, RAND 10/13).

INTERNATIONAL

• A survey of 20,045 adults in 11 industrialized countries, intended to form a baseline for the impact of the ACA on the U.S. health system in an international context, found that U.S. adults are far more likely than people in other nations to go without health care, have trouble paying medical bills, and encounter time-consuming health insurance paperwork or disputes, or claims unexpectedly not paid. The other nations studied were Australia, Canada, France, Germany, the Netherlands, Norway, Sweden, Switzerland and the U.K. Even insured U.S. adults were more likely than adults in other countries to forgo care because of costs and to struggle with medical bills. Forty-two percent of insured Americans reported paying $1,000 or more out-of-pocket for medical bills last year, compared to 2 percent of Swedes and 3 percent of people in the U.K. 

Thirty-two percent of U.S. adults had to spend a lot of time on insurance paperwork or had an insurer deny a claim. Problems with insurers were also common in Switzerland (25 percent), the Netherlands (19 percent), and Germany (17 percent), the other three nations in the survey that use multiple payers (albeit highly regulated) for basic coverage in their systems. (Switzerland and the Netherlands use private insurance while Germany uses “sickness funds.”) There has been a steep increase in the proportion of people in the Netherlands forgoing care because of costs, rising from 8 percent in 2010 to 22 percent in 2013, a period in which the Netherlands implemented market-based reforms, along with austerity (Schoen et al., “Access, Affordability, And Insurance Complexity Are Often Worse In The United States Compared To Ten Other Countries,” Health Affairs, December 2013).

ACA WATCH

• Tom Scully, the former CMS chair who shepherded the Medicare drug bill – based on private, for-profit drug plans – through Congress in 2003, recently assured a group of hedge fund and private equity investment managers that “[Obamacare] is not a government takeover of medicine. It’s the privatization of health care” (Davidson, “The President wants you to get rich on Obamacare,” New York Times Magazine, 10/30/13).

Early enrollment figures

• A net of about 9.3 million uninsured adults between the ages of 18 and 64 gained coverage during the first quarter of 2014, according to a mid-March survey of 2,425 adults by RAND. An expansion of employer-based coverage (to 8.2 million people, of whom 7.1 million were uninsured) and Medicaid (to 5.9 million people, of whom 3.6 million were uninsured), not enrollment through the exchanges, accounted for most of the new coverage among the uninsured, the survey found. RAND estimated that two-thirds of the people who enrolled via the health exchanges had prior coverage, along with all but about 500,000 of the 7.8 million people who enrolled in individual plans directly through insurers. Overall, RAND found that the uninsured rate among 18-64 year olds dropped to 15.8 percent in 2014 from 20.5 percent in 2013. Because the data did not include the final two weeks of open enrollment, the actual uninsured rate for this group is likely to be slightly lower (Carman and Eibner, “Survey estimates net gain of 9.3 million American adults with health insurance,” RAND, April 2014).

A similar survey by the Urban Institute in early March estimated that 15.2 percent of adults aged 18-64 were uninsured. In states that are expanding their Medicaid programs, 12.4 percent of non-elderly adults were uninsured, compared with a rate of 18.1 percent in states not expanding Medicaid (Long, Urban Institute, 4/3/14). 

• Nearly 83 percent of those signing up for private coverage through exchanges received a federal subsidy, but overall, only about 21 percent of people eligible for a subsidy actually enrolled, according to an early estimate by the Kaiser Family Foundation. A higher proportion – up to 40 percent – of those eligible enrolled in Washington, California, Connecticut and Rhode Island. Tragically, the ACA made no provisions for subsidies to people earning less than 100 percent of the federal poverty line because the authors assumed that all states would expand their Medicaid programs (Levitt, “How much financial assistance are people receiving under the Affordable Care Act,” Kaiser Family Foundation, 3/27/14).

The average federal subsidy for private health insurance premiums on the exchanges will be about $4,250 per enrollee in 2014, rising to $7,170 per enrollee in 2024, according to the Congressional Budget Office’s latest estimates. The CBO estimates that about 25 million people each year will purchase private insurance with federal subsidies between 2016 and 2024. Factoring in subsidized cost-sharing ($167 billion), federal subsidies to the private insurance industry over the 10-year period 2015-2024 will total $1.03 trillion (CBO, “Insurance Coverage Provisions of the Affordable Care Act,” April 2014).

• Several of the 14 state-based exchanges experienced major problems. Maryland, Massachusetts, Oregon, Nevada and Vermont replaced top officials, cancelled contracts with software companies and spent tens of millions of dollars on new contractors and fixes. Only about 63,000 people were able to sign up for private coverage in Maryland, far short of the state’s goal of 250,000 people. Maryland officials have decided to drop their exchange and start over with Connecticut’s exchange software. The software is free, but they’ll have to invest another $50 million to adapt it for Maryland. Oregon officials are dumping their $248 million exchange and switching to the federal exchange HealthCare.gov next year. The switch will cost about $35 million to complete. The Massachusetts Connector, which received $180 million in federal grant money to prepare for the transition to the ACA, was unable to sign people up for federally subsidized coverage. The state signed up about 30,000 people for unsubsidized coverage, and 138,000 people for “temporary coverage,” with many of the sign-ups occurring via paper applications. The state also asked HHS to allow 114,000 Massachusetts residents to stay in their current plans through September (“extended coverage”) due to their technical problems. Xerox and the Nevada health exchange are being sued for not passing on premiums and applications to insurers, leading to disputes among hospitals, patients, and insurers over medical bills (Chereb, “Bungling mars health care deadline in some states,” AP, 3/25/14; Walker, “MD votes to adopt health exchange software used in Connecticut,” Baltimore Sun, 4/2/14; Cassidy, “$180 million Fed connector tab eyed,” Boston Herald, 4/1/14; and Chereb, “Xerox, Nevada health exchange subject of class-action filing,” Las Vegas Sun, 4/2/14).

• Several states are concerned that their exchanges aren’t financially sustainable. The Hawaii Health Connector, which cost $54 million to build, only signed up 7,788 people, for a cost of $6,934 per enrollee; it is expected to cost $15 million annually to operate, but only bring in $1 million in revenues from a 2 percent fee on the plans it sells. The Hawaii exchange would have needed to sign up 150,000 people to be sustainable; officials now admit this was an “unrealistic” expectation in a state with 100,000 people who are uninsured, half of them eligible for Medicaid (Consillo, “Hawaii health connector won’t be sustainable after 2014,” Honolulu Star-Advertiser, 2/26/14).

Benefits

Low actuarial value, ultra-narrow networks, high administrative costs

• As of April 1, 20 percent of policies purchased through the exchanges were bronze, 65 percent were silver, 9 percent were gold, and 5 percent were platinum. Bronze plans have lower premiums but are not eligible for federal subsidies for cost-sharing (available to those with incomes below 250 percent of poverty), so most people enrolled in silver plans that are eligible for these additional subsidies (Summary enrollment report, HHS,  5/1/14).

• Patients are responsible for up to 50 percent of the cost of specialty drugs in plans sold on the exchanges, a burden that will hit people with chronic illness especially hard, according to reviews by Milliman Inc. and Avalere Health. Milliman reported, in a study of plans in California, New York, Florida and Texas, that the latter two states have especially high drug coinsurance, of 40 percent to 50 percent. An analysis of plans in 19 states by Avalere found that 60 percent of bronze plans and 23 percent of silver plans had drug coinsurance rates of 30 percent or more (“Chronically ill facing high drug costs under U.S. health law,” Reuters, 2/28/14).

• Every insurer offering plans on the health exchanges restricts patients to its own network of doctors and hospitals. Even more expensive plans in the same market from the same insurer don’t necessarily grant access to a wider choice of providers, and out-of-network care can be costly. Federal subsidies for cost-sharing don’t apply for out-of-network care, and out-of-network care costs may not count toward the out-of-pocket maximums ($6,350 for an individual, and $12,700 for a family, excluding premiums), leaving patients on the hook for the entire cost. A McKinsey & Co. analysis of 120 silver-level exchange plans found that 70 percent were narrow network, with at least 30 percent of the area’s largest hospitals excluded, or ultra-narrow, excluding at least 70 percent. While insurers can’t charge more for out-of-network emergency department care, patients placed on observation status or admitted to an out-of-network hospital are no longer shielded from uncovered costs (Andrews, “Warning, Opting Out of Your Insurance Plan’s Provider Network is Risky,” Kaiser Health News, 3/18/14).

• For the most part, patients were unable to verify if their doctors were covered by a particular plan on the exchange in advance of purchasing it. According to ZocDoc, an online appointment booking firm which tried to verify the accuracy of insurers’ directories, about half of the listings for in-network providers were wrong. The California exchange took down its directory in early February due to errors (Tozzi, “Obamacare limits choices under some plans,” Bloomberg Businessweek, 3/20/14).

