More Insured, but the Choices Are Narrowing

By Reed Abelson
The New York Times, May 12, 2014

In the midst of all the turmoil in health care these days, one thing is becoming clear: No matter what kind of health plan consumers choose, they will find fewer doctors and hospitals in their network — or pay much more for the privilege of going to any provider they want.

These so-called narrow networks, featuring limited groups of providers, have made a big entrance on the newly created state insurance exchanges, where they are a common feature in many of the plans. While the sizes of the networks vary considerably, many plans now exclude at least some large hospitals or doctors’ groups. Smaller networks are also becoming more common in health care coverage offered by employers and in private Medicare Advantage plans.

Insurers, ranging from national behemoths like WellPoint, UnitedHealth and Aetna to much smaller local carriers, are fully embracing the idea, saying narrower networks are essential to controlling costs and managing care.

“We have to break people away from the choice habit that everyone has,” said Marcus Merz, the chief executive of PreferredOne, an insurer in Golden Valley, Minn., that is owned by two health systems and a physician group.

Nonetheless, for people who are directly picking plans in the open markets, insurers say price is turning out to be critical. People “are weighing affordability and breadth of network,” said Karen Ignagni, the chief executive of America’s Health Insurance Plans, an industry trade group. “What we’re finding is individuals are experiencing a preference for affordability,” she said.

****

White House defends cost-containment efforts in health-care reform bills

By Shailagh Murray
The Washington Post, November 26, 2009

Critics of the Democratic bills point to cost control as a chief deficiency. Karen Ignagni, president of America’s Health Insurance Plans, said the Senate bill includes only “pilot programs and timid steps” to reform the health-care delivery system, “given the scope of the cost challenge the nation faces.”

Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, “Health costs will continue to weigh down the economy and place a crushing burden on employers and families.”

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/25/AR2009112503474.html

Comment:

By Don McCanne, MD

During the health reform process, AHIP health insurance lobbyist Karen Ignagni stated repeatedly that health insurance is not going to be affordable unless lawmakers do something to control health care costs. So is health care cost containment a function of the government or a function of private insurers? Let see how this is playing out.

According to Ignagni, in 2009 the Senate bill – the Affordable Care Act – contained only timid steps to control costs. It was clear that the government was not going to play any major role in controlling costs – certainly not in regulating health care prices, as they do quite successfully in most other wealthy nations.

The public sector uses administered prices. The private sector depends more on price competition within the marketplace. Because the government did not act, the insurance industry has to depend on private market approaches, even though Kenneth Arrow had shown long ago that market dynamics do not work in health care.

In markets, price competition is an important tool. But in health care, only at the margin can price shopping be effective. The private insurers have been inserted as our price shopping intermediaries. They force hospitals and physicians to compete on price, and they then exclude from their plans those that fall short of the lowest bids. Even though they claim that they select their networks based on quality, it is the lower prices that allow them to keep their insurance premiums competitive.

This process is not new. Establishing plan networks with contracted payment rates was the most important innovation during the managed care revolution. That did slow temporarily the rate of increase in health care costs. What is new is that the plans are trying to drive much harder bargains with providers that want to be part of their now narrower networks. In response, hospitals and physicians are now consolidating in order to be “must have” providers that insurers need for their networks. Of course, that weakens the negotiating position of the insurers. So we are seeing a loss of choice of health care professionals and institutions in exchange for only very modest reductions in health insurance premiums.

More recently, Karen Ignagni is claiming that consumers are choosing “affordability” (lower premiums) over “breadth of network” (greater choice of providers). According to the industry, it is the patients who elect to go the cheap – a classic example of blaming the victim. Most people buying insurance are relatively healthy but are concerned about the very high premiums, so they will choose plans with lower premiums, often not even knowing which providers are in the networks. But that does not mean that they would prefer to give up access to physicians and hospitals whom they trust and where they believe that they could get the best care.

Thus we can have distorted price competition in the dysfunctional health care marketplace with the self-serving insurers functioning quite ineffectively as our price shopping intermediaries as they take away our choices in health care, or we can have a single government entity that uses administered pricing in a system that allows us free choices in health care and makes it affordable for all through progressive public funding. Price competition in establishing provider networks is a very weak tool to contain costs, and losing choices in health care is too great of a price to pay.

We do not have to choose between affordability and breadth of network. We can make health care affordable for all of us while getting rid of the insurers and their restrictive networks, that is if we’re willing to quit playing the victim role.

