PNHP

ACO incentives exceed efficiency gains

ACO incentives exceed efficiency gains

Structuring Incentives Within Organizations: The Case of Accountable Care Organizations

By Brigham Frandsen, James B. Rebitzer
NBER, April 2014

Accountable Care Organizations (ACOs) are new organizations created by the Affordable Care Act to encourage more efficient, integrated care delivery. To promote efficiency, ACOs sign contracts under which they keep a fraction of the savings from keeping costs below target provided they also maintain quality levels. To promote integration and facilitate measurement, ACOs are required to have at least 5,000 enrollees and so must coordinate across many providers. We calibrate a model of optimal ACO incentives using proprietary performance measures from a large insurer. Our key finding is that free-riding is a severe problem and causes optimal incentive payments to exceed cost savings unless ACOs simultaneously achieve extremely large efficiency gains. This implies that successful ACOs will likely rely on motivational strategies that amplify the effects of under-powered incentives. These motivational strategies raise important questions about the limits of ACOs as a policy for promoting more efficient, integrated care.

http://www.nber.org/papers/w20034

The growth in the number of accountable care organizations (ACOs) has been phenomenal considering that they are primarily only a wish on the part of the policy community and bureaucrats that such organizations would increase efficiencies to reduce health care spending, especially when earlier results have been very disappointing. This study has added to the doubts about ACOs by showing that incentive payments that they receive will exceed cost savings unless the ACOs “achieve extremely large efficiency gains” – an extremely unlikely outcome.

The policy literature is saturated with these “wish they would work” reports and recommendations to further expand the use of ACOs. The experiment has already failed, and we are meandering back into the disdained managed care organization model disguised as ACOs. The tragedy is that this has distracted our politicians and bureaucrats from moving forward with a model that actually would increase efficiencies, not to mention meeting other goals such as universality and removing financial barriers to care – a single payer national health program.

Lessons from British Columbia

Health-care changes seem to be paying off in B.C.

By Keith Baldrey
Surrey Now, April 8, 2014

Have we finally wrestled that voracious gobbler of tax dollars – the public health-care system – to a standoff, if not to the ground? By that I mean the days of the system automatically devouring increasingly large amounts of money every year to feed itself may be drawing to a close, at least in British Columbia.

Of course, I don’t mean the health-care system will stop being the biggest area of government spending by far (the health-care budget this year is pegged at $16.9 billion, out of a budget of $44.4 billion).

But the rate of growth in spending is slowing down significantly. The annual hike is down to 2.6 per cent this year, compared to just several years ago when it was above five per cent.

Now, there are those who think this is bad news. After all, shouldn’t we be plowing even more money into the system rather than less? If we don’t, won’t health-care standards suffer? The answers are: a) not necessarily and b) no.

The ideological defenders of the public health-care system (who think the answer to everything is to blindly spend gargantuan amounts of more money) think the only measuring stick worth anything is per capita spending. In other words, B.C. should spend more dollars per person than anywhere else, and things will take care of themselves.

But those with experience in the system, who study it and come up with good ideas for change, point to another and far better measurement: health outcomes.

And in that regard, B.C. ranks the highest in the country. While we sit second-to-last in per-capita spending, (only Quebec ranks lower) we beat most other provinces in all kinds of areas: best cancer survival rates, lowest heart attack rate, longest life expectancy, lowest smoking rate, lowest infant mortality rate, etc.

When it comes to wait times for certain surgeries (an admittedly frustrating situation for many people on those wait-lists), they’ve been mostly going down and not up. The median wait time for a hip joint replacement has declined to 13 weeks from 19 weeks over the last 10 years, while a knee joint replacement has gone from 25 weeks to 18 weeks over the same time period.

None of this is to suggest the health-care system does not need constant up-keeping and reform (crowded emergency rooms, for example, seem to be a chronic problem, and we could always use more nurses). But it is encouraging that blind yearly spending hikes are being replaced by newer, innovative ways of spending that are both efficient and lead to healthier outcomes for the users of the system.

Not being able to count on big increases in funding every year has brought some much-needed discipline to the system, and employing some different models has also helped.

One of the most significant changes that is paying off is the government’s relationship with doctors.

In the past, physicians were viewed as costly, self-interested cogs in the system.

Now, however, they are viewed as equal partners who have real responsibilities when it comes to running the health-care system.

For example, several joint committees have been established with the Doctors of B.C. (formerly called the B.C. Medical Association) where doctors and the government shape policies that are aimed at improving patient health, rather than protecting the financial interest of either party.

One committee is for general practitioner services (overseeing improvements to the primary care system), another is for specialist services (aimed at improving access for specialist care) and a third is for shared care (focused on better integration of all levels of care).

As well, something called the Divisions of Family Practice has been created. It links family doctor practices and is designed to improve common healthcare goals in a particular region (improved maternity coverage, for example).

Committees such as these were unheard of a decade ago. They appear to be improving patient care by focusing on smart, evidence-based decisions rather than on simply demanding more money, either for doctors’ pay packets or a health authority’s budget.