• Individuals can keep coverage that doesn’t meet the minimum benefits standards of the ACA for another year, and in some cases until 2016, according to new rules from HHS. Insurance commissioners in 21 states and the District of Columbia have blocked the extension on the grounds that they need these people in the exchange risk pools to avoid premium increases (“Keeping Your Insurance Policy,” New York Times, 3/6/14).

Insurers will be allowed to spend more than the ACA’s limit of 20 percent of their premiums on overhead because of the rocky rollout of the exchanges. Insurers complain that it required them to hire more call-center staff, process applications manually, and, in some states, like Maryland, where the exchange hasn’t functioned at all, pay broker fees (Hancock and Appleby, “Insurers may get cost break thanks to rocky ACA rollout,” Kaiser Health News, 3/13/14).

• Insurers are also receiving more federal help in the form of new, lower, reinsurance rates. In 2014, reinsurance for high-cost cases will kick in at $45,000 in claims for one individual, down from $60,000, and extending to a cap of $250,000. While reinsurance is a temporary $10 billion program that, like the risk corridors (which limit gains or losses by insurers over 3 percent of premiums) is only in effect until 2016, risk adjustment is a permanent feature of the new law. Plans that can show they have enrolled a sicker population are supposed to receive payments from plans that have enrolled healthier people. But risk adjustment is easy to game (as repeatedly demonstrated in the Medicare Advantage program) by labeling patients with more diagnoses, known as “upcoding.” Insurers are already scrambling to find out about enrollees’ health conditions, which they say they need to know in order reduce the cost of caring for those patients. Cigna is calling enrollees to ask about health conditions, medications, and other medical needs, while Florida Blue is encouraging enrollees to fill out health risk forms and get tests for cholesterol and blood sugar (Mathews, “Health plans rush to size up new clients,” Wall Street Journal, 2/27/14).

• The penalty for not having health insurance by March 1, 2014, will “almost always” be more than the $95 figure often cited in news reports. The penalty is $95 or 1 percent of adjusted gross income, whichever is greater, minus some adjustments, up to the cost of the premium of a bronze plan. The penalty will rise to 2 percent of income or a minimum of $325 in 2015, and 2.5 percent of income but at least $695 in 2016. A “tax penalty calculator” is online at the Tax Policy Center (McKinnon, Wall Street Journal, 3/6/14).

• Insurers are required to keep people on their rolls for three months if payments are missed, but are only required to pay their medical bills for the first month, leaving providers on the hook for the other two months if payments are not forthcoming. (“Commenters say ACA grace period rule puts unfair burden on hospitals, providers,” Bloomberg BNA, 8/21/13).

Medicaid expansion

• As of March 28, 21 states have decided to opt out of the Medicaid expansion and three are still debating their participation (Missouri, Pennsylvania and Utah). Most of the states opting out require parents to make less than 50 percent of the federal poverty level to be eligible for Medicaid. The Commonwealth Fund estimated that states opting out of the Medicaid expansion will forgo an estimated $34.7 billion in federal funds between 2014 and 2022 (Advisory.com and Glied et al., Commonwealth Fund, December 2013).

States privatize, shrink Medicaid benefits

Arkansas, which was allowed by HHS to use its federal Medicaid funds to buy private insurance for 94,000 Medicaid-eligible residents this year, diverted anyone thought to be medically frail (about 10 percent of new enrollees) to traditional Medicaid, thereby selectively enrolling the healthy in four for-profit, “private option” plans, which receive $476 per person, per month. Now Arkansas is seeking waivers to shift more costs onto patients by (1) expanding the use of co-pays to people with incomes as low as 50 percent of poverty (only enrollees with incomes between 100 and 138 percent of poverty are currently charged co-pays), (2) curtailing non-emergency transportation assistance, and (3) setting up health savings accounts for beneficiaries (without necessarily putting funds in them). The state’s Republican Party has threatened to end the expansion unless CMS approves these changes (DeMillo, “Arkansas officials eye changes to Medicaid plan,” AP, 3/5/14, and Goodnough, “In Arkansas, private option Medicaid plan could be derailed,” New York Times, 2/11/14).

Several other states are appealing to HHS to institute premiums or co-pays for Medicaid enrollees, including Arizona, Iowa, Michigan, Indiana, New Hampshire, Pennsylvania and Tennessee. Iowa wants to charge Medicaid enrollees premiums of $30 a month that beneficiaries can “earn back” by quitting smoking or losing weight. Premiums discourage uninsured poor people from enrolling in Medicaid while raising little in new health funds. Similarly, co-pays penalize the sick, particularly those with chronic illness (Saloner et al., “Pinching the Poor,” NEJM, 3/27/14, and Vestal, “‘Private Option’ for Medicaid Expansion Would Cut Some Benefits,” KHN, 3/27/14).

• The number of long-term care residents enrolled in mandatory Medicaid managed care is projected to double this year to 1.2 million. Florida, New Jersey, Ohio, California, and Virginia are implementing statewide mandates this year, while some other states, including New York, Texas, and Rhode Island, are expanding the approach to additional counties. “The mandatory transition of large numbers of consumers who use long-term care … is unprecedented,” according to Laura Summer at Georgetown (Galewitz, “States accelerate shift of nursing home residents into Medicaid managed care,” 2/11/14).

Employer mandate delayed, cap on deductibles for employees of small business eliminated

• The employer mandate in the ACA was slated to begin January 1, 2014. Now, the large employer mandate (>100 employees) has been postponed for one year, and will be phased in, so that in 2015 employers only need to cover 70 percent of employees working 30 or more hours per week to avoid a penalty, rising to 95 percent of workers in 2016. The deadline for employers with 51-99 workers to provide coverage for their workers or pay a fine was also extended for an additional year, to 2016. Seasonal employees who work six months or less are not considered full-time employees.

• Businesses with 50 workers or less are not required to provide or report coverage, but the federal government and 16 states and the District of Columbia have set up separate exchanges for small businesses and their employees under a program called the Small Business Health Insurance Options Project (SHOP). In 14 states and D.C., SHOP exchanges are facilitating small business owners’ ability to shift costs onto their workers through defined contributions. Instead of covering a uniform set of benefits for every employee, employers are permitted to contribute a set percentage (typically 50 percent) of the cost of an index plan towards the cost of the policy of the employee’s choice, making the worker responsible for the difference. While the ACA required plans sold through SHOP to limit deductibles to $4,000 for family policies and $2,000 for individual coverage, the cap on deductibles was removed in the “doc fix” legislation passed in March (Dash, Commonwealth Fund, 3/14, and Lieberman, “Repeal on deductible caps marks another step in The Great Cost Shift,” Columbia Journalism Review, 4/11/14).

Labor issues under the ACA

• Union-management-run health insurance plans (Taft-Hartley plans) are not eligible for subsidies under the ACA; subsidies are restricted to the private plans sold on the exchanges. As a result, firms hiring nonunion workers with access to subsidized plans have a competitive advantage over unionized firms. In addition, firms with employees working less than 30 hours per week are not required to provide coverage, so there is a strong incentive for employers to cut workers’ hours. Labor unions warn that the ACA will lead to cuts in wages and benefits for the middle class (Mark Dudzic, “Ten things unions need to look out for when bargaining under Obamacare,” www.laborforsinglepayer.org).

VA scandal lessons are not about the viability of single-payer

By Paul Hochfeld, M.D., Chinh Le, M.D., Betty Johnson and Mike Huntington, M.D.
Corvallis Gazette-Times, Letters, June 16, 2014

We would like to thank Bill Dougherty for his question of whether a single-payer health insurance plan can still be advocated (Letters, June 5, “If VA is example of single-payer, that should be avoided”).

It offers us the opportunity to respond with an unequivocal “Yes!”

There is no question that the issues raised by the recent VA care scandal needs to be addressed, and can be fixed. We still need to acknowledge that in many domains, such as quality and safety of care, cost control, patient satisfaction and ultimately patient health outcomes, the VA has kept pace with, or surpassed private sector health systems, despite its severe constraints and demands (source: New England Journal of Medicine, June 5, 2014).

A statewide, or a national single-payer system would be different from the VA system, as we envision health care financed from an equitable public funding source, but locally administered and privately delivered.

“Gaming the system,” using misaligned performance measurements as financial incentives, organizational insularity and secrecy is seen in many sectors of our society, but it is especially damaging in the current medical industrial complex. What needs to be learned from the VA scandal is a cautionary note that no system can be insulated from public accountability and transparency.

Paul Hochfeld, M.D., Chinh Le, M.D., Betty Johnson and Mike Huntington, M.D., live in Corvallis.

http://www.gazettetimes.com/news/opinion/mailbag/letter-va-scandal-lessons-are-not-about-the-viability-of/article_afb57404-f529-11e3-a5d5-001a4bcf887a.html

Should private insurers be allowed to dictate rates to non-contracted hospitals?