More Insured, but the Choices Are Narrowing

By Reed Abelson
The New York Times, May 12, 2014

In the midst of all the turmoil in health care these days, one thing is becoming clear: No matter what kind of health plan consumers choose, they will find fewer doctors and hospitals in their network — or pay much more for the privilege of going to any provider they want.

These so-called narrow networks, featuring limited groups of providers, have made a big entrance on the newly created state insurance exchanges, where they are a common feature in many of the plans. While the sizes of the networks vary considerably, many plans now exclude at least some large hospitals or doctors’ groups. Smaller networks are also becoming more common in health care coverage offered by employers and in private Medicare Advantage plans.

Insurers, ranging from national behemoths like WellPoint, UnitedHealth and Aetna to much smaller local carriers, are fully embracing the idea, saying narrower networks are essential to controlling costs and managing care.

“We have to break people away from the choice habit that everyone has,” said Marcus Merz, the chief executive of PreferredOne, an insurer in Golden Valley, Minn., that is owned by two health systems and a physician group.

Nonetheless, for people who are directly picking plans in the open markets, insurers say price is turning out to be critical. People “are weighing affordability and breadth of network,” said Karen Ignagni, the chief executive of America’s Health Insurance Plans, an industry trade group. “What we’re finding is individuals are experiencing a preference for affordability,” she said.

http://www.nytimes.com/2014/05/13/business/more-insured-but-the-choices-…

****

White House defends cost-containment efforts in health-care reform bills

By Shailagh Murray
The Washington Post, November 26, 2009

Critics of the Democratic bills point to cost control as a chief deficiency. Karen Ignagni, president of America’s Health Insurance Plans, said the Senate bill includes only “pilot programs and timid steps” to reform the health-care delivery system, “given the scope of the cost challenge the nation faces.”

Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, “Health costs will continue to weigh down the economy and place a crushing burden on employers and families.”

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/25/AR200911…

During the health reform process, AHIP health insurance lobbyist Karen Ignagni stated repeatedly that health insurance is not going to be affordable unless lawmakers do something to control health care costs. So is health care cost containment a function of the government or a function of private insurers? Let see how this is playing out.

According to Ignagni, in 2009 the Senate bill – the Affordable Care Act – contained only timid steps to control costs. It was clear that the government was not going to play any major role in controlling costs – certainly not in regulating health care prices, as they do quite successfully in most other wealthy nations.

The public sector uses administered prices. The private sector depends more on price competition within the marketplace. Because the government did not act, the insurance industry has to depend on private market approaches, even though Kenneth Arrow had shown long ago that market dynamics do not work in health care.

In markets, price competition is an important tool. But in health care, only at the margin can price shopping be effective. The private insurers have been inserted as our price shopping intermediaries. They force hospitals and physicians to compete on price, and they then exclude from their plans those that fall short of the lowest bids. Even though they claim that they select their networks based on quality, it is the lower prices that allow them to keep their insurance premiums competitive.

This process is not new. Establishing plan networks with contracted payment rates was the most important innovation during the managed care revolution. That did slow temporarily the rate of increase in health care costs. What is new is that the plans are trying to drive much harder bargains with providers that want to be part of their now narrower networks. In response, hospitals and physicians are now consolidating in order to be “must have” providers that insurers need for their networks. Of course, that weakens the negotiating position of the insurers. So we are seeing a loss of choice of health care professionals and institutions in exchange for only very modest reductions in health insurance premiums.

More recently, Karen Ignagni is claiming that consumers are choosing “affordability” (lower premiums) over “breadth of network” (greater choice of providers). According to the industry, it is the patients who elect to go the cheap – a classic example of blaming the victim. Most people buying insurance are relatively healthy but are concerned about the very high premiums, so they will choose plans with lower premiums, often not even knowing which providers are in the networks. But that does not mean that they would prefer to give up access to physicians and hospitals whom they trust and where they believe that they could get the best care.

Thus we can have distorted price competition in the dysfunctional health care marketplace with the self-serving insurers functioning quite ineffectively as our price shopping intermediaries as they take away our choices in health care, or we can have a single government entity that uses administered pricing in a system that allows us free choices in health care and makes it affordable for all through progressive public funding. Price competition in establishing provider networks is a very weak tool to contain costs, and losing choices in health care is too great of a price to pay.

