CMS may require Obamacare insurers to accept Ryan White payments

By Bill Berkrot and Sharon Begley
Reuters, February 9, 2014

The 1990 Ryan White Act offered people with HIV/AIDS federal financial help in paying for AIDS drugs and health insurance premiums, especially in state-run, high-risk pools. Obamacare, which bans insurers from discriminating against people with preexisting conditions, was designed to replace these high-risk pools.

Hundreds of HIV/AIDS patients are dependent on Ryan White payments for Obamacare because they fall into a coverage gap. They are not eligible for Medicaid, the joint federal-state health insurance program for the poor, because Louisiana did not expand the low-income program, and Obamacare federal subsidies don’t kick in until people are at 100 percent of the federal poverty level.

Hundreds of people with HIV/AIDS in Louisiana trying to obtain coverage under President Barack Obama’s healthcare reform are in danger of being thrown out of the insurance plan they selected in a dispute over federal subsidies and interpretation of rules about preventing Obamacare fraud, Reuters reported on Saturday.

Blue Cross and Blue Shield of Louisiana, the state’s largest health insurer, is rejecting checks from a federal program designed to help these patients pay for AIDS drugs and insurance premiums, and has begun notifying customers that their enrollment in its Obamacare plans will be discontinued.

The insurer insists it is not trying to keep people with HIV/AIDS from enrolling in one of its policies under the Affordable Care Act, but is instead rejecting third party premium payments in an effort to prevent potential fraud.

http://www.reuters.com/article/2014/02/09/us-usa-healthcare-obamacare-id…

One of the advantages of the Affordable Care Act (ACA) is that private insurers can no longer reject the applications of individuals with serious, expensive disorders, such as HIV/AIDS. But the response of Blue Cross and Blue Shield of Louisiana – the largest insurer in Louisiana – is another example of how private insurers are not inclined to change from their business model to a patient service model.

For HIV/AIDS patients, the need was so great that Congress passed the Ryan White Act in 1990 in order to provide funds to pay premiums for them in high-risk pools. Since ACA requires insurers to accept all applicants, many of the high-risk pools are transferring their beneficiaries to the exchange plans. These are expensive patients yet the premiums the insurers receive are the same as for everyone else in the individual risk pools.

Clearly, the insurers do not want these patients, yet the Ryan White funds are still available to pay the premiums, especially for those with incomes below poverty in a state that has refused to expand its Medicaid program.

So what did Blue Cross and Blue Shield of Louisiana do? They refused to accept Ryan White checks to pay for the premiums on the basis that such payments could expose the insurer to fraud. What? A federal government check creates a greater potential for fraud?

The fraud is obviously on the part of Blue Cross and Blue Shield of Louisiana which is using this ruse to keep high-cost HIV/AIDS patients out of their health plans – patients which they are required to cover.

HHS’s response? They are going to encourage insurers and Marketplaces to accept Ryan White payments. They offer what doesn’t even amount to a tweak when what we need is get rid of the private insurers and cover everyone with our own improved version of Medicare. The goal should be optimal patient service, not optimal business success for private insurers.

Insurers face new pressure over limited doctor choice

By Anna Wilde Mathews and Christopher Weaver
Wall Street Journal, February 6, 2014

Insurers are facing pressure from regulators and lawmakers about plans that offer limited choices of doctors and hospitals, a tactic the industry said is vital to keep down coverage prices in the new health law’s marketplaces.

This week, federal regulators proposed a tougher review process for the doctors and hospitals in plans to be sold next year through HealthCare.gov, a shift that could force insurers to expand those networks. 

Meantime, regulators in states including Washington and New Hampshire are ramping up their own scrutiny, and lawmakers in Mississippi and Pennsylvania, among others, are weighing bills that could force plans to add more hospitals and doctors.

The moves come amid complaints by some consumers that they don’t have access to a broad enough range of care—such as specialists at top academic medical centers…

http://online.wsj.com/news/articles/SB10001424052702304450904579365373011903340?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304450904579365373011903340.html

==

Health law goals face antitrust hurdles

By Eduardo Porter
The New York Times, February 4, 2014

[I]n a remote courthouse in Idaho … less than two weeks ago a district judge sided with the Federal Trade Commission and ordered the unwinding of the merger between one of the state’s biggest hospital systems and its biggest independent network of doctors.