Calif. Court Rules Insurer Payments Should Reflect Value of Care

California Healthline, June 16, 2014

An appellate court ruling in Fresno last week could change the way California hospitals and health insurers enter into contracts and negotiate payments for services, the Sacramento Business Journal reports.

Background on Case

The lawsuit between Children’s Hospital Central California and Anthem Blue Cross involved a dispute over insurer reimbursement rates for hospital services.

In 2007, the hospital and insurer for about 10 months were unable to reach an agreement to renew a contract setting reimbursement rates for hospital services. During that time, federal and state laws required that Children’s Hospital continue to provide emergency care to Anthem beneficiaries.

The hospital later billed Anthem for post-stabilization emergency medical care that took place during the 10-month contract gap. In the billing, the hospital listed the full rate of services included in its “chargemaster” document instead of the usual discounted rate based on volume. In total, the hospital charged Anthem $10.8 million for care provided to 896 beneficiaries.

Anthem paid the hospital about $4.2 million based on Medi-Cal rates. Medi-Cal is California’s Medicaid program.

Children’s Hospital filed a lawsuit over the difference, and a jury awarded the hospital $6.6 million. Anthem then filed an appeal.

Details of Ruling

On Tuesday, the Fifth District Court of Appeals ruled that insurers are not required to reimburse hospitals for amounts that are more than the actual value of services.

The ruling states that the hospital “rarely received payment based on [their] published chargemaster rates.” Therefore, the trial court should have allowed Anthem to present evidence of the value of post-stabilization emergency services.

The appeals court ordered a new trial between Children’s Hospital and Anthem to establish damages that reflect the “reasonable value” of services, as opposed to the higher costs included on hospital’s bill to the insurer.

Implications

Dan Baxter, an attorney representing Anthem, said, “This ruling will absolutely change the landscape between hospitals and health plans in litigation going forward.” He added, “It’s a clear-cut California case we didn’t have until now — finally — that says in no uncertain terms you can consider a full body of information, not just billed charges.”

However, Glenn Solomon, an attorney representing Children’s Hospital, said the ruling could result in insurers paying contract rates for health care services without actually establishing a contract.

Solomon said, “If a health plan can get the benefit of contracted rates without actually engaging in a contract themselves, there’s less incentive for them to enter into a contract in the first place,” adding, “That’s not just bad for hospitals. It’s bad for all of California” (Robertson, Sacramento Business Journal, 6/13).

http://www.californiahealthline.org/articles/2014/6/16/calif-court-rules…

This case centers around a dispute on whether an insurer pays list rates (chargemaster prices) or prior contracted rates during an interval in which the insurer/hospital contract had lapsed. But there is a much more important issue here: Should an insurer be able to dictate unilaterally to a hospital what rates will be paid during a time in which there is no contract with the hospital?

Regarding the particulars of this case, hospital chargemaster rates are usually pie-in-the-sky rates that nobody pays. The insurer, Anthem Blue Cross Medi-Cal managed care, should be able to negotiate rates down. On the other hand, Medicaid (Medi-Cal) rates in California are the lowest in the nation and result in a loss for most providers, so Children’s Hospital Central California should be able to negotiate up the rates for “post-stabilization emergency services” when it has no contract with the insurer. It appears that the intent of this court ruling was to prevent unreasonably high, binding rates from being set arbitrarily by hospital chargemaster programmers.

Although other laws apply, this ruling seems to be a step towards allowing private insurers to dictate rates when no contract is in force. It would be untenable if private insurers could enforce provisions of a contract that they would like to have without the necessity of formally contracting with the providers.

This is no way to set payment rates. Control should be completely removed from the private insurers. They should be dismissed from the health care financing scene anyway since they waste resources diverted to their intrusive exploitations. We also know that providers should not be allowed to set their own rates. During the implementation of Medicare, physicians were paid based on usual, customary and reasonable fees, and they responded by driving fees up exponentially. No, we know from the experience of other countries that the government must be involved if we expect fair pricing.

Under a single payer system, whether setting global budgets for hospitals or negotiating rates for professional services or health care products, including pharmaceuticals, our own government stewards would be there to represent us as patients and as taxpayers. As public servants, they would not be representing their own personal interests. Payments would be based on legitimate costs and fair margins.

Besides receiving greater value, we would be eliminating the costs and grief of the profound administrative waste of our current fragmented, dysfunctional financing system. That alone should be enough for us to decide to make the change.

VA has issues, but its bright spots show value of Medicare-for-all system

Enhanced single-payer health insurance would save lives and money and provide high-quality care

By Julie Keller Pease, M.D., and Kevin Twine
Portland (Maine) Press Herald, June 18, 2014

Not surprisingly, columnist Steve Robinson of the Maine Heritage Policy Center has jumped onto the story of the Department of Veterans Affairs scandal to sound the alarm about “single-payer” and “socialized medicine” (“VA corruption devastating for Michaud, single-payer fans,” June 7).

As physicians and concerned citizens, we offer a more rational and reasoned perspective. The problems within the VA have in fact presented another opportunity for us to shine a light on the many benefits of an improved version of Medicare for all.

Historically, there have been long waits for care at the VA. This is not unique to the VA. Compared to the rest of Americans, eligible veterans have better access to quality health care, and in some areas the VA has been unable to recruit enough doctors and mental health professionals to keep up with demand.

This is not all the VA’s fault: There is a national shortage of primary care doctors, and there is no evidence that wait times in the private sector for primary care are any shorter. For example, a family practitioner who arrived in rural Maine last August now has a wait time of almost 11 months for new patients. Many practices in Maine and elsewhere are not accepting any new patients.

Long waits for VA care are often associated with the time it takes to determine if veterans are eligible to receive care at the VA. Not all veterans are eligible. Currently, about 2.3 million veterans and their family members are uninsured, representing about 5 percent of the 47 million medically uninsured Americans in our country today.

When people are uninsured, and don’t get the care they need, the results can be catastrophic. We have learned that an estimated 40 veterans reportedly died while waiting for VA care in Phoenix.

This is tragic. However, in Maine, more than 130,000 of our citizens lack health insurance and are unable to access health care. It is estimated that because of this, 150 Mainers will die this year.

Even more devastating, more than 46,000 Americans die every year because they cannot access the care that they need, mostly because they lack health insurance or have substandard plans. In dramatic contrast, if we were to expand and improve Medicare to cover all Americans, these “excess deaths” would be avoided.

Not only would an improved Medicare for all cover everyone and save lives, but it would save money by eliminating much of the enormous administrative overhead generated in our current fragmented system of care.

William Hsiao, an internationally recognized health care economist and designer of health care systems around the world, testified before a select committee of the Maine Legislature in October 2010. He estimated that Mainers could save 10 percent of total health care spending, or $1 billion in the first year alone, by implementing a universal Medicare-like system. UMass economist Gerald Friedman estimates that a universal Medicare system would save as much as $570 billion per year nationwide.

Single-payer national health insurance, an improved Medicare for All, would offer a single tier of high-quality care to everyone. Everyone would be able to choose any provider and source of care in the U.S. It would address wait times in an organized way, be transparent and accountable, and allocate medical resources based on need, not ability to pay.

In the furor over the manipulation of waiting lists, we cannot overlook the many positives about the Veterans Affairs health care system. The VA has pioneered quality improvement initiatives and delivery system changes. It has an electronic medical record system that is far ahead of the private sector. Its administrative overhead is far less than the private health insurance industry’s.

Veterans’ service organizations praise the VA, even as they report the wait times, precisely because of its high quality. Patient and provider satisfaction within the VA system is consistently much higher than within the private, for-profit sector of our fragmented health care system.

As for substituting a voucher-like insurance system for the VA, would anyone in their right mind suggest that we take Maine’s veterans out of the VA and put them into Gov. LePage’s PL 90 health insurance plan?

We have much to learn from both the problems and the successes within the VA system. We applaud the steps taken by Sens. Bernie Sanders, I-Vt., and John McCain, R-Ariz., to quickly address some of the problems. And we will continue our efforts to promote universal access to quality health care for all Americans, via an improved system of Medicare for all.

Julie Keller Pease, M.D., and Kevin Twine are both residents of Brunswick, Maine, and members of Physicians for a National Health Program and Maine AllCare.

Maine Voices: VA has issues, but its bright spots show value of Medicare-for-all system

PNHP backgrounder on the VA – June 2014

PNHP has physician-spokespeople who are available to the media for comment on these issues. To schedule an interview, contact PNHP communications director Mark Almberg at mark@pnhp.org.

1. Waits for care in the Veterans Health Administration are probably similar to (or shorter than) waits elsewhere, but are more carefully scrutinized in the VA.