We do not have to choose between affordability and breadth of network. We can make health care affordable for all of us while getting rid of the insurers and their restrictive networks, that is if we’re willing to quit playing the victim role.

Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

By Laurence C. Baker, M. Kate Bundorf and Daniel P. Kessler
Health Affairs, May 2014

The share of US physician practices owned by hospitals more than doubled from 2002 to 2008. This trend toward vertical integration between hospitals and physicians means that more producers of complementary services that were once independent are now either commonly owned or related by contract.

Whether this trend has been good for consumers has been the subject of considerable debate. On the one hand, vertical integration has the potential to improve the quality and efficiency of care by reducing what are broadly described by economists as “transaction costs.” For example, closer ties between physicians and hospitals can improve communication across care settings and reduce wasteful duplication of diagnostic tests.

On the other hand, vertical integration may hurt consumers by allowing hospitals and physicians to raise prices. By employing or contracting with physicians, hospitals may increase their market power by amassing control over a larger bundle of services or by depriving their rivals of a source of or destination for referrals. In addition, vertical integration may increase physicians’ incentives to supply unnecessary treatments if such treatments are used as a vehicle to pay what are effectively kickbacks for inappropriate referrals.

Understanding how vertical integration of physicians and hospitals affects spending and the quality of care has become especially important in recent years. The Affordable Care Act creates incentives that are likely to intensify the historical trend toward vertical integration. The act rewards doctors and hospitals that join together in an accountable care organization (ACO) by making them eligible for cash bonuses from Medicare. In theory, ACOs affect only how providers relate to Medicare. However, most health policy analysts believe that in practice, these organizations will increase the extent to which doctors and hospitals bargain with private purchasers jointly instead of independently.

From the Discussion

Vertical integration can have both socially beneficial and socially harmful effects. There is almost universal agreement that greater coordination of care, especially between physicians and hospitals, would be in patients’ best interests. At the same time, health policy analysts have expressed the concern that integration can have unintended harmful consequences for consumers. According to economic theory, vertical integration has the potential to increase the market power of providers, especially hospitals, and to encourage physicians to supply inappropriate treatments by facilitating hospitals’ payments of kickbacks that would be illegal if they were made formally.

Our study had two key findings. First, in its tightest form, vertical integration appears to lead to statistically and economically significant increases in hospital prices and spending. This is consistent with the hypothesis that vertical integration increases hospitals’ market power. We found that a one-standard-deviation increase in the market share of hospitals that own physician practices was associated with significant increases in prices and spending of 2–3 percent. In comparison, a one-standard-deviation increase in the hospital Hirschman-Herfindahl index increased prices and spending by 4–6 percent.

Second, the consequences of looser forms of vertical integration were more benign and potentially socially beneficial. Increases in these forms of integration did not appear to increase prices or spending significantly and may even decrease hospital admission rates. This finding is consistent with the hypothesis that vertical integration can improve the coordination of care.

However, the effects on volume associated with these types of integration were small — so small that they did not generate a significant reduction in hospital spending. In addition, although our estimates of the effect of contractual integration on price were statistically indistinguishable from zero, the imprecision of our estimates limited our ability to confidently assess their true impact.

http://content.healthaffairs.org/content/33/5/756.abstract

Comment:

By Don McCanne, MD

An intent of the Affordable Care Act was to reduce health care spending through the establishment of more efficient integrated health systems, operating as accountable care organizations. The ultimate integration is for hospitals to assume ownership of physician practices. This study demonstrates that this form of vertical integration does not reduce prices and spending but rather increases them, likely through the anti-competitive effects of such consolidation. Looser forms of vertical integration (contracts rather than ownership) also failed to achieve a reduction in hospital spending.

One important aspect of this study that will likely escape the attention of the policy community is that they used data from Truven Analytics MarketScan – a data base of claims filed by privately insured people who obtained insurance through a participating employer. Thus the ineffectiveness in recovering through lower prices the efficiencies of the consolidated systems represents a failure of the private insurance industry, whether functioning as insurers or as administrators for self-insured employers.

So maybe vertically integrated systems, in which the hospitals own physician practices, have the market clout to prevent efficiency savings from being passed on to the purchasers of health care, but if we had a single payer financing system, our public stewards would ensure that we paid the right amount through administered pricing rather than being victim to unfairly leveraged market negotiations. We need to replace marketplace oligopolies with our own public monopsony – an improved Medicare for all.

Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

By Laurence C. Baker, M. Kate Bundorf and Daniel P. Kessler
Health Affairs, May 2014

The share of US physician practices owned by hospitals more than doubled from 2002 to 2008. This trend toward vertical integration between hospitals and physicians means that more producers of complementary services that were once independent are now either commonly owned or related by contract.

Whether this trend has been good for consumers has been the subject of considerable debate. On the one hand, vertical integration has the potential to improve the quality and efficiency of care by reducing what are broadly described by economists as “transaction costs.” For example, closer ties between physicians and hospitals can improve communication across care settings and reduce wasteful duplication of diagnostic tests.

On the other hand, vertical integration may hurt consumers by allowing hospitals and physicians to raise prices. By employing or contracting with physicians, hospitals may increase their market power by amassing control over a larger bundle of services or by depriving their rivals of a source of or destination for referrals. In addition, vertical integration may increase physicians’ incentives to supply unnecessary treatments if such treatments are used as a vehicle to pay what are effectively kickbacks for inappropriate referrals.

Understanding how vertical integration of physicians and hospitals affects spending and the quality of care has become especially important in recent years. The Affordable Care Act creates incentives that are likely to intensify the historical trend toward vertical integration. The act rewards doctors and hospitals that join together in an accountable care organization (ACO) by making them eligible for cash bonuses from Medicare. In theory, ACOs affect only how providers relate to Medicare. However, most health policy analysts believe that in practice, these organizations will increase the extent to which doctors and hospitals bargain with private purchasers jointly instead of independently.

From the Discussion

Vertical integration can have both socially beneficial and socially harmful effects. There is almost universal agreement that greater coordination of care, especially between physicians and hospitals, would be in patients’ best interests. At the same time, health policy analysts have expressed the concern that integration can have unintended harmful consequences for consumers. According to economic theory, vertical integration has the potential to increase the market power of providers, especially hospitals, and to encourage physicians to supply inappropriate treatments by facilitating hospitals’ payments of kickbacks that would be illegal if they were made formally.

Our study had two key findings. First, in its tightest form, vertical integration appears to lead to statistically and economically significant increases in hospital prices and spending. This is consistent with the hypothesis that vertical integration increases hospitals’ market power. We found that a one-standard-deviation increase in the market share of hospitals that own physician practices was associated with significant increases in prices and spending of 2–3 percent. In comparison, a one-standard-deviation increase in the hospital Hirschman-Herfindahl index increased prices and spending by 4–6 percent.

Second, the consequences of looser forms of vertical integration were more benign and potentially socially beneficial. Increases in these forms of integration did not appear to increase prices or spending significantly and may even decrease hospital admission rates. This finding is consistent with the hypothesis that vertical integration can improve the coordination of care.

However, the effects on volume associated with these types of integration were small — so small that they did not generate a significant reduction in hospital spending. In addition, although our estimates of the effect of contractual integration on price were statistically indistinguishable from zero, the imprecision of our estimates limited our ability to confidently assess their true impact.

http://content.healthaffairs.org/content/33/5/756.abstract

An intent of the Affordable Care Act was to reduce health care spending through the establishment of more efficient integrated health systems, operating as accountable care organizations. The ultimate integration is for hospitals to assume ownership of physician practices. This study demonstrates that this form of vertical integration does not reduce prices and spending but rather increases them, likely through the anti-competitive effects of such consolidation. Looser forms of vertical integration (contracts rather than ownership) also failed to achieve a reduction in hospital spending.

One important aspect of this study that will likely escape the attention of the policy community is that they used data from Truven Analytics MarketScan – a data base of claims filed by privately insured people who obtained insurance through a participating employer. Thus the ineffectiveness in recovering through lower prices the efficiencies of the consolidated systems represents a failure of the private insurance industry, whether functioning as insurers or as administrators for self-insured employers.

So maybe vertically integrated systems, in which the hospitals own physician practices, have the market clout to prevent efficiency savings from being passed on to the purchasers of health care, but if we had a single payer financing system, our public stewards would ensure that we paid the right amount through administered pricing rather than being victim to unfairly leveraged market negotiations. We need to replace marketplace oligopolies with our own public monopsony – an improved Medicare for all.

The Problem With Free Health Care

By H. Gilbert Welch
The New York Times, April 30, 2014

The Affordable Care Act does have its flaws. Here’s a big one: It favors screening over diagnosis.