The Canada Health Accord between the provinces and the federal government died last week. It means Ottawa will be cutting in half its annual transfer of money to pay for health care.

The fact the B.C. government hardly said a peep about the accord’s demise is evidence of how much the system has changed in the past few years.

http://www.thenownewspaper.com/opinion/baldrey-health-care-changes-seem-to-be-paying-off-in-b-c-1.946815

****

Comment:

By Don McCanne, MD

Evidence based health care. Why should that be controversial? Yet it is. It provokes accusations of “cook book medicine,” or “bureaucrats interfering with your health care.” Current efforts in British Columbia can provide us with a more rational perspective than is being provided by these negative memes.

Physicians from the B.C. medical association (Doctors of B.C.) and the government are cooperating on efforts to improve patient health in manners other than by simply increasing spending (though that should not be neglected when there is an obvious imperative). Such efforts to spend better rather than simply spending more will be particularly important now that the federal government is being run by individuals who promised to protect Canada’s medicare but instead cut federal spending on the program in half.

Although single payer systems are often criticized for being bogged down by government inflexibility and laggardly progress, the activities in B.C. demonstrate that such processes need not be an inevitability. In fact, B.C. is showing us that their single payer system does have the flexibility to make needed improvements.

In the United States we are currently using models, such as accountable care organizations, supposedly to achieve higher quality at a lower cost. Unfortunately, the model seems to have been misdirected away from efforts to improve health care based on evidence to efforts granting nominal awards based on penny pinching and a few negligible teach-to-the-test measures. Under our fragmented, multipayer system it is difficult achieve widespread adaptation of systemic improvements, simply because it is our unique, dysfunctional financing system that is so inflexible.

This is not to belittle the efforts of AHRQ toward expanding the use of evidence based medicine. Rather it is to make the point that government efforts such as those of AHRQ can be more effective if we get the dysfunctional financing system out of the way, especially the intrusive private insurers, and allow AHRQ and other public entities to cooperate more effectively with the people actually delivering health care.

Lessons from British Columbia

Health-care changes seem to be paying off in B.C.

By Keith Baldrey
Surrey Now, April 8, 2014

Have we finally wrestled that voracious gobbler of tax dollars – the public health-care system – to a standoff, if not to the ground? By that I mean the days of the system automatically devouring increasingly large amounts of money every year to feed itself may be drawing to a close, at least in British Columbia.

Of course, I don’t mean the health-care system will stop being the biggest area of government spending by far (the health-care budget this year is pegged at $16.9 billion, out of a budget of $44.4 billion).

But the rate of growth in spending is slowing down significantly. The annual hike is down to 2.6 per cent this year, compared to just several years ago when it was above five per cent.

Now, there are those who think this is bad news. After all, shouldn’t we be plowing even more money into the system rather than less? If we don’t, won’t health-care standards suffer? The answers are: a) not necessarily and b) no.

The ideological defenders of the public health-care system (who think the answer to everything is to blindly spend gargantuan amounts of more money) think the only measuring stick worth anything is per capita spending. In other words, B.C. should spend more dollars per person than anywhere else, and things will take care of themselves.

But those with experience in the system, who study it and come up with good ideas for change, point to another and far better measurement: health outcomes.

And in that regard, B.C. ranks the highest in the country. While we sit second-to-last in per-capita spending, (only Quebec ranks lower) we beat most other provinces in all kinds of areas: best cancer survival rates, lowest heart attack rate, longest life expectancy, lowest smoking rate, lowest infant mortality rate, etc.

When it comes to wait times for certain surgeries (an admittedly frustrating situation for many people on those wait-lists), they’ve been mostly going down and not up. The median wait time for a hip joint replacement has declined to 13 weeks from 19 weeks over the last 10 years, while a knee joint replacement has gone from 25 weeks to 18 weeks over the same time period.

None of this is to suggest the health-care system does not need constant up-keeping and reform (crowded emergency rooms, for example, seem to be a chronic problem, and we could always use more nurses). But it is encouraging that blind yearly spending hikes are being replaced by newer, innovative ways of spending that are both efficient and lead to healthier outcomes for the users of the system.

Not being able to count on big increases in funding every year has brought some much-needed discipline to the system, and employing some different models has also helped.

One of the most significant changes that is paying off is the government’s relationship with doctors.

In the past, physicians were viewed as costly, self-interested cogs in the system.

Now, however, they are viewed as equal partners who have real responsibilities when it comes to running the health-care system.

For example, several joint committees have been established with the Doctors of B.C. (formerly called the B.C. Medical Association) where doctors and the government shape policies that are aimed at improving patient health, rather than protecting the financial interest of either party.

One committee is for general practitioner services (overseeing improvements to the primary care system), another is for specialist services (aimed at improving access for specialist care) and a third is for shared care (focused on better integration of all levels of care).

As well, something called the Divisions of Family Practice has been created. It links family doctor practices and is designed to improve common healthcare goals in a particular region (improved maternity coverage, for example).

Committees such as these were unheard of a decade ago. They appear to be improving patient care by focusing on smart, evidence-based decisions rather than on simply demanding more money, either for doctors’ pay packets or a health authority’s budget.