  • Notwithstanding recent reports of long waits for non-urgent care at some sites for new patients, a recent audit of VA wait times system-wide found that 96 percent of the 6,004,350 appointments currently scheduled have wait times of 30 days or less. Only 4 percent of appointments have wait times of more than 30 days.
  • At the Phoenix VA, where the investigation started, 89 percent of appointments have wait times under 30 days. The average wait for established patients to see a primary care doctor was 3 days, and to see a specialist was 14 days.
  • Overall, the audit found 57,436 veterans (<1 percent of appointments) can’t be seen in the next 90 days and are waiting for appointments, and another 63,869 veterans (1 percent) have enrolled in the VHA in the past 10 years but have never sought an appointment, most likely because they have other coverage. (Some veterans sign up for the VA in case eligibility standards tighten in the future.) The VA plans to contact the last two groups (VA Audit Wait Times Fact Sheet, 6/9/2014).
  • According to a recent Massachusetts Medical Society survey, the average wait time for a new patient appointment for an internist in that state (which has the most doctors per capita) is 50 days and for a family physician is 39 days (MMS Patient Access to Care Study, Massachusetts Medical Society, 7/2013).
  • According to a recent Merritt Hawkins survey of wait times, the cumulative average wait time to see a physician in five specialties (family medicine, OB/GYN, dermatology, cardiology and orthopedic surgery) in 15 major metropolitan markets in 2013 was 18.5 days, and in some cases much longer (2014 Physician Appointment Wait Times, Merritt Hawkins).
  • Even the longest waits for care in the private sector don’t reflect the true extent of unmet need because over one-third (37 percent) of adults forgo care due to financial concerns (Schoen et al., “Access, Affordability, And Insurance Complexity Are Often Worse In The United States Compared To Ten Other Countries,” Health Affairs, 11/2013).
  • In many locales, Medicaid patients face long waits because many private physicians and hospitals do not accept Medicaid. A recent study found that children with Medicaid waited 22 days longer for an appointment than the privately insured (Bisgaier et al., “Auditing Access to Specialty Care for Children with Public Insurance,” NEJM, 6/16/2011).

2. Long waits in the VA result largely from inadequate resources, especially a shortage of clinicians, not inefficiency.

  • There are over 400 positions for primary care physicians that are currently unfilled in the VA, reflecting both a national shortage of primary care doctors and the VA’s relatively low pay scale (Oppel and Goodnough, “Doctor Shortage Is Cited in Delays at V.A. Hospitals,” New York Times, 5/29/14).
  • The VA has faced a surge in demand by aging Vietnam-era vets with a rapidly growing burden of chronic illness and the 6.4 million veterans of the wars in Iraq and Afghanistan, many of whom have severe injuries that will require lifelong care and/or mental health problems such as PTSD. Another factor contributing to increased demand is a greater willingness to seek mental health care among younger veterans.
  • The loosening of VA eligibility standards by the Obama administration in 2010 contributed to a large influx of new patients. Veterans with certain illnesses that have been linked to Agent Orange exposure (including Parkinson’s disease, prostate cancer, diabetes and ischemic heart disease) are now presumed to have a service-related condition and to be eligible for VA care. The VA simultaneously reduced demands for documentation supporting claims of post-traumatic stress disorder (Longman, “VA Care: Still the Best Care Anywhere?” Washington Monthly, 6/3/2014).
  • While the VA budget kept up with overall medical inflation between 2003 and 2012, rising from $25.5 billion to $45.5 billion, the increase did not take into account the increased demand for services (Merrill Goozner, “Beyond the theatrics of the VA wait-list scandal,” Modern Healthcare, 5/24/2014).
  • The inadequate supply of VA resources is particularly acute in the South (e.g. Phoenix and Miami), where the population of older vets has increased rapidly, but VA resources have not.

3. Studies indicate that quality of care at the VA is, on average, as good as or better than in the private sector.

  • A Rand study found that: 
    • VA patients received much more of the care recommended by national standards, 66 percent as opposed to 50 percent in a representative national sample of non-veterans.
    • Among chronic care patients, VA patients received about 70 percent of recommended care, compared with about 60 percent in the national sample.
    • For preventive care, the difference was greater: VA patients received about 65 percent of recommended care, while patients in the national sample received 45 percent.
    • VA patients received consistently better care across the board, including screening, diagnosis, treatment, and follow-up (Asch et al., “Comparison of Quality of Care for Patients in the Veterans Health Administration and Patients in a National Sample,” Annals of Internal Medicine, 12/21/2004).
  • A recent systematic review concluded: “Studies that assessed recommended processes of care almost always demonstrated that the VA performed better than non-VA comparison groups. Studies that assessed risk-adjusted mortality generally found similar rates for patients in VA and non-VA settings” (Trivedi et al., “Systematic review: comparison of the quality of medical care in Veterans Affairs and non-Veterans Affairs settings,” Medical Care, 1/2011).
  • A direct comparison of quality in the VA and Medicare Advantage (MA) plans concluded that: “Among persons aged 65 years or older, the VA health-care system significantly outperformed private-sector MA plans and delivered care that was less variable by site, geographic region, and socioeconomic status” (Trivedi et al., “Quality and equity of care in the VA and Medicare Advantage health plans,” Medical Care, 6/2011).
  • Patients cared for in the VA have lower risk-adjusted mortality compared with those in private Medicare Advantage plans. (AJ Selim et al., “Risk-adjusted mortality as an indicator of outcomes: comparison of Medicare Advantage Program with the Veterans Health Administration” Medical Care, 4/2006).
  • Patient satisfaction scores at the VA are consistently higher than the private sector. For patients recently discharged from a VA hospital, average overall satisfaction is 4 points higher (84 out of 100 points) than for patients discharged from non-VA hospitals. When asked if they would use a VA medical center the next time they need inpatient or outpatient care, veterans overwhelmingly indicate that they would (96 percent and 95 percent, respectively). (Final report: 2013 Customer Satisfaction Inpatient Survey, CFI Group, 3/2014).

4. VA costs are lower than private sector costs and rising more slowly.

5. The alleged fraudulent reporting of wait times by VA officials was apparently stimulated by pay-for-performance (P4P) incentives. Similar fraudulent reporting occurs in the private sector. P4P incentives are the problem, not the VA.

6. The VA is not a single-payer system. It coexists with many other payers, and not all veterans are eligible for care at the VA.

  • Of 21.6 million veterans, only 9.1 million are enrolled in the VHA system.
  • 2.3 million veterans and their family members were uninsured in 2010. Nationally, 41.2 percent of uninsured veterans report unmet medical needs and 33.7 percent report delaying care due to cost (Haley and Kenney, “Uninsured Veterans and Family Members,” Urban Institute, 5/2012).
  • VA care is not an entitlement. Iraq and Afghanistan veterans are automatically eligible for VA care for five years after discharge. After that, they are subject to means testing or must show that they have a service-related condition like Vietnam-era veterans to determine if they are eligible. Eligibility determinations can take 6-9 months or longer, and are often confused by veterans and the media as waiting times for appointments, which are completely separate. The need to determine eligibility would be unnecessary in a single-payer system.

Data Update – Summer 2014 newsletter

UNINSURED AND UNDERINSURED

• 8 million people signed up for private coverage on the federal and state health exchanges during the open enrollment period that ended March 31, according to a report from the Department of Health and Human Services.  Since as many as two-thirds of enrollees had prior coverage and 10-20 percent of people have yet to pay their first month’s premiums, the net impact of the ACA’s exchanges and federal subsidies on the number of uninsured won’t be clear for several months (Pear, “Late rush to sign up for insurance,” New York Times, 5/2/14).

In its most recent release, the Congressional Budget Office estimates that 42 million Americans will remain uninsured in 2014, 36 million in 2015, and 29-31 million between 2016 and 2024 (CBO, “Insurance Coverage Provisions of the Affordable Care Act,” April 2014).

• In 2012, 31.7 million Americans under age 65 were underinsured, according to a conservative estimate by The Commonwealth Fund. The estimate was based on new Census Bureau data on household medical expenditures. An additional 47.3 million Americans were uninsured that year. “Underinsurance” in the study was defined as spending 10 percent or more of household income for medical care or, if under 200 percent of the federal poverty line, greater than 5 percent of household income. The estimate didn’t include people who were insured but went without care due to cost, or were healthy but whose insurance was so skimpy they would have faced high costs in the event of illness (Schoen et al., “America’s Underinsured,” Commonwealth Fund, 3/14).

• Nearly 3.7 million low-income, uninsured people with a serious mental illness, serious psychological distress, or a substance use disorder will not receive coverage under the Affordable Care Act because they live in one of the 24 states that have refused to expand their Medicaid programs to people with incomes up to 138 percent of poverty. Three-quarters of these individuals (2.7 million) live in 11 Southern states, and over 1.1 million live in just two states – Texas (625,000) and Florida (535,000) (American Mental Health Counselors Association, 2/27/14).