While the distinction may seem arcane, it has real-world implications. Screening is what we offer to the well; it’s the effort to find abnormalities in those who do not have signs or symptoms of disease. Because screening is considered part of preventive care under the Affordable Care Act, it is provided at no charge.

Diagnosis is what we offer to those who do have signs or symptoms of disease. Because diagnosis is not preventive care, it is subject to deductibles and co-payments.

I wish money wasn’t such a powerful incentive in medical care. But the economists are right: Incentives matter. Right now they favor lower risk patients (those being screened) over higher risk ones (those with signs and symptoms).

They also encourage a feeding frenzy among providers to recategorize diagnostic testing as screening. Free screenings were seen as a way to get people through the door and ideally to find and address problems before they become more dangerous and expensive.

But in practice, it may not work this way. Some hospitals offer free screening knowing full well that the costs will be more than made up for by all the subsequent services required. More testing, false alarms and overdiagnosis are all part of screening. And if you make it free, patients are less likely to give proper consideration to these potential harms — not to mention the potential for a lot of out-of-pocket costs down the line.

Here’s the fix: Eliminate the incentive mismatch between screening and diagnosis. Treat them equally.

We need people to consider medical care carefully, and that’s what cost sharing is all about.

****

When Cost Deters Care

Letters, The New York Times, May 8, 2014

To the Editor:

H. Gilbert Welch is right to be concerned that patients will forgo diagnostic mammograms, colonoscopies and other kinds of care for serious conditions if they aren’t free, as “prevention” is under the Affordable Care Act (“The Problem With Free Health Care,” Op-Ed, May 1).

Studies show that even patients who need emergency care for a potentially serious problem will go without it if they are in a high-deductible health plan (although this increases their risk of subsequent hospitalization). And therein lies the problem. While cost sharing discourages overuse of medical care, it worsens a greater problem, that of underuse.

In an 11-nation survey by the Commonwealth Fund, more than a third (37 percent) of Americans reported not going to the doctor when sick or not filling a prescription because of cost, compared with a small percentage of people in Britain, Sweden and Norway. The difference: They have single-payer systems in which care is generally free at the point of service.

Ida Hellander

Chicago, May 2, 2014

The writer is director of health policy and programs for Physicians for a National Health Program.

****

Access, Affordability, and Insurance Complexity Are Often Worse in the United States Compared to 10 Other Countries

By Cathy Schoen, Robin Osborn, David Squires, and Michelle M. Doty 
The Commonwealth Fund, November 13, 2013

Synopsis

A 2013 survey conducted in 11 countries finds that U.S. adults are significantly more likely than their counterparts to forgo health care because of the cost, to have difficulty paying for care even when they have insurance, and to deal with time-consuming insurance issues.

http://www.commonwealthfund.org/Publications/In-the-Literature/2013/Nov/Access-Affordability-and-Insurance.aspx

USPSTF A and B Recommendations: http://www.uspreventiveservicestaskforce.org/uspstf/uspsabrecs.htm

Comment:

By Don McCanne, MD

H. Gilbert Welch has been a leading voice in warning us about the costs and adverse consequences of overdiagnosis. When there is little benefit but greater potential harm and expense for a given diagnosis, it usually would be better if that diagnosis had never been made. This is especially true when a screening test is done on a healthy individual if it leads to a diagnosis that will be of no help but could result in harm to the patient.

When should screening tests be done? The decisions should be made by patients after their health care professionals provide them with adequate information regarding the potential benefits and adverse consequences of the screening procedures. That advice should reflect the latest information available from sources such as the U.S. Preventive Services Task Force (USPSTF). In fact, the Affordable Care Act specifically covers, without charge, level A and B preventive service recommendations of the USPSTF. (Link above – USPSTF recommendations are updated as new information becomes available.)

Dr. Welch would add one other consideration. He would require patients to pay a portion of the costs for the screening tests just as they would for diagnostic testing used to evaluate specific symptoms or signs. It is well known that if people have to pay for screening tests that they should have, many will decline them simply because of the expense. This can result in adverse health outcomes or even death. If a screening test warrants an A or B USPSTF rating, its benefits do outweigh the potential harm, and it should be offered to the patient without placing it behind a “paywall” (deductible, coinsurance or copayment).

Dr. Welch has it backwards. We should eliminate the incentive mismatch between screening and diagnosis, but we should do that by removing the paywalls for diagnostic and therapeutic services rather than creating new ones for preventive screening.