The ruling against St. Luke’s Health System’s 2012 purchase of the Saltzer Medical Group underlined a potentially important conflict between the nation’s antimonopoly laws and the Affordable Care Act. The new law has encouraged the creation of big, broad accountable care organizations, which are paid to keep patients healthy rather than for individual services.

“We want to be providing a more coordinated product that delivers health care at a lower overall cost to the community we serve,” Christine Neuhoff, general counsel at St. Luke’s, told me. ….

Paradoxically, Judge B. Lynn Winmill seemed to agree. In his decision, he noted that the merger, had he let it stand, would probably have improved patient outcomes: “St. Luke’s is to be applauded,” he wrote, “for its efforts to improve the delivery of health care in the Treasure Valley,” which stretches west from Boise.

Still, he slapped it down because the merged group, he reasoned, would be able to demand higher reimbursement rates from health insurers and raise rates for services like X-rays, pushing up health care costs for consumers. “There are other ways” to obtain the desired efficiencies that “do not run such a risk of increased costs,” he concluded.

http://www.isidewith.com/news/article/economic-scene-health-law-goals-face-antitrust-hurdles

==

FTC wins challenge against Idaho hospital deal

By Brent Kendall
Wall Street Journal, January 24, 2014

Lawyer David A. Ettinger, who represented a competing Idaho hospital that opposed the St. Luke’s transaction, said the judge’s ruling effectively rebuts “the notion that all these transactions are appropriate because of the Affordable Care Act.”

http://online.wsj.com/news/articles/SB10001424052702304856504579340733626090534

Comment:

By Kip Sullivan

The Affordable Care Act has set off another wave of mergers among hospitals, and it has induced insurance companies to kick doctors out of their “networks.” Both hospitals and insurers are justifying their behavior by claiming it is exactly what the authors of the Affordable Care Act wanted them to do. Hospitals claim they are merely trying to create “accountable care organizations” (a new synonym for HMO endorsed by the ACA) that will better “coordinate care” and thereby reduce costs. The insurance industry is claiming they are narrowing their networks in order to lower costs and winnow out doctors who don’t care about “quality.”

The emperor here is stark naked. The hospital and insurance industries are building up market power as fast as they can in order to maintain countervailing power against each other. By reducing the size of their networks, insurers create more power over the remaining providers and use it to negotiate lower reimbursements. By merging with other hospitals and buying up clinics, hospitals make it harder for insurers refuse to include them in their networks and to squash their fees. Neither the insurers nor the hospitals can afford to disarm unilaterally.  

Proponents of the ACO provisions within the ACA should have predicted that their handiwork would set off the equivalent of an arms race. The least they can do now is admit that’s what happened and that the consequences – smaller networks and bigger hospital-clinic chains – need to be unraveled. But ACA proponents either ignore the issue or suggest solutions that make no sense. In the New York Times article quoted above, Jonathan Skinner, a leading ACO proponent, argues that empire building by hospitals won’t lead to higher prices because insurance companies are also building up countervailing power by creating narrower networks. The Times quotes Skinner as follows: “It’s certainly true that the consolidation of physician groups and hospitals can lead to greater market power and higher charges to insurance companies. But the insurance companies are creating narrower networks of providers. So providers who try to charge more risk getting dropped entirely from the now narrower network.” What Skinner is saying is that we needn’t worry about giant hospital chains because giant insurance companies will react by reducing consumer choice and all will be well. In this battle between Godzilla and King Kong, patients will lose choice of provider, but that’s not anything we should worry our little minds about. What’s important is that the ACO experiment should play out across the country.

The Times also quotes Obama ally David Cutler saying that if hospital-clinic monopolies do evolve, that’s fine because they are probably the “only way to obtain good care,” and if that turns out to be the case, then we’ll have to “regulate [their] prices or total spending.” Like Skinner, Cutler is assuming that enormous hospital-clinic chains confer such obvious benefits that society must give up choice of provider and learn to tolerate enormous hospital-centered monopolies. The only difference between Cutler’s “solution” and Skinner’s is that the government will play Godzilla to the hospital’s King Kong, not the insurance industry.

But the claim that enormous health “systems,” dressed up as ACOs or anything else, can improve care and lower costs remains unproven. Until it is proven, the FTC, the Justice Department, and state attorneys general should not stand idly by and watch the empire builders. And judges should not treat the claims made by ACO proponents as true as the judge in the St. Luke’s case apparently did. When the FTC or Justice brings the empire builders into court and the empire builders claim they are merely trying to “integrate care” per the ACA, judges should demand evidence that ACOs or “integrated systems” work as advertised. That evidence does not exist today and probably never will exist.