Of an estimated 115,000 uninsured and low-income people with HIV/AIDS living in the U.S., over half (about 60,000 people) live in states that are not expanding Medicaid, according to an analysis of HIV surveillance data and data from the National Health Interview Survey (Snider et al., Health Affairs, March 2014).

• Many insurance plans – including both employer-based plans and those purchased through the health exchanges – include “source-of-injury” exclusions that preclude coverage of medical bills arising from suicide or attempted suicide, even when it stems from a mental illness. Despite the federal mental health parity law (2008), insurers still discriminate in the fine print, claiming that parity only requires them to cover mental health benefits, not medical bills arising from an intentional overdose or injury (Andrews, “Some plans refuse to cover medical costs related to suicide despite federal rules,” Kaiser Health News, 2/18/14).

SOCIOECONOMIC INEQUALITY

• Women’s life expectancy in McDowell County, W.Va., where average household income is around $22,000, has fallen by two years since 1985, to 73 years. In contrast, women’s life expectancy in Fairfax County, Va., where average household income is $107,000, has risen over the same period by five years, to 85 (“Income Gap, Meet the Longevity Gap,” New York Times, 3/16/14).

• Income inequality is rising around the world, not just in the U.S. The rate of return to capital has historically been higher than the rate of economic growth and wages, according to a new analysis of centuries of data by Thomas Piketty of the Paris School of Economics. The first half of the 20th century was an aberration due to the destruction of a huge amount of capital in two world wars. In 1913, at the end of the Gilded Age, the stock of the world’s privately held capital amounted to about five years’ worth of global income. In 1950 it had fallen to three, by 2010 risen to four, and will rise to seven by the end of the century. Future inequality in the U.S. will be driven by two forces: a rising share of income going to corporate profits and the owners of capital, and of the remaining labor income, a rising share going to top executives (Porter, “A relentless widening of disparity in wealth,” New York Times, 3/12/14).

• The U.S. middle class is no longer the richest in the world, according to an analysis of data from the Luxembourg Income Study.  After-tax median income in Canada is now higher than in the U.S., and Britain, the Netherlands, and Sweden are closing in.  Also, poor U.S. families, at the 20th percentile of the income distribution, make significantly less than similar families in Canada, Sweden, Norway, Finland or the Netherlands.  The findings are due to U.S. firms distributing a higher share of pay to top executives and lower top tax rates, and to Canadian and European government policies that redistribute income and subsidize health care, college, day care, paid maternity leave, and other benefits for their residents (Leonhardt, “U.S. middle class no longer world’s richest,” New York Times, 4/23/14).

COSTS

• The cost of employer-sponsored health care among large employers (>1,000 employees) is expected to rise 4.4 percent, to $9,560 per employee, in 2014, despite another round of benefit cuts (without this year’s cuts the increase would have been 7 percent). Employees’ share of premiums will increase an estimated 7 percent, to $2,975. Employees will pay an estimated 37 percent of total health costs (premiums and out-of-pocket costs) in 2014, up from 34.4 percent in 2011. Nearly two-thirds of large (>1,000 employees) companies with employer-sponsored health coverage say they are likely to eliminate coverage in the next few years and steer their workers to public exchanges. They have already started with their under-age-65 retirees (Towers Watson, “Survey for the National Business Group on Health,” 3/6/14).

• Maryland has received a waiver from CMS to transition its “all payer” hospital payment system, under which all insurers pay the same fees, to a global budget system, effective January 1, 2014. The goal is to reduce overutilization of inpatient care and shift resources to more appropriate settings. Whether it will control costs or just, in the absence of a single payer that can slash bureaucracy, restrict access to care, is unclear. The effort, led by the Maryland Health Services Cost Review Commission, is just getting under way. Details may be found at www.hscrc.maryland.gov. 

‘Medicare for all’ given to more victims of asbestos poisoning

Sen. Max Baucus, D-Mont., who as chair of the Senate Finance Committee relied heavily on staffer Liz Fowler, a former WellPoint VP, to craft the private-insurance-based ACA, created an exception from his own bill and gave Medicare and supplementary benefits to residents of all ages in Libby, Mont., with asbestos-related disease caused by the operations of the W.R. Grace mining company. Instead of being required to buy private insurance on the health exchange, affected Libby residents received lifelong Medicare coverage and access to a new, permanent “Libby Pilot Program,” which covers services “tailored to specific health needs resulting from asbestos exposure” not covered by Medicare, like long-term care, medications, and transportation. Now, affected residents of Libby who have moved to any of 18 other counties (including six counties in Idaho and seven in Washington state) will be able to access those services without charge under an expansion of the program approved by CMS (Gerstenecker, “Libby Montana program expands,” The Western News, 2/4/14).

• Even a small unpaid medical debt can damage a person’s credit rating, making it harder and more expensive to get a mortgage or other loan. Medical bills account for about half of all bills reported to collection agencies and affect the credit record of about 20 percent of the population, according to Richard Cordray, director of the federal Consumer Financial Protection Bureau. About 40 percent of a sample of 5,000 mortgage applicants to a Texas firm, Supreme Lending, had medical debt in collection, with the average around $400. Most people were unaware of their debt. The problem is worsening with increasing deductibles and the rise of large physician and hospital groups, making it impossible for patients to negotiate debt with their physician (Rosenthal, “When Health Costs Harm Your Credit,” New York Times, 3/8/14).

• Massachusetts’ 2006 health reforms, the model for the ACA, did not solve the problem of unaffordable health care costs.  In 2012, more than one-third (38.7 percent) of insured Massachusetts adults reported problems with health care costs. The proportion of adults reporting problems with costs rose to 41.6 percent for people with incomes below 138 percent of poverty, and to 49.5 percent for people with incomes between 139 and 399 percent of poverty. Over 40 percent of insured, low-income people had problems with costs despite the fact that Massachusetts’ reform has stronger consumer protections against out-of-pocket costs (e.g. limited to $1,000 for people below 200 percent of poverty) than the ACA (Long, “Health insurance coverage is just the first step: Findings from Massachusetts,” Health Affairs blog, 3/26/14).

Congress boosts pay to private Medicare plans

In response to a multimillion-dollar lobbying campaign by the insurance industry, HHS reversed its plans for a 1.9 percent cut in payments (about $7 billion) to Medicare Advantage (MA) plans.  Instead, the plans will receive a 0.4 percent raise in 2014.  The plans were overpaid by 6 percent compared to the cost of taking care of similar enrollees in traditional Medicare in 2012, according to the Medicare Payment Advisory Committee.  MA plan enrollment grew by 9 percent last year, to 14.4 million.  According to a study by economists at the University of Pennsylvania, the excess payments to MA plans almost all go to marketing and profits, with only 17 percent going into benefits. Humana makes two-thirds of its total annual profit on MA plans (Hancock, “Decoding the high-stakes debate over Medicare Advantage cuts”, Kaiser Health News, 4/7/14).

CORPORATE MONEY AND CARE

For-profit hospital chains breed fraud, again

• The Justice Department is investigating the giant hospital chain Health Management Associates (HMA) for Medicare and Medicaid fraud. HMA, which recently merged with Community Health Systems (CHS) in a $7.6 billion deal to create the nation’s second largest for-profit hospital chain with over 200 hospitals, is the target of eight separate whistle-blower (qui tam) lawsuits in six states and several investigations by states’ attorneys general for using “sophisticated software systems, financial incentives, and threats” to inflate hospital admissions. HMA administrators used a customized software program called Pro-Med to monitor its physicians and drive admissions. For example, the software gave emergency department physicians daily scorecards on their progress towards meeting the firm’s target of admitting 50 percent of all ER patients over age 65, regardless of clinical necessity. Physicians and administrators who questioned HMA’s policies and procedures were threatened and fired. Former HMA CEO Gary Newsome, who received $22 million in compensation in the three years before his departure last year, was a top executive at CHS prior to being hired by HMA; CHS faces similar accusations. In 2003, HCA (the biggest for-profit hospital chain) paid the then-largest health care fraud settlement in U.S. history, $1.7 billion, for Medicare fraud (Creswell and Abelson, “Hospital Chain Said to Scheme to Inflate Bills,” New York Times, 1/23/14).

CEOs at top insurers still getting outsize pay

CEO pay at the nation’s biggest for-profit health insurers generally held firm, but in one case increased sharply between 2012 and 2013: Aetna’s CEO, Mark Bertolini, saw his compensation more than double to $30.7 million from $13.3 million. UnitedHealth Group’s Stephen Hemsley received $12.1 million in 2013, WellPoint’s Joseph Swedish received $17 million, Humana’s Bruce Broussard took in $8.8 million, and Cigna’s David Cordani received $13.5 million. In the three years since the passage of the ACA, 32 executives of the nation’s five biggest for-profit health insurance firms have received a total of $548.4 million in cash and stock options (“The Irony of Obamacare,” UNITE HERE, March 2014, and SEC schedules 14A in 2011, 2012, 2013).