PNHP’s director of health policy, Ida Hellander, has it exactly right. Rather than overuse, we have a much greater problem with underuse of beneficial health care services, and cost-sharing paywalls worsen that problem.

The Commonwealth Fund study that Dr. Hellander cites shows that the United States has a much greater cost-related access problem than do the other ten wealthy nations studied, yet those nations spend far less on total health care than we do, without the necessity of erecting these paywall financial barriers to care.

We can thank Dr. Welch for his great work in explaining to us the potential negative consequences of screening tests. With this information we can better inform the patient who has to make the decision on undergoing screening. But we can also thank Dr. Hellander for her great work on explaining to us why health care should be based on patient need rather than on the patient’s ability to pay.

Quite simply, patients should have the care that medical science dictates they should have, if they want it, but not denied that care because they feel they cannot afford it.

The Problem With Free Health Care

By H. Gilbert Welch
The New York Times, April 30, 2014

The Affordable Care Act does have its flaws. Here’s a big one: It favors screening over diagnosis.

While the distinction may seem arcane, it has real-world implications. Screening is what we offer to the well; it’s the effort to find abnormalities in those who do not have signs or symptoms of disease. Because screening is considered part of preventive care under the Affordable Care Act, it is provided at no charge.

Diagnosis is what we offer to those who do have signs or symptoms of disease. Because diagnosis is not preventive care, it is subject to deductibles and co-payments.

I wish money wasn’t such a powerful incentive in medical care. But the economists are right: Incentives matter. Right now they favor lower risk patients (those being screened) over higher risk ones (those with signs and symptoms).

They also encourage a feeding frenzy among providers to recategorize diagnostic testing as screening. Free screenings were seen as a way to get people through the door and ideally to find and address problems before they become more dangerous and expensive.

But in practice, it may not work this way. Some hospitals offer free screening knowing full well that the costs will be more than made up for by all the subsequent services required. More testing, false alarms and overdiagnosis are all part of screening. And if you make it free, patients are less likely to give proper consideration to these potential harms — not to mention the potential for a lot of out-of-pocket costs down the line.

Here’s the fix: Eliminate the incentive mismatch between screening and diagnosis. Treat them equally.

We need people to consider medical care carefully, and that’s what cost sharing is all about.

http://www.nytimes.com/2014/05/01/opinion/the-problem-with-free-health-c…

****

When Cost Deters Care

Letters, The New York Times, May 8, 2014

To the Editor:

H. Gilbert Welch is right to be concerned that patients will forgo diagnostic mammograms, colonoscopies and other kinds of care for serious conditions if they aren’t free, as “prevention” is under the Affordable Care Act (“The Problem With Free Health Care,” Op-Ed, May 1).

Studies show that even patients who need emergency care for a potentially serious problem will go without it if they are in a high-deductible health plan (although this increases their risk of subsequent hospitalization). And therein lies the problem. While cost sharing discourages overuse of medical care, it worsens a greater problem, that of underuse.

In an 11-nation survey by the Commonwealth Fund, more than a third (37 percent) of Americans reported not going to the doctor when sick or not filling a prescription because of cost, compared with a small percentage of people in Britain, Sweden and Norway. The difference: They have single-payer systems in which care is generally free at the point of service.

Ida Hellander

Chicago, May 2, 2014

The writer is director of health policy and programs for Physicians for a National Health Program.

http://www.nytimes.com/2014/05/09/opinion/when-cost-deters-care.html?ref…

****

Access, Affordability, and Insurance Complexity Are Often Worse in the United States Compared to 10 Other Countries

By Cathy Schoen, Robin Osborn, David Squires, and Michelle M. Doty 
The Commonwealth Fund, November 13, 2013

Synopsis

A 2013 survey conducted in 11 countries finds that U.S. adults are significantly more likely than their counterparts to forgo health care because of the cost, to have difficulty paying for care even when they have insurance, and to deal with time-consuming insurance issues.

http://www.commonwealthfund.org/Publications/In-the-Literature/2013/Nov/…

USPSTF A and B Recommendations:http://www.uspreventiveservicestaskforce.org/uspstf/uspsabrecs.htm

H. Gilbert Welch has been a leading voice in warning us about the costs and adverse consequences of overdiagnosis. When there is little benefit but greater potential harm and expense for a given diagnosis, it usually would be better if that diagnosis had never been made. This is especially true when a screening test is done on a healthy individual if it leads to a diagnosis that will be of no help but could result in harm to the patient.