In ruling against St. Luke’s, the Idaho judge made a valuable observation. He said “there are other ways” to achieve the goals ACO advocates claim they want to achieve. Imagine that. May I suggest one way: Why don’t ACO proponents state concretely and specifically what they want ACOs to do, and if evidence indicates what they’re proposing is good for patients, then let’s pay clinics and hospitals (not ACOs) to provide those services. When I say ACO proponents should speak “concretely and specifically,” I mean in everyday language, not “coordinated” this and “integrated” that and other fatuous labels invented by the illuminati at 80,000 feet. 

For example, if ACO proponents were to say that what they really want is nurses to visit heart failure patients at home after discharge and to monitor them remotely thereafter, I believe all of us – ACO proponents and skeptics alike – would agree the evidence indicates that is good for patients http://www.innovations.ahrq.gov/content.aspx?id=275. In that event, we could write a code for those services and order public and private insurers to pay for them. Why funnel un-earmarked “capitation” payments through the headquarters of enormous hospital-clinic chains and hope they’ll use the money to pay nurses to take better care of heart failure patients rather, than, say, more advertising or more mergers? 

Paying clinics and hospitals directly would remove much of the incentive to build empires and it would give society a much better record of where our money went. 

Of course, the ultimate antidote to empire-building is a single-payer system. 

Draft 2015 Letter to Issuers in the Federally-facilitated Marketplaces

Centers for Medicare & Medicaid Services, February 4, 2014

This Letter provides issuers seeking to offer Qualified Health Plans (QHPs), including stand-alone dental plans (SADPs), in a Federally- facilitated Marketplace (FFM) and/or Federally-facilitated Small Business Health Options Program (FF-SHOP), with operational and technical guidance to help them successfully participate in the Marketplaces.

Chapter 2

Section 3. Network Adequacy

Pursuant to 45 C.F.R. 156.230(a)(2), an issuer of a QHP that has a provider network must maintain a network that is sufficient in number and types of providers, including providers that specialize in mental health and substance use disorder services, to assure that all services will be accessible to enrollees without unreasonable delay.

For the 2015 benefit year, issuers will be required to submit a provider list that includes all in-network providers and facilities for all plans for which a QHP certification application is submitted. CMS will review the collected provider list to evaluate provider networks using a “reasonable access” review standard, and will identify networks that fail to provide access without unreasonable delay. In order to determine whether an issuer meets the “reasonable access” standard, CMS will focus most closely on those areas which have historically raised network adequacy concerns. These areas may include the following:

• Hospital systems,

• Mental health providers,

• Oncology providers, and

• Primary care providers.

If CMS determines that an issuer’s network is inadequate under the reasonable access review standard, CMS will notify the issuer of the identified problem area(s) and will consider the issuer’s response in assessing whether the issuer has met the regulatory requirement and prior to making the certification or recertification determination.

Section 4. Essential Community Providers

Essential community providers (ECPs) include providers that serve predominantly low-income and medically underserved individuals (includes federally qualified health centers, Ryan White HIV/AIDS Providers, Title X Family Planning Clinics, Tribal and Urban Indian Organization Providers, Disproportionate Share Hospital (DSH) and DSH-eligible Hospitals, Children’s Hospitals, Rural Referral Centers, Sole Community Hospitals, Free-standing Cancer Centers, Critical Access Hospitals, STD Clinics, TB Clinics, Hemophilia Treatment Centers, Black Lung Clinics, and other entities that serve predominantly low-income, medically underserved individuals).

i. Evaluation of Network Adequacy with respect to ECP

Because the number and types of ECPs available vary significantly by location, CMS intends to propose in rulemaking an approach to evaluating QHP Applications for sufficient inclusion of ECPs for the 2015 benefit year.

If finalized, we intend for certification year 2015 to utilize a general ECP standard whereby the application would first have to demonstrate that at least 30 percent of available ECPs in each plan’s service area participate in the provider network.

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/draft-issuer-letter-2-4-2014.pdf

Comment:

By Don McCanne, M.D.

In an effort to improve the function of health plans being offered through the Federally-facilitated Marketplaces (insurance exchanges), CMS has issued a Draft Letter providing guidance to Qualified Health Plans (QHPs) as they apply for certification or recertification of their plans. From CMS’s 51 page letter, two of the issues presented warrant our special attention: 1) network adequacy for the QHPs, and 2) network inclusion of Essential Community Providers (ECPs).