CEOs at the nation’s two largest Medicaid managed care insurers received huge pay raises. Centene CEO Michael Neidorff received $14.5 million in compensation in 2013, up 71 percent from 2012. Centene runs Medicaid programs in nearly 20 states, including Missouri and Illinois. On top of his salary of $1.2 million, Neidorff got a $3 million bonus, $10 million in stock, and $82,798 of personal flights on a company plane, financial adviser fees, event tickets and security services. If Neidorff leaves Centene after a takeover, his golden parachute will be worth $31.9 million. That includes $24.2 million for unvested stock and $7.7 million in severance, bonus and incentive payments. Molina Healthcare CEO Mario Molina’s pay more than doubled, rising to $12 million from $5 million. Molina runs Medicaid programs in 11 states (David Nicklaus, “Centene CEO’s pay jumps to $14.5 million,” St. Louis Post Dispatch, 2/25/14, and SEC filings).

• Two recent studies of Patient Centered Medical Homes (PCMH) found that most quality indicators did not improve and there were no significant cost savings compared with control practices. The first study, supported by The Commonwealth Fund, was a randomized controlled trial that compared 18 small adult primary care practices in New York that were randomly chosen to receive two years of support and financial incentives to redesign their practices into PCMHs (as recognized by the National Committee of Quality Assurance), with 14 control practices. Compared to controls, PCMH physicians performed better on just 2 of 11 quality indicators (blood pressure control and breast cancer screening) and 1 of 10 efficiency indicators (care visits leading to ED visits) but there were no significant cost savings. The second study, a large three-year RAND trial comparing performance on 11 quality measures, utilization, and costs at 32 PCMH’s to 29 comparison practices in southern Pennsylvania, found significant improvement on only one quality measure (nephropathy screening in diabetes). No significant differences in utilization or costs of care were found other than a one-year increase in ambulatory care sensitive admissions in PCMH practices. Pilot practices accumulated bonuses averaging $92,000 per physician over the three-year study (which were excluded from the cost calculations). The lack of savings from PCMH’s suggests that delivery system reform alone won’t control costs (Fifield et al., JGIM, 6/1/13, and Friedberg et al., JAMA, 2/26/14).

GALLOPING TOWARD OLIGOPOLY

• Just two health insurers controlled over 50 percent of the market for private health insurance in 45 states in 2011. In 15 states, a single insurer had more than 50 percent of the private insurance market, according to the AMA’s most recent study of the lack of competition in the commercial health insurance market (AMA, “AMA Analysis Lists States Where One Private Health Insurer Rules,” 11/7/13).

• Anthem, the giant for-profit Blues plan, is the only firm selling health insurance on the exchange in New Hampshire. Nationwide, in 515 mostly rural, low-income counties across 15 states, only a single insurer is offering coverage on the health exchange. Premiums in those counties can be hundreds of dollars more per month than in nearby metropolitan areas. Overall, monthly premiums for a silver plan for a 40-year-old individual range from $154 in Minneapolis to $461 in southwest Georgia and $483 in Colorado’s mountain resort region, where many permanent residents are low-paid service workers. Insurers are not supposed to deny coverage to patients with pre-existing conditions since the passage of the ACA, and risk adjustment for sicker patients is supposed to make “cherry-picking” obsolete, but for-profit insurers have found new methods to accomplish the same thing. Aetna’s CEO, for example, admitted they were targeting areas with high employment and incomes to attract desirable customers (Martin and Weaver, “For many, few health plan choices,” Wall Street Journal, 2/12/14, and Ehley, “Ten worst places to live for Obamacare,” Fiscal Times, 2/20/14).

Corporate ‘finance people’ closely monitor patient care – for profits

“The practice of medicine is moving more rapidly than ever from decision-making by individual doctors toward control by corporate interests. The transformation is being fueled by the emergence of large hospital systems that include groups of physicians employed by hospitals and others, and new technologies that closely monitor care. While the new medicine offers significant benefits, like better coordination of a patient’s treatment and measurements of quality, critics say the same technology, size and power can be used against physicians who do not meet the measures established by companies trying to maximize profits. ‘It’s not a doctor in there watching those statistics – it’s the finance people,’” said an attorney representing whistle-blowers (Creswell and Abelson, “Hospital Chain Said to Scheme to Inflate Bills,” New York Times, 1/23/14).

• The Cleveland Clinic is contracting directly with national employers like Lowe’s to perform cardiac and orthopedic surgery on their employees. Lowe’s pays the cost of travel and waives deductibles and co-pays for its workers to have their surgery at the clinic for a set fee. While the Cleveland Clinic claims to have a lower-than-average readmission rate for cardiac patients, patients who are able to travel for care are undoubtedly younger, healthier, and more stable than the average cardiac patient. The practice raises questions about the clinic “cream skimming”  profitable patients, leaving more costly, sicker and less well-insured patients for local facilities (Daily Briefing, Advisory.com, “For Cleveland Clinic, employer deals have been a ‘win-win-win,’” 3/10/14).

PHARMA

• Gilead is marketing its new hepatitis C drug, sofosbuvir, in the U.S. for $84,000 for a three-month course ($168,000 for six months of treatment that some patients need) or about $1,000 per pill.  Gilead’s first quarter sales of $2.3 billion of sofosbuvir are the highest ever for a new drug.  During the same period, UnitedHealth Group, the nation’s largest insurer, spent over $100 million on sofosbuvir and other treatments for hepatitis C, some of which it attributed to pent-up demand for treatment by newly insured patients.  Sofosbuvir, which costs less than $1.62 per pill to produce, is sold for about $350 per pill in the U.K. Gilead says it will sell the drug to low-income countries for $2,000 for a 12-week course, but Médecins Sans Frontières says, based on their experience treating HIV, that diagnosis and comprehensive treatment costs must be limited to $500 per patient in both middle- and low- income nations to be successful (Pollack, “Gilead  revenue soars on hepatitis C drug” New York Times, 4/23/14, and “MSF responds to reports on Gilead pricing for hepatitis C drug sofosbuvir in developing countries,” Médecins Sans Frontières Access Campaign, 2/7/14).

As the price of specialty drugs soars, employers are shifting more of the cost onto patients. This year, 23 percent of employer-sponsored health plans and nearly all plans sold on the health exchanges have a separate tier with higher cost-sharing for specialty drugs, up from 5 percent of plans in 2006. Just 2.3 percent of prescriptions now account for 30 percent of all out-of-pocket costs. In 2012, U.S. regulators approved 39 drugs, the most since 1996. Of the 12 for cancer, 11 cost at least $100,000 a year (“Hard pills to swallow,” The Economist, 1/5/14, and Thomas, “Prices Soaring for Specialty Drugs, Researchers Find,” New York Times, 4/15/14).

• Questcor has raised the price of a 60-year-old immune system drug, Acthar, from $40 to more than $28,000 a vial since acquiring the rights to the drug for $100,000 in 2001. Acthar, made from the pituitary glands of pigs, was originally used to treat a rare disease in babies. Questcor has aggressively marketed the drug for more common conditions like multiple sclerosis and lupus, uses approved several decades ago when approval standards were low, and clinical trials were not needed. As a result, sales of Acthar topped $761 million last year, and the firm is being bought out by another drug maker, Mallinckrodt Pharmaceuticals, for $5.6 billion. Questcor’s promotional practices are under investigation by the Justice Department (Pollack, “Mallinckrodt pharmaceuticals to buy Questcor for $5.6 billion,” New York Times, 4/8/14).

• A federal jury in Louisiana awarded $6 billion in punitive damages against Takeda Pharmaceuticals, the manufacturer of the diabetes drug Actos, and $3 billion against Eli Lilly Inc., the U.S. distributor of Actos, for failing to disclose that the drug raises the risk of bladder cancer when used for more than one year. Regulators in France and Germany suspended sales of Actos over health concerns in 2009. (Li, Los Angeles Times, 4/8/14).

POLLS

• Nearly two-thirds (64.3 percent) of Maine physicians and medical students favor a single-payer approach to health system reform, up from 52.3 percent in 2008, according to a recent survey by the Maine Medical Association. The survey asked the following question both years: “When considering the topic of health care reform, would you prefer to make improvements to the current public/private system or a single-payer system such as a ‘Medicare for all’ approach?” Support for “improvements to the current public/private system” fell to 35.7 percent in 2014 from 47.4 percent in 2008. There was no significant difference in response to the question based upon age, geographic location, or MMA membership status. Primary care physicians and psychiatrists were more supportive of single payer than other physicians, as were physicians who did not own their own practices. More details of the survey are available on the association’s website at www.mainemed.com.