The Canada Health Accord between the provinces and the federal government died last week. It means Ottawa will be cutting in half its annual transfer of money to pay for health care.

The fact the B.C. government hardly said a peep about the accord’s demise is evidence of how much the system has changed in the past few years.

http://www.thenownewspaper.com/opinion/baldrey-health-care-changes-seem-…

Evidence based health care. Why should that be controversial? Yet it is. It provokes accusations of “cook book medicine,” or “bureaucrats interfering with your health care.” Current efforts in British Columbia can provide us with a more rational perspective than is being provided by these negative memes.

Physicians from the B.C. medical association (Doctors of B.C.) and the government are cooperating on efforts to improve patient health in manners other than by simply increasing spending (though that should not be neglected when there is an obvious imperative). Such efforts to spend better rather than simply spending more will be particularly important now that the federal government is being run by individuals who promised to protect Canada’s medicare but instead cut federal spending on the program in half.

Although single payer systems are often criticized for being bogged down by government inflexibility and laggardly progress, the activities in B.C. demonstrate that such processes need not be an inevitability. In fact, B.C. is showing us that their single payer system does have the flexibility to make needed improvements.

In the United States we are currently using models, such as accountable care organizations, supposedly to achieve higher quality at a lower cost. Unfortunately, the model seems to have been misdirected away from efforts to improve health care based on evidence to efforts granting nominal awards based on penny pinching and a few negligible teach-to-the-test measures. Under our fragmented, multipayer system it is difficult achieve widespread adaptation of systemic improvements, simply because it is our unique, dysfunctional financing system that is so inflexible.

This is not to belittle the efforts of AHRQ toward expanding the use of evidence based medicine. Rather it is to make the point that government efforts such as those of AHRQ can be more effective if we get the dysfunctional financing system out of the way, especially the intrusive private insurers, and allow AHRQ and other public entities to cooperate more effectively with the people actually delivering health care.

A pro-single payer doctor’s concerns about Obamacare

Believe me, the right’s approach would be much worse. But the underinsured are getting a worse deal than you think

By Adam Gaffney, MD
Salon, April 11, 2014

As a single-payer advocate who is also a doctor, I was concerned after the Affordable Care Act was passed that it didn’t do enough to combat rising underinsurance. A recent study by the Commonwealth Fund, which used new data to demonstrate that in 2012 some 31.7 million Americans were underinsured (i.e. insured, but still with heavy additional out-of-pocket health care expenses), argued that the burden of underinsurance will likely lessen as the ACA fully unfolds. But is there really reason for such optimism?

This is a complicated issue with many moving parts, so one way to tackle it (before immersing ourselves in the exhilarating policy literature) is to pose a simpler question: if your family is insured, and someone gets seriously sick, can you not worry about going broke?

The short answer: it depends on how much you have in the bank, and on the “out-of-pocket maximum” established by the ACA for your particular plan. The out-of-pocket maximum is the most that you would have to pay (after premiums) on things like co-pays for medications or deductibles for hospitalizations, and it can go as high as $12,700 annually for exchange plans under the ACA. But doesn’t the law provide protection for lower-income individuals, for instance, in the form of reduced out-of-pocket limits? The answer is yes – but to a lesser extent than we initially thought, even though, somehow, no one informed us that things had changed.

After it passed, my concerns about underinsurance re: the ACA revolved around codifying cost sharing measures, like large deductibles and copays, into law. But the out-of-pocket maximums that the law created were admittedly better than nothing, and – as important – were based on income. According to the text of the law, once your family income goes below 400% of the federal poverty level (which for those enrolling now would be less than $94,200 for a family of four) the maximum out-of-pocket limit (now $12,700) would be progressively reduced by either one-third, one-half, or two-thirds, giving (roughly) the following figures for 2014:

In other words, if you make less money, you have less liability for medical expenses. Putting aside the question of whether any out-of-pocket liability is a good idea (I think not), this makes sense. But, though the two-thirds/one-half/one-third limit reductions were written into law, they no longer hold.

In what seems to have gone essentially if not entirely unreported, a densely written rule issued by the Department of Health and Human Services in March 2013 eliminated the reduced out-of-pocket maximum for those making above 250% of the federal poverty level. Additionally, for those making between 200 – 250% of poverty, the limit was raised from one-half to four-fifths of the $12,700 maximum (i.e. $6,350 to $10,160). These limits were then rounded up a bit more to account for “any potential inaccuracies” in estimates, to give us today’s actual limits:

To summarize: everyone who makes between 200% and 400% of the federal poverty level (i.e. a good portion of the middle class) quietly had their Obamacare out-of-pocket liability raised substantially: for a family of four with an income of $60,000, it suddenly doubled to $12,700.

Now first, was this major change legal? Unfortunately yes, as the ACA contained a clause giving the administration the power to adjust the law’s reduced out-of-pocket maximums upwards, if (bear with me on this) the original limits would cause the “respective actuarial values to exceed the values” specified by the law. In other words, if it seemed that the original limits in the law would result in insurance companies footing too big a piece of the health care bill (i.e. more than 70% for a silver plan), the Secretary would – Voile! – raise the out-of-pocket limit. Otherwise, insurance companies would compensate by further increasing copays and deductibles, so as to bring their share of your health care bill back down to 70%.