When should screening tests be done? The decisions should be made by patients after their health care professionals provide them with adequate information regarding the potential benefits and adverse consequences of the screening procedures. That advice should reflect the latest information available from sources such as the U.S. Preventive Services Task Force (USPSTF). In fact, the Affordable Care Act specifically covers, without charge, level A and B preventive service recommendations of the USPSTF. (Link above – USPSTF recommendations are updated as new information becomes available.)

Dr. Welch would add one other consideration. He would require patients to pay a portion of the costs for the screening tests just as they would for diagnostic testing used to evaluate specific symptoms or signs. It is well known that if people have to pay for screening tests that they should have, many will decline them simply because of the expense. This can result in adverse health outcomes or even death. If a screening test warrants an A or B USPSTF rating, its benefits do outweigh the potential harm, and it should be offered to the patient without placing it behind a “paywall” (deductible, coinsurance or copayment).

Dr. Welch has it backwards. We should eliminate the incentive mismatch between screening and diagnosis, but we should do that by removing the paywalls for diagnostic and therapeutic services rather than creating new ones for preventive screening.

PNHP’s director of health policy, Ida Hellander, has it exactly right. Rather than overuse, we have a much greater problem with underuse of beneficial health care services, and cost-sharing paywalls worsen that problem.

The Commonwealth Fund study that Dr. Hellander cites shows that the United States has a much greater cost-related access problem than do the other ten wealthy nations studied, yet those nations spend far less on total health care than we do, without the necessity of erecting these paywall financial barriers to care.

We can thank Dr. Welch for his great work in explaining to us the potential negative consequences of screening tests. With this information we can better inform the patient who has to make the decision on undergoing screening. But we can also thank Dr. Hellander for her great work on explaining to us why health care should be based on patient need rather than on the patient’s ability to pay.

Quite simply, patients should have the care that medical science dictates they should have, if they want it, but not denied that care because they feel they cannot afford it.

Hospitals plot the end of insurance companies

By Rob Garver
The Fiscal Times, March 27, 2014

At The Atlantic’s Health Care Forum in Washington on Thursday [March 27], health care and business professionals said that there’s an increasing trend in the industry toward cutting insurance companies out of the process entirely, as large, regional hospital systems move into the insurance business. 

Dr. Kenneth L. Davis, CEO and president of Mount Sinai Health System, the largest health care provider in the state of New York, said that starting next year, Mt. Sinai will begin offering its own Medicare Advantage plan. It will look for other opportunities to bring premium payments directly into the hospital system, rather than filtering them through insurance companies.

Davis said he expects organizations similar to his to move in the same direction. “Inevitably the large systems are going to move to take part of the premium dollar,” he said.

For both non-profit systems like Mt. Sinai and for-profit systems, he said, retaining more and more of the health care premiums paid by consumers is essential to providing a full spectrum of care. He said that his system’s St. Luke’s Hospital in New York runs a psychiatric program that loses $14 million per year. It’s “not sustainable,” he said, so the system needs to cross-subsidize the money-losing services that it nonetheless must continue to provide, with income from more profitable services, such as orthopedic surgery.

http://www.thefiscaltimes.com/Articles/2014/03/27/Hospitals-Plot-End-Insurance-Companies

****

Comment:

By Kip Sullivan, JD

The media is doing a good job of telling the public that consolidation within the hospital industry accelerated dramatically after the Affordable Care Act was enacted. The media is doing a terrible job of explaining why. 

The flabbiness of managed-care speak is part of the problem. So too is the tendency of merger partners in all sectors of the economy to feign disinterest in market power and to claim their merger was motivated only by a desire for greater efficiency. These problems were on display during a recent interview of Dr. Kenneth Davis, CEO of Mount Sinai Health System (an enormous hospital-clinic chain), by Corby Kummer, a senior editor for the Atlantic. http://www.theatlantic.com/live/events/health-care-forum/2014/ 

The Fiscal Times summary of that interview, quoted above, accurately portrays what Davis said. He mentioned two motives for his recent acquisition of other hospitals: (1) to ensure that services that lose money for Mt. Sinai, such as pediatrics, psychiatry, and obstetrics, are cross-subsidized by money-making services such as orthopedics; and (2) to create an entity large enough to bear insurance risk. But Dr. Davis failed to explain why Mt. Sinai should have to cross-subsidize anything or bear any insurance risk, and Mr. Kummer’s vague questions failed to clarify Dr. Davis’s opaque remarks. 