Vermont residents favor single payer 55 percent to 42 percent after being read a brief description and rationale for reform. An even greater majority, 70 percent, say they favor a system that would have the government pay medical bills directly instead of through insurance companies. The margin of support drops but remains a majority (51 percent in favor, 43 percent opposed) when told it would mean “the largest tax increase in Vermont history.” Women, younger adults, people with college or graduate degrees, and Democrats are more likely to be supportive. Three-fourths of Vermonters say they would either favor or remain neutral towards a candidate supporting single payer; only one-quarter of respondents said they would oppose such a candidate. The poll of 502 Vermonters in mid-January, at the height of problems with the rollout of the Vermont health exchange, was conducted by Boston-based Kiley and Co. with funding from the National Education Association (True, “Single-payer advocacy group gets boost from NEA, poll shows support for health reform,” Vtdigger.com, 2/21/2014).

• Despite a $27 billion investment by the federal government, nearly 70 percent of physicians think electronic health records have not been worth the effort, resources, and cost, according to a national survey of 1,000 physicians for Medical Economics. Sixty-nine percent of respondents said that coordination of care with hospitals has not improved, 67 percent dislike the functionality of their EHR system, and 66 percent of internists would not buy their current system. A qualitative study of 30 physician practices in six states by RAND found that a number of problems with EHR’s significantly worsened physician satisfaction. “Aspects of current EHRs that were particularly common sources of dissatisfaction included poor usability, time-consuming data entry, interference with face-to-face patient care, inefficient and less fulfilling work content, inability to exchange health information, and degradation of clinical documentation” (Verdon, “Physician outcry on EHR functionality, cost,” Medical Economics, 2/10/14, RAND 10/13).

INTERNATIONAL

• A survey of 20,045 adults in 11 industrialized countries, intended to form a baseline for the impact of the ACA on the U.S. health system in an international context, found that U.S. adults are far more likely than people in other nations to go without health care, have trouble paying medical bills, and encounter time-consuming health insurance paperwork or disputes, or claims unexpectedly not paid. The other nations studied were Australia, Canada, France, Germany, the Netherlands, Norway, Sweden, Switzerland and the U.K. Even insured U.S. adults were more likely than adults in other countries to forgo care because of costs and to struggle with medical bills. Forty-two percent of insured Americans reported paying $1,000 or more out-of-pocket for medical bills last year, compared to 2 percent of Swedes and 3 percent of people in the U.K.

Thirty-two percent of U.S. adults had to spend a lot of time on insurance paperwork or had an insurer deny a claim. Problems with insurers were also common in Switzerland (25 percent), the Netherlands (19 percent), and Germany (17 percent), the other three nations in the survey that use multiple payers (albeit highly regulated) for basic coverage in their systems. (Switzerland and the Netherlands use private insurance while Germany uses “sickness funds.”) There has been a steep increase in the proportion of people in the Netherlands forgoing care because of costs, rising from 8 percent in 2010 to 22 percent in 2013, a period in which the Netherlands implemented market-based reforms, along with austerity (Schoen et al., “Access, Affordability, And Insurance Complexity Are Often Worse In The United States Compared To Ten Other Countries,” Health Affairs, December 2013).

ACA WATCH

• Tom Scully, the former CMS chair who shepherded the Medicare drug bill – based on private, for-profit drug plans – through Congress in 2003, recently assured a group of hedge fund and private equity investment managers that “[Obamacare] is not a government takeover of medicine. It’s the privatization of health care” (Davidson, “The President wants you to get rich on Obamacare,” New York Times Magazine, 10/30/13).

Early enrollment figures

• A net of about 9.3 million uninsured adults between the ages of 18 and 64 gained coverage during the first quarter of 2014, according to a mid-March survey of 2,425 adults by RAND. An expansion of employer-based coverage (to 8.2 million people, of whom 7.1 million were uninsured) and Medicaid (to 5.9 million people, of whom 3.6 million were uninsured), not enrollment through the exchanges, accounted for most of the new coverage among the uninsured, the survey found. RAND estimated that two-thirds of the people who enrolled via the health exchanges had prior coverage, along with all but about 500,000 of the 7.8 million people who enrolled in individual plans directly through insurers. Overall, RAND found that the uninsured rate among 18-64 year olds dropped to 15.8 percent in 2014 from 20.5 percent in 2013. Because the data did not include the final two weeks of open enrollment, the actual uninsured rate for this group is likely to be slightly lower (Carman and Eibner, “Survey estimates net gain of 9.3 million American adults with health insurance,” RAND, April 2014).

A similar survey by the Urban Institute in early March estimated that 15.2 percent of adults aged 18-64 were uninsured. In states that are expanding their Medicaid programs, 12.4 percent of non-elderly adults were uninsured, compared with a rate of 18.1 percent in states not expanding Medicaid (Long, Urban Institute, 4/3/14).

• Nearly 83 percent of those signing up for private coverage through exchanges received a federal subsidy, but overall, only about 21 percent of people eligible for a subsidy actually enrolled, according to an early estimate by the Kaiser Family Foundation. A higher proportion – up to 40 percent – of those eligible enrolled in Washington, California, Connecticut and Rhode Island. Tragically, the ACA made no provisions for subsidies to people earning less than 100 percent of the federal poverty line because the authors assumed that all states would expand their Medicaid programs (Levitt, “How much financial assistance are people receiving under the Affordable Care Act,” Kaiser Family Foundation, 3/27/14).

The average federal subsidy for private health insurance premiums on the exchanges will be about $4,250 per enrollee in 2014, rising to $7,170 per enrollee in 2024, according to the Congressional Budget Office’s latest estimates. The CBO estimates that about 25 million people each year will purchase private insurance with federal subsidies between 2016 and 2024. Factoring in subsidized cost-sharing ($167 billion), federal subsidies to the private insurance industry over the 10-year period 2015-2024 will total $1.03 trillion (CBO, “Insurance Coverage Provisions of the Affordable Care Act,” April 2014).

• Several of the 14 state-based exchanges experienced major problems. Maryland, Massachusetts, Oregon, Nevada and Vermont replaced top officials, cancelled contracts with software companies and spent tens of millions of dollars on new contractors and fixes. Only about 63,000 people were able to sign up for private coverage in Maryland, far short of the state’s goal of 250,000 people. Maryland officials have decided to drop their exchange and start over with Connecticut’s exchange software. The software is free, but they’ll have to invest another $50 million to adapt it for Maryland. Oregon officials are dumping their $248 million exchange and switching to the federal exchange HealthCare.gov next year. The switch will cost about $35 million to complete. The Massachusetts Connector, which received $180 million in federal grant money to prepare for the transition to the ACA, was unable to sign people up for federally subsidized coverage. The state signed up about 30,000 people for unsubsidized coverage, and 138,000 people for “temporary coverage,” with many of the sign-ups occurring via paper applications. The state also asked HHS to allow 114,000 Massachusetts residents to stay in their current plans through September (“extended coverage”) due to their technical problems. Xerox and the Nevada health exchange are being sued for not passing on premiums and applications to insurers, leading to disputes among hospitals, patients, and insurers over medical bills (Chereb, “Bungling mars health care deadline in some states,” AP, 3/25/14; Walker, “MD votes to adopt health exchange software used in Connecticut,” Baltimore Sun, 4/2/14; Cassidy, “$180 million Fed connector tab eyed,” Boston Herald, 4/1/14; and Chereb, “Xerox, Nevada health exchange subject of class-action filing,” Las Vegas Sun, 4/2/14).

• Several states are concerned that their exchanges aren’t financially sustainable. The Hawaii Health Connector, which cost $54 million to build, only signed up 7,788 people, for a cost of $6,934 per enrollee; it is expected to cost $15 million annually to operate, but only bring in $1 million in revenues from a 2 percent fee on the plans it sells. The Hawaii exchange would have needed to sign up 150,000 people to be sustainable; officials now admit this was an “unrealistic” expectation in a state with 100,000 people who are uninsured, half of them eligible for Medicaid (Consillo, “Hawaii health connector won’t be sustainable after 2014,” Honolulu Star-Advertiser, 2/26/14).

Benefits

Low actuarial value, ultra-narrow networks, high administrative costs

• As of April 1, 20 percent of policies purchased through the exchanges were bronze, 65 percent were silver, 9 percent were gold, and 5 percent were platinum. Bronze plans have lower premiums but are not eligible for federal subsidies for cost-sharing (available to those with incomes below 250 percent of poverty), so most people enrolled in silver plans that are eligible for these additional subsidies (Summary enrollment report, HHS,  5/1/14).

• Patients are responsible for up to 50 percent of the cost of specialty drugs in plans sold on the exchanges, a burden that will hit people with chronic illness especially hard, according to reviews by Milliman Inc. and Avalere Health. Milliman reported, in a study of plans in California, New York, Florida and Texas, that the latter two states have especially high drug coinsurance, of 40 percent to 50 percent. An analysis of plans in 19 states by Avalere found that 60 percent of bronze plans and 23 percent of silver plans had drug coinsurance rates of 30 percent or more (“Chronically ill facing high drug costs under U.S. health law,” Reuters, 2/28/14).