Remarkably, although there was some uproar after it was reported last year that another buried rule change would allow insurers to not count (for one year) pharmaceutical costs towards the out-of-pocket limit, there has been, as far as I’ve been able to find, nothing in the media on this more important change (which is set to continue in subsequent years).

So what does this mean for an average family? Let’s take two adults in their 40s, who have two kids and a gross income of $50,000 and who buy a plan on the exchange. Based on US averages, after subsidies, the family would pay $3,365 annually for the premium of a “silver plan,” which might sound reasonable. That plan, however, would cover (on average, and even with additional subsidies) only 73% of their health care expenses. If someone needed health care, copays, deductibles and co-insurance could cost them an additional $10,400 every year. And if they made the mistake of (intentionally or not) going outside the narrow “high-value” network of doctors and hospitals that most of these plans provide, there would be no limit (or, generally speaking, coverage) at all.

Between stagnating wages, soaring prices for higher education, and (in many areas) unaffordable housing, we can safely assume that such families will be severely squeezed by sickness. It would be very hard to blame them for skipping appointments, missing pills, or even avoiding the Emergency Room when a worrisome symptom developed.  If that’s not underinsurance, what is?

I’m certainly not advocating going backwards, and the conservative “solution” would clearly only makes things much worse. As the Commonwealth Fund study emphasized, the expansion of Medicaid will, in particular, provide crucial assistance for millions. And the pre-ACA individual insurance market was by all accounts ugly, with no guarantee that you could even buy into it. “My deductible is nearly $3,000, which is ridiculously high, in my opinion,” one woman remarked to The New York Times. “But as someone with pre-existing conditions, I’m grateful to be able to buy insurance at all.”

It’s clearly good news that she’s now covered. But should such an individual have to be grateful to buy insurance that makes her spend thousands every time she needs to use it, just for the crime of being sick?

AG is a physician and writer in Massachusetts. He blogs at www.theprogressivephysician.org and is on Twitter at @awgaffney.

http://www.salon.com/2014/04/11/a_pro_single_payer_doctors_concerns_about_obamacare/

The Twilight of the British Public Health System?

By Adam Gaffney, M.D.
Dissent, Spring 2014

Less than two years after the fall of Nazi Germany, a bankrupt Britain – reeling from the most destructive war in history and living under conditions of stark austerity – elected to create an extraordinary system of universal health care, the National Health Service (NHS). Aneurin Bevan, the Labour Party minister of health who played a crucial role in its creation, famously remarked that the NHS would “last as long as there are folk left with the faith to fight for it.” Subsequent developments, it seems, have put his challenge to the test.

In 2012 David Cameron’s Conservative-led government passed the Health and Social Care Act, legislation that opens the NHS to privatization like never before. Building on a series of neoliberal health care “reforms” dating back to the Thatcher era and coinciding with the dictates of our age of austerity, Cameron’s law could very well mark the beginning of a slow end for the English NHS (the largely autonomous Scottish NHS has been going in a much different direction). To be clear, the law is not meant to privatize the system entirely; after all, caring for a whole population – including its poor, elderly, and chronically ill – is messy, complex, and frequently unprofitable, and so historically uninteresting from a commercial perspective. Instead, the law will allow – indeed, it will require – the competitive “tendering” of health care services to corporate providers, which can then pick off the profitable parts, bit by bit. Its provisions end the fundamental legal requirement that the secretary of state ensure comprehensive care throughout the country. The law encourages NHS facilities to provide uncovered services for cash, while at the same time reductions in funding force cuts in covered services. The law may even ultimately open new opportunities for fees to be charged at the point of service, in direct contradiction of the service’s founding principles.

The Health and Social Care Act, in other words, will not end the NHS. It will fragment and commercialize it, while the demands of austerity will continue to stretch it thin. At some point, though the NHS will continue to exist, we may no longer be able to recognize it.

I. 1948–1980: ‘It Is Not a Charity’

Shortly after the NHS went into effect in 1948, a leaflet was distributed to all homes to explain the function and purpose of the new system:

It will provide you with all medical, dental, and nursing care. Everyone – rich or poor, man, woman or child – can use it or any part of it. There are no charges, except for a few special items. There are no insurance qualifications. But it is not a charity. You are all paying for it, mainly as taxpayers, and it will relieve your money worries in times of illness.

Though its organizational structure may have been considerably complex, such a simple and straightforward summary spoke to the truly radical – and fundamentally universal – nature of the new service.

Its first few years in action revealed the great, unmet medical needs of the country, with the sudden surge in the use of health care resulting in substantial initial over- spending. This precipitated, in the early 1950s, the introduction of fees for medications, eyeglasses, dentures, and eventually all dental treatment. Still, other care remained free at the point of service, and the NHS’s general structure remained largely intact over the next few decades, protected by strong public support and by a consensus between Labour and Conservatives on the importance of the welfare state. Yet at the same time, the NHS was often starved of resources.