Dr. Davis was one of several experts convened on March 27 by The Atlantic for a forum on “fundamental questions underlying” the Affordable Care Act. Mr. Kummer began the interview with this gentle question: “How should people be viewing… the size of these health care systems?”

Dr. Davis first replied with his cross-subsidization argument. He claimed cross-subsidization was possible only “in an integrated health care system” that can create “efficiencies both in clinical care and corporate infrastructure.” He said the Roosevelt Hospital was going to become a “real mecca for orthopedics,” and that in turn would make adequate financing of underfunded services possible. 

Note the unspoken, undocumented assumptions lurking under these statements, including: 

• Control of numerous hospitals and clinics by a single corporation results in “efficiencies;” 
• Mt. Sinai’s management, not society through its government, should decide how much doctors should be paid, and
• Mt. Sinai should seize the power to do that by gobbling up other providers.

Some version of the second question did enter Mr. Kummer’s mind, but he couldn’t figure out how to pose it. “Is one way of bending the cost curve trying to equalize that hierarchy of reimbursement, or is that just too much to hope for?” he finally blurted out. Davis dodged the question (see Davis’s answer at 5:30 into the interview).

Rather than rephrase his question, Kummer raised another subject. He asked Davis if Mt. Sinai intended to start its own insurance company. Davis said it wasn’t clear yet whether Mt. Sinai would create an insurance company in partnership with an existing insurer or “with our own license,” but he had no doubt Mt. Sinai would become an insurance company. 

Rather than question why hospitals should be branching into the insurance business, Kummer asked: “Does the Affordable Care Act make it easier for you to think in terms of offering this product?”

“No, it’s the macroeconomics of health care that is forcing this,” Davis replied. “It’s large systems coming together that are large enough to take actuarial risk…. You need a certain size and scale to be able to take risk.”

Can you imagine a more abstract answer? Some force majeure was making Davis build an empire so he could “take actuarial risk.” Kummer bought it.

A good interview would have helped listeners understand the policies that have triggered periodic spasms of merger fever in our health care system, and the arguments for and against letting those policies persist. The most important cause of the rapid consolidation of our health care system is the 40-year-old campaign waged by the powerful managed care movement to blame the fee-for-service method for overuse of health care, and to replace that method with capitation and other methods of forcing doctors and hospitals to bear insurance risk. The zenith of this campaign was reached in March 2010 with the enactment of the Affordable Care Act. This campaign conveniently ignores the role of high administrative costs inflicted on the system by our multiple-payer system and by managed care itself.

The media occasionally drops a hint that the attack on fee-for-service is the original cause in the chain of causes leading to merger fever. For example, the New York Times article on Mt. Sinai’s merger with Continuum Health Partners last year quoted Richard Ravitch, a member of Mt. Sinai’s board, saying: “‘The fee-for-service system is going to be history shortly,” it will be replaced with a system of “bundled payments” that shift insurance risk to hospitals, and to handle that new system hospitals will “need a population that’s larger than what any one [hospital] has … today.” http://www.nytimes.com/2013/07/17/nyregion/2-hospital-networks-agree-to-merge-raising-specter-of-costlier-care.html 

But the article made no effort to explain why the fee-for-service method should be terminated, why a system of “bundled payments” would be better, and who is promoting these notions. The nation badly needs the mainstream media to connect the dots between the demonization of fee-for-service and the latest merger spasm in our health care system.

The dots could be connected quite simply, as follows: 

• Managed care advocates, including leaders of both political parties, think overuse is the cause of our health care crisis, and that overuse is caused by the fee-for-service method; 
• The managed care movement’s demonization of fee-for-service and its lionization of shifting risk onto hospitals and doctors means providers must consolidate in order to bear insurance risk. 

Once the dots are connected, society can then ask, Is it true that overuse is our main problem and fee-for-service causes it, and if not, is there a better way to solve the health care crisis? 

For single-payer advocates, the answer is clear. It makes utterly no sense to replace the existing insurance industry with a hospital-based insurance industry. The existence of multiple, privately controlled insurers is the problem. Shifting control over those insurers from the traditional insurance industry to the hospital industry does not solve that problem. We need one publicly controlled insurer.