• Every insurer offering plans on the health exchanges restricts patients to its own network of doctors and hospitals. Even more expensive plans in the same market from the same insurer don’t necessarily grant access to a wider choice of providers, and out-of-network care can be costly. Federal subsidies for cost-sharing don’t apply for out-of-network care, and out-of-network care costs may not count toward the out-of-pocket maximums ($6,350 for an individual, and $12,700 for a family, excluding premiums), leaving patients on the hook for the entire cost. A McKinsey & Co. analysis of 120 silver-level exchange plans found that 70 percent were narrow network, with at least 30 percent of the area’s largest hospitals excluded, or ultra-narrow, excluding at least 70 percent. While insurers can’t charge more for out-of-network emergency department care, patients placed on observation status or admitted to an out-of-network hospital are no longer shielded from uncovered costs (Andrews, “Warning, Opting Out of Your Insurance Plan’s Provider Network is Risky,” Kaiser Health News, 3/18/14).

• For the most part, patients were unable to verify if their doctors were covered by a particular plan on the exchange in advance of purchasing it. According to ZocDoc, an online appointment booking firm which tried to verify the accuracy of insurers’ directories, about half of the listings for in-network providers were wrong. The California exchange took down its directory in early February due to errors (Tozzi, “Obamacare limits choices under some plans,” Bloomberg Businessweek, 3/20/14).

• Individuals can keep coverage that doesn’t meet the minimum benefits standards of the ACA for another year, and in some cases until 2016, according to new rules from HHS. Insurance commissioners in 21 states and the District of Columbia have blocked the extension on the grounds that they need these people in the exchange risk pools to avoid premium increases (“Keeping Your Insurance Policy,” New York Times, 3/6/14).

Insurers will be allowed to spend more than the ACA’s limit of 20 percent of their premiums on overhead because of the rocky rollout of the exchanges. Insurers complain that it required them to hire more call-center staff, process applications manually, and, in some states, like Maryland, where the exchange hasn’t functioned at all, pay broker fees (Hancock and Appleby, “Insurers may get cost break thanks to rocky ACA rollout,” Kaiser Health News, 3/13/14).

• Insurers are also receiving more federal help in the form of new, lower, reinsurance rates. In 2014, reinsurance for high-cost cases will kick in at $45,000 in claims for one individual, down from $60,000, and extending to a cap of $250,000. While reinsurance is a temporary $10 billion program that, like the risk corridors (which limit gains or losses by insurers over 3 percent of premiums) is only in effect until 2016, risk adjustment is a permanent feature of the new law. Plans that can show they have enrolled a sicker population are supposed to receive payments from plans that have enrolled healthier people. But risk adjustment is easy to game (as repeatedly demonstrated in the Medicare Advantage program) by labeling patients with more diagnoses, known as “upcoding.” Insurers are already scrambling to find out about enrollees’ health conditions, which they say they need to know in order reduce the cost of caring for those patients. Cigna is calling enrollees to ask about health conditions, medications, and other medical needs, while Florida Blue is encouraging enrollees to fill out health risk forms and get tests for cholesterol and blood sugar (Mathews, “Health plans rush to size up new clients,” Wall Street Journal, 2/27/14).

• The penalty for not having health insurance by March 1, 2014, will “almost always” be more than the $95 figure often cited in news reports. The penalty is $95 or 1 percent of adjusted gross income, whichever is greater, minus some adjustments, up to the cost of the premium of a bronze plan. The penalty will rise to 2 percent of income or a minimum of $325 in 2015, and 2.5 percent of income but at least $695 in 2016. A “tax penalty calculator” is online at the Tax Policy Center (McKinnon, Wall Street Journal, 3/6/14).

• Insurers are required to keep people on their rolls for three months if payments are missed, but are only required to pay their medical bills for the first month, leaving providers on the hook for the other two months if payments are not forthcoming. (“Commenters say ACA grace period rule puts unfair burden on hospitals, providers,” Bloomberg BNA, 8/21/13).

Medicaid expansion

• As of March 28, 21 states have decided to opt out of the Medicaid expansion and three are still debating their participation (Missouri, Pennsylvania and Utah). Most of the states opting out require parents to make less than 50 percent of the federal poverty level to be eligible for Medicaid. The Commonwealth Fund estimated that states opting out of the Medicaid expansion will forgo an estimated $34.7 billion in federal funds between 2014 and 2022 (Advisory.com and Glied et al., Commonwealth Fund, December 2013).

States privatize, shrink Medicaid benefits

Arkansas, which was allowed by HHS to use its federal Medicaid funds to buy private insurance for 94,000 Medicaid-eligible residents this year, diverted anyone thought to be medically frail (about 10 percent of new enrollees) to traditional Medicaid, thereby selectively enrolling the healthy in four for-profit, “private option” plans, which receive $476 per person, per month. Now Arkansas is seeking waivers to shift more costs onto patients by (1) expanding the use of co-pays to people with incomes as low as 50 percent of poverty (only enrollees with incomes between 100 and 138 percent of poverty are currently charged co-pays), (2) curtailing non-emergency transportation assistance, and (3) setting up health savings accounts for beneficiaries (without necessarily putting funds in them). The state’s Republican Party has threatened to end the expansion unless CMS approves these changes (DeMillo, “Arkansas officials eye changes to Medicaid plan,” AP, 3/5/14, and Goodnough, “In Arkansas, private option Medicaid plan could be derailed,” New York Times, 2/11/14).

Several other states are appealing to HHS to institute premiums or co-pays for Medicaid enrollees, including Arizona, Iowa, Michigan, Indiana, New Hampshire, Pennsylvania and Tennessee. Iowa wants to charge Medicaid enrollees premiums of $30 a month that beneficiaries can “earn back” by quitting smoking or losing weight. Premiums discourage uninsured poor people from enrolling in Medicaid while raising little in new health funds. Similarly, co-pays penalize the sick, particularly those with chronic illness (Saloner et al., “Pinching the Poor,” NEJM, 3/27/14, and Vestal, “‘Private Option’ for Medicaid Expansion Would Cut Some Benefits,” KHN, 3/27/14).

• The number of long-term care residents enrolled in mandatory Medicaid managed care is projected to double this year to 1.2 million. Florida, New Jersey, Ohio, California, and Virginia are implementing statewide mandates this year, while some other states, including New York, Texas, and Rhode Island, are expanding the approach to additional counties. “The mandatory transition of large numbers of consumers who use long-term care … is unprecedented,” according to Laura Summer at Georgetown (Galewitz, “States accelerate shift of nursing home residents into Medicaid managed care,” 2/11/14).

Employer mandate delayed, cap on deductibles for employees of small business eliminated

• The employer mandate in the ACA was slated to begin January 1, 2014. Now, the large employer mandate (>100 employees) has been postponed for one year, and will be phased in, so that in 2015 employers only need to cover 70 percent of employees working 30 or more hours per week to avoid a penalty, rising to 95 percent of workers in 2016. The deadline for employers with 51-99 workers to provide coverage for their workers or pay a fine was also extended for an additional year, to 2016. Seasonal employees who work six months or less are not considered full-time employees.

• Businesses with 50 workers or less are not required to provide or report coverage, but the federal government and 16 states and the District of Columbia have set up separate exchanges for small businesses and their employees under a program called the Small Business Health Insurance Options Project (SHOP). In 14 states and D.C., SHOP exchanges are facilitating small business owners’ ability to shift costs onto their workers through defined contributions. Instead of covering a uniform set of benefits for every employee, employers are permitted to contribute a set percentage (typically 50 percent) of the cost of an index plan towards the cost of the policy of the employee’s choice, making the worker responsible for the difference. While the ACA required plans sold through SHOP to limit deductibles to $4,000 for family policies and $2,000 for individual coverage, the cap on deductibles was removed in the “doc fix” legislation passed in March (Dash, Commonwealth Fund, 3/14, and Lieberman, “Repeal on deductible caps marks another step in The Great Cost Shift,” Columbia Journalism Review, 4/11/14).

Labor issues under the ACA

• Union-management-run health insurance plans (Taft-Hartley plans) are not eligible for subsidies under the ACA; subsidies are restricted to the private plans sold on the exchanges. As a result, firms hiring nonunion workers with access to subsidized plans have a competitive advantage over unionized firms. In addition, firms with employees working less than 30 hours per week are not required to provide coverage, so there is a strong incentive for employers to cut workers’ hours. Labor unions warn that the ACA will lead to cuts in wages and benefits for the middle class (Mark Dudzic, “Ten things unions need to look out for when bargaining under Obamacare,” www.laborforsinglepayer.org).