The NHS is frequently touted for its success at keeping the cost of health care low, easily beating not only the United States but also most of its continental peers with respect to efficiency. (In 2008, for instance – after a period of historically high spending – the UK was still only spending $3,129 annually per capita on health care, compared with $3,737 in Germany, $4,079 in Canada, and $7,539 in the United States.) Yet its frugality has time and time again gone too far, and the end of the 1970s – when the United Kingdom was facing anemic growth, marked inflation, and persistent deficits – was one such time. 

To read the full article, click here.

To read the latest articles in Dissent magazine, click here.

P4P fails again

Does Winning a Pay-for-Performance Bonus Improve Subsequent Quality Performance? Evidence from the Hospital Quality Incentive Demonstration

By Andrew Ryan, Matthew Sutton and Tim Doran
HSR, April 2014

To test whether receiving a financial bonus for quality in the Premier Hospital Quality Incentive Demonstration (HQID) stimulated subsequent quality improvement.

Under the HQID, hospitals received a 1 percent bonus on Medicare payments for scoring between the 80th and 90th percentiles on a composite quality measure, and a 2 percent bonus for scoring at the 90th percentile or above.

We found little evidence that hospitals’ receipt of quality bonuses was associated with subsequent improvement in performance. This raises questions about whether winning in pay-for-performance programs, such as Hospital Value-Based Purchasing, will lead to subsequent quality improvement.

http://www.hsr.org/hsr/abstract.jsp?aid=49319522092

Comment:

By Don McCanne, MD

Quality derives from dedicated professionals, working within a well-designed health care infrastructure, striving to obtain the best health care for their patients.

Politicians and the policy community seem to miss this point as they continue to look for administrative gimmicks that are essentially managed care innovations. What we don’t need in the United States is more administrative excess. Pay-for-performance (P4P) continues to fail as an incentive for true quality improvement, even if some studies have shown almost worthless teach-to-the-test increases in scores.

If we really want quality, we need to work on our health care infrastructure, beginning with implementing a financing system that drives quality – a single payer national health program.

P4P fails again

Does Winning a Pay-for-Performance Bonus Improve Subsequent Quality Performance? Evidence from the Hospital Quality Incentive Demonstration

By Andrew Ryan, Matthew Sutton and Tim Doran
HSR, April 2014

To test whether receiving a financial bonus for quality in the Premier Hospital Quality Incentive Demonstration (HQID) stimulated subsequent quality improvement.

Under the HQID, hospitals received a 1 percent bonus on Medicare payments for scoring between the 80th and 90th percentiles on a composite quality measure, and a 2 percent bonus for scoring at the 90th percentile or above.

We found little evidence that hospitals’ receipt of quality bonuses was associated with subsequent improvement in performance. This raises questions about whether winning in pay-for-performance programs, such as Hospital Value-Based Purchasing, will lead to subsequent quality improvement.

http://www.hsr.org/hsr/abstract.jsp?aid=49319522092

Quality derives from dedicated professionals, working within a well-designed health care infrastructure, striving to obtain the best health care for their patients.

Politicians and the policy community seem to miss this point as they continue to look for administrative gimmicks that are essentially managed care innovations. What we don’t need in the United States is more administrative excess. Pay-for-performance (P4P) continues to fail as an incentive for true quality improvement, even if some studies have shown almost worthless teach-to-the-test increases in scores.

If we really want quality, we need to work on our health care infrastructure, beginning with implementing a financing system that drives quality – a single payer national health program.

Medicaid expansion would save lives

By Joseph Kanter, M.D., and Elmore Rigamer, M.D.
The Times-Picayune (New Orleans), Letters, April 2, 2014

Re “Protesters call for Reversal of Medicaid,” Sunday, (March 30) A13: We know that people who do not have health insurance have a hard time getting the care they need. Care received in emergency rooms or free clinics cannot address the complex medical problems that come with years of being uninsured.

People who do not have regular access to health care are sicker when they get sick and have a short­ened life expectancy.

In Louisiana, Medicaid expansion would have covered 272,000 people and saved 249 to 542 lives annually, according to the Census Bureau and Dickman, Woolhandler et al. in Health Affairs 2014.

Drs. Kanter and Rigamer reside in New Orleans.

http://www.nola.com/opinions/index.ssf/2014/04/medicaid_expansion_would_save_1.html

A plea for Medicaid coverage for our suffering citizens

By Jennifer Avegno, M.D., Joseph Kanter, M.D., and Elmore Rigamer, M.D.
The Times-Picayune (New Orleans), March 3, 2014

Louisiana has one of the high­est rates of diabetes and cardio­vascular diseases in the country. Recent state Medicaid changes are leaving our most vulnerable patients without access to physi­cians, health services and essen­tial medications. The changes disrupt the relationships doctors have with patients and do not make economic sense. As physi­cians in the Interim LSU Hospi­tal Emergency Department and a local community clinic, we have seen patients return time and again to the ER because they have been unable to fill their essential prescriptions or access their physicians.

The people most affected by these changes often live on the economic margins of our communities. Frequently, their chronic diseases get worse at the end of the month when they run out of food and cannot eat properly. Few have jobs that have sick leave and a day in the ER is lost wages. The monthly costs for one of these patients’ medication pales in comparison to the $20,000 average cost for a four-day hospital stay. Costs to the health system are multiples of what they would be if patients were being treated by routine outpatient visits and proper medications.

We believe the Legislature should prevail upon Gov. Bobby Jindal to reconsider his decision not to expand Medicaid and ask him to reverse the changes made to the program Jan. 1, 2014. We ask that everyone at or below the federal poverty level who has diabetes, hypertension and heart or respiratory disease receive medications to control these diseases.

This will improve the qual­ity of their lives and minimize the costs of treating the future preventable complications. The state and the city of New Orleans did a remarkable job of opening community health clinics in New Orleans after Katrina. What sense does it make for some of our patients to come to the clinics, receive high quality care, and leave without the means to treat their medical problems?

Jennifer Avegno, M.D., is clinical assistant professor of emergency medicine Interim LSU Hospital New Orleans; Joseph Kanter, M.D., is chief resident, emergency department, Interim LSU Hospital; and Elmore Rigamer, M.D., is medical director of Catholic Charities Archdiocese of New Orleans.

http://www.nola.com/opinions/index.ssf/2014/03/a_plea_for_medicaid_coverage_f.html

Paul Krugman on Thomas Piketty’s “Capital”

Why We’re in a New Gilded Age

By Paul Krugman
The New York Review of Books, May 8, 2014

Review of “Capital in the Twenty-First Century”

By Thomas Piketty, translated from the French by Arthur Goldhammer
Belknap Press/Harvard University Press, 685 pp., $39.95

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age — or, as Piketty likes to put it, a second Belle Époque — defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work.

The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

This is a book that will change both the way we think about society and the way we do economics.

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.

The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe.

But this doesn’t have to happen.

At times, Piketty almost seems to offer a deterministic view of history, in which everything flows from the rates of population growth and technological progress. In reality, however, Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation — in particular taxation of wealth and inheritance — can be a powerful force limiting inequality. Indeed, Piketty concludes his masterwork with a plea for just such a form of taxation. Unfortunately, the history covered in his own book does not encourage optimism.

Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/

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Comment:

By Don McCanne, MD

Hopefully the excerpts above from Paul Krugman’s review of Thomas Piketty’s “Capital in the Twenty-First Century” will entice you to read Krugman’s full review, and then that will entice you to read Piketty’s full book. If you do so, you’ll understand why Krugman says, “we’ll never talk about wealth and inequality the same way we used to.”

Although a book on capital would seem to be off the topic of health care, Piketty provides us with the background to understand why we can’t seem to get health care financing right here in the United States, though he doesn’t discuss it specifically.

We do use progressive tax policies to partially fund health care through general revenues, but we also burden wage earners with the cost of health plans partially financed through regressive tax expenditures – the tax deductibility of employer-sponsored plans paid by employees through forgone wage increases.

Whereas median household income in the United States is now about $50,000, the cost of health care for the typical family of four is now about $22,000 (Milliman Medical Index). These numbers no longer compute, but they tend to be lost in the fragmented, dysfunctional way in which we finance health care. They cry out for reform.

There are two general approaches – on spending and on revenues – that seem to be imperative. One would be to reduce the wasteful spending in health care that occurs from our profound administrative excesses, our high prices, and the maldistribution of our resources due to a lack of adequate public oversight. A single payer system would redirect our resources to much better use.

The other approach that we need – as the disconnect between income and health costs demonstrates – would be to fund the single payer system through much better defined progressive taxes. Piketty’s treatise shows us that we really don’t have any other alternative. And since we already spend such a large portion of our GDP on health care, a progressively financed single payer system would provide a significant step in the visionary direction that Piketty has laid out for us.

Report: Universal Healthcare Would Be ‘Boon’ to Businesses

By Bob Herman 
Becker’s Hospital CFO, April 9, 2014

A new report from nonpartisan advocacy group Public Citizen said a publicly funded healthcare system that guarantees universal coverage would not only reduce healthcare costs — it would also be an economic relief for employers and businesses.

Public Citizen analysts said a single-payer system, commonly referred to as a “Medicare for all” option, could benefit businesses and the general public in three ways:

  • Universal healthcare would end “job lock.” Job lock is a term used for when employees do not want to switch jobs or pursue new ventures out of fear of losing health insurance.
  • Universal healthcare would likely reduce healthcare costs. Several healthcare researchers and physicians have conducted studies finding that annual savings from moving from a multipayer to a single-payer system could be in the billions, most of which would be gained from less spending on administrative and billing functions.
  • Universal healthcare would equalize healthcare costs for businesses. Competitive U.S. businesses already pay large sums of money to offer health insurance to their employees, the report stated. Financing a single-payer system would require different taxing mechanisms on businesses, but reports indicate businesses would not likely pay more than they already do — and many may actually pay less. This would especially help small business owners, the report said.

Taylor Lincoln, research director of Public Citizen’s Congress Watch division and author of the report, said in a news release the issue is nonpartisan, but it has been absorbed by partisan factions at both ends of the aisle.

“Small businesses have rated the cost of health insurance as their top concern for a quarter century, and large businesses struggle with healthcare obligations that their international competitors do not have to worry about,” Mr. Lincoln said. “If it weren’t for entrenched partisan alliances, business leaders would have demanded that Congress relieve them of healthcare burdens long ago.”

Public Citizen’s report comes roughly eight months after Gerald Friedman, PhD, a professor of economics at the University of Massachusetts at Amherst, released a similar study. Dr. Friedman found if the U.S. adopted a single-payer system, the healthcare system could save $1.8 trillion over 10 years.

http://www.beckershospitalreview.com/finance/report-universal-healthcare-would-be-boon-to-businesses.html

Now that the Affordable Care Act is working, it is time to adopt national single-payer health care

By Neil H. Buchanan
Justia (Mountain View, Calif.), April 10, 2014

To the surprise of many people, and to the great consternation of Republicans, the Affordable Care Act (ACA, or the dreaded “Obamacare”) failed to fail. Last week, to much fanfare, the Obama Administration announced that the ACA’s enrollment target had been met, which means that the health care law will not collapse from lack of adequate participation.

This was surprising, of course, because of the early software problems that emboldened the ACA’s opponents, and which raised the possibility that technical problems would doom the new law before it could even get started. Now, however, we know that we will proceed to the next stages of our national experiment with a broad expansion of profit-oriented, subsidized health care.

Despite this success, we must now plan to get rid of the ACA, and replace it with something much better. The ACA is inherently incapable of solving the larger long-term problems that our country faces in providing health care to all of our citizens. It was an important step forward, and we should be happy that it did not die a premature death, but we cannot now allow ourselves to believe that the current system is sustainable, or even acceptable.

That is why it is essential to say, clearly and unambiguously, that the United States needs to adopt a system of universal, single-payer national health insurance, as soon as possible. The ACA is as good as it gets, when it comes to basing a health care system on private insurance, and it is simply not good enough. Even as the ACA takes effect, therefore, we need to start planning to make it disappear.

The success of the ACA, and the importance of its component parts

The reason that the ACA was at risk of failing to launch is actually a somewhat complicated story, but the explanation is ultimately about the nature of private insurance. If, against all logic, we decide to continue to run our health care system through competition among private insurers, the system must be designed with several key elements, in order to avoid what economists call a “death spiral.”

Insurers, even those that are not-for-profit companies, need to make sure that they do not ultimately have to pay out more in benefits than they take in from customers’ premiums. This means that insurers will try to separate people into different categories, on the basis of how expensive they are likely to become in the future. Smokers, for example, are treated differently from nonsmokers, for obvious reasons.

It is this simple logic that causes insurers to refuse to insure people with pre-existing conditions. If, for example, you have late-stage cancer, and you want to be covered by a health insurance policy, it would make no sense for the insurer to agree to take you on as a customer. Short of charging you exactly as much as you would have to pay directly for your cancer treatments, the insurer cannot help but lose money on you.

If you fail to disclose to the insurer that you have a late-stage cancer, then the insurer would need a way to protect itself from the economic loss that your deception would create. That is why insurance contracts generally exclude coverage for treatments related to pre-existing conditions. The problem is that insurers, over time, perfected increasingly aggressive ways to define what counts as a pre-existing condition, such that too many people who were insured suddenly found (after paying premiums year in and year out) that their insurers were canceling their coverage because, for example, a cancer patient had failed to disclose that she once had an unrelated illness (such as psoriasis).

Public outrage against such abuses grew, and the result was that even most opponents of President Obama understood that the insurers had overplayed their hands regarding pre-existing conditions. This meant that, when serious discussions began in 2009 regarding health care reform, one of the fundamental elements required of any such plan was that Americans could not be denied coverage due to pre-existing conditions.

This, however, raised a further difficulty. If everyone were to know that they could never be denied insurance coverage for an illness, then there would be no reason to take out insurance in advance of getting sick. This meant that people needed to be required to sign up for insurance in advance. Healthy policyholders, in particular, are an essential part of the economic model of private insurance. Without them, no private company could stay in business for long, because it is the currently healthy people’s premiums that finance the benefits that are paid on behalf of currently sick people.

The so-called mandate, which was the subject of the much discussed NFIB v. Sebelius Supreme Court decision two years ago, was thus an inextricable part of the ACA, because without it, no one would have any reason to sign up for health insurance in a world where they could not later be turned away, no matter how sick (and thus expensive) they became. Without the mandate, the entire insurance system would collapse. Hence, the term “death spiral.”

Finally, in order to allow everyone to become part of the insurance pool, the law had to recognize that some people could not afford to pay for their insurance. They would need to receive subsidies, allowing them to sign up, and thus to make the system nearly universal.

When this was all turned into law, however, it turned out that there was still some possibility that a large number of people would choose to pay the tax (or penalty) that was designed to push them into the insurance pool. Hence, the drama leading up to March 31’s enrollment deadline, which was entirely a matter of seeing whether the insurance pool would be large enough – and include enough currently-healthy people – to avoid the death spiral. Happily, it worked.

The system is inherently wasteful, even when the ACA is running as planned

The success of the ACA will, ultimately, be seen in its expansion of coverage to people who were otherwise uninsured (a long-standing national shame), as well as its elimination of the risk that people will lose their insurance coverage due to abusive practices by insurance companies. This is no small accomplishment, because health-related tragedies have long been one of the leading causes of personal bankruptcies and family ruin.

Even so, the very difficulty of explaining why the ACA had to include its three component parts – (1)universal coverage, (2) mandated participation, and (3) subsidies – gives us some sense of what is still wrong with our system now. Private insurers are still in the business of sorting customers, and trying to get them to take on more of their own health care expenses, so that insurers can spend less money on benefits.

However, this effort to get people to take on more of their own costs up front, and to bear more risk of higher expenses later, is itself an expensive proposition. Even if insurance companies can no longer kick people who become sick off of their rolls, insurance companies still have every reason to try to extract more money from people.

The most direct way in which we can see these additional costs in action is, in fact, in the sign-up process itself. The insurers were allowed to create different types of plans (Gold, Silver, and Bronze) on the basis of costs, deductibles, and so on, for people who were willing to take on different degrees of risk. People then needed to figure out which of the available options was best for them.

Every step of this process involved needless expense. Designing the choices was expensive. Building the website was expensive. Advertising the coverage was expensive. Helping people navigate the exchanges was expensive. And, going forward, insurers will spend a great deal of money trying to poach their competitors’ best customers, by spending money on promotional materials, hiring attractive representatives to talk to the public about why Insurer A is better than Insurer B, and so on.

Why is that expense “needless”? Because, if there were only one insurer, there would be no need to get people to sign up for one insurance company rather than others, and there would be no reason to spend money and resources getting people to choose insurance as if they were choosing among different brands of breakfast cereal.

The potential savings from adopting a single-payer system

How much extra money do we spend in the U.S. because of our commitment to keeping private health insurance companies in business? In 2012, we spent nearly 18% of total U.S. gross domestic product (GDP) on health care, or about $2.8 trillion. The Congressional Budget Office estimates that this amount will rise to 22 percent of GDP by the year 2038.

By comparison, the next most expensive health care system, among our economic peers, is France’s, which devoted less than 12 percent of its GDP in 2012 to health care. If the U.S. had been able to accomplish that feat, we would have spent almost one trillion fewer dollars on health care in that year.

The United States government could take on the role of “insurer” in the sense that it would use revenues to pay doctors, hospitals, and others for providing treatment to all Americans. It would, like other advanced countries’ governments, become the single payer, making it unnecessary to have private insurers engage in destructive competition that wastes so much of the nation’s resources.

We already have such a system for a sub-group of Americans. It is called Medicare, and it is extremely popular. It is true that Medicare faces possible financial difficulties, but any such problems loom only because we insist on treating Medicare as a stand-alone system financed by payroll taxes, rather than admitting that it is simply a well-run government program that provides insurance for nearly everyone over age 65. It has extremely low administrative costs, and its costs for paying for medical care have risen more slowly than those for private insurers.

Is Medicare’s success expandable, such that we could cover the entire U.S. population? There is, in fact, a proposal in Congress that would put the United States on the road to a single-payer system. The Expanded & Improved Medicare For All Act (H.R. 676) would expand our current elders-only single-payer health care program into a universal program, available to all regardless of age.

But would such a program actually save money in the United States? The economist Gerald Friedman, of the University of Massachusetts, has studied H.R. 676. He estimates that, by 2023, the U.S. could shave 7 percent of GDP off of the costs of our health care system, compared to the costs of continuing current law. At that point, that will amount to almost one and a half trillion dollars.

There are many subordinate questions regarding the adoption of a single-payer health care plan for the United States, which are beyond the scope of this column. For now, however, it is important to remind ourselves just how much we are wasting because Republicans as well as Democrats (very much led by President Obama in this regard) peremptorily ruled out any consideration of transitioning to a single-payer system.

People who oppose single payer thus need to confront a simple question: Do your reasons for protecting private insurers justify the diversion of over one trillion dollars per year, rising every year in perpetuity, from other productive uses into unproductive health care expenses?

As happy as we should be that we now have moved our country forward, coming closer to the laudable goal of universal health care coverage, we cannot let that accomplishment obscure just how absurd our health care system is, at its core. It is expensive and wasteful, and we have the means to change it. It is time to get started.

Neil H. Buchanan, a Justia columnist, is an economist and legal scholar, a professor of law at The George Washington University, and a senior fellow at the Taxation Law and Policy Research Institute, Monash University (Melbourne, Australia). He blogs at DorfonLaw.org.

http://verdict.justia.com/2014/04/10/now-affordable-care-act-working-time-adopt-national-single-payer-health-care#sthash.CcoAvYGj.dpuf