The Affordable Care Act (ACA) very intentionally included limited provider networks as a tool to reduce health care spending. QHPs could negotiate lower payment rates by offering physicians and hospitals exclusivity – exchanging lower fees for higher volume, while excluding the other physicians and hospitals in the community. The insurers seemed to think that they were given carte blanche and trimmed these back to narrow networks or even ultra-narrow networks. The insurers’ bargaining leverage with the few providers that sign on is even greater, plus these narrow networks further reduce spending since patients have greater difficulties accessing care because of transportation problems and difficulties obtaining appointments with overbooked providers. Patients losing their established health care providers not only have the right to be angry, but that can also be disruptive to the care of those in ongoing treatment programs for more serious problems. Disruption of care, impairing access, and depriving patients of choice of their care are opposite of the policies that reform should bring us.

The CMS Letter states that “a provider network must maintain a network that is sufficient in number and types of providers,” and that “issuers will be required to submit a provider list that includes all in-network providers and facilities” so that CMS can “evaluate provider networks using a ‘reasonable access’ review standard.”

Well, that’s a nice process. Sufficient providers? Reasonable access standard? Every community is different. How many hospitals and physicians would be needed in each network, and, furthermore, how do you choose which ones are to be anointed? Is this another one of those public-private partnerships burying corruption under the banner of market efficiency? Further, what about the next year when it turns out that the selected providers were not so hot after all? Do you then turn to the providers who were rejected? Not if they closed shop and left town. Disrupting the community health care infrastructure is the opposite of the policies that reform should bring us.

Since tens of millions will remain uninsured it is essential that ECPs be supported. The uninsured will have to rely largely on federally qualified health centers, disproportionate share hospitals, critical access hospitals, rural referral centers and other institutions that have traditionally provided care to the poor and uninsured. In many communities, these institutions also provide services to insured individuals, including especially those with Medicaid. Sometimes these sites are chosen by patients because of impaired access to mainstream providers, sometimes for convenience, and sometimes because of patient preference, especially when these sites have always been the individual’s source of care.

So what is the new proposed CMS rule on ECPs? For 2015, CMS would require that “at least 30 percent of available ECPs in each plan’s service area participate in the provider network.” The reciprocal? The health plans can exclude up to 70 percent of essential community providers from its networks! ACA reduced the funding for safety-net institutions since “everybody would be insured” so their care could be paid for through the plans. Yet when the beneficiaries use these essential community providers, the insurers do not have to pay for care provided by 70 percent of these ESSENTIAL institutions. Defunding essential community providers is the opposite of the policies that reform should bring us.

The few good polices contained in ACA do not begin to offset all of the terrible policies that already characterize our dysfunctional health care system – policies that were left in place because of the highly flawed design of ACA.

There is something we can do about it. First, it is essential that everyone has a solid foundation in knowledge about social insurance. Once we have that, it will be so obvious that we need a universal, publicly financed and publicly administered program of social insurance for health care, something like an improved Medicare that covers everyone. For those who missed yesterday’s Quote of the Day on “Social Insurance” by Marmor et al, click on the link below, read the message, and then buy the book.

https://www.pnhp.org/news/2014/february/social-insurance-what-you-need-to-know

Draft 2015 Letter to Issuers in the Federally-facilitated Marketplaces

Centers for Medicare & Medicaid Services, February 4, 2014

This Letter provides issuers seeking to offer Qualified Health Plans (QHPs), including stand-alone dental plans (SADPs), in a Federally- facilitated Marketplace (FFM) and/or Federally-facilitated Small Business Health Options Program (FF-SHOP), with operational and technical guidance to help them successfully participate in the Marketplaces.

Chapter 2

Section 3. Network Adequacy

Pursuant to 45 C.F.R. 156.230(a)(2), an issuer of a QHP that has a provider network must maintain a network that is sufficient in number and types of providers, including providers that specialize in mental health and substance use disorder services, to assure that all services will be accessible to enrollees without unreasonable delay.

For the 2015 benefit year, issuers will be required to submit a provider list that includes all in-network providers and facilities for all plans for which a QHP certification application is submitted. CMS will review the collected provider list to evaluate provider networks using a “reasonable access” review standard, and will identify networks that fail to provide access without unreasonable delay. In order to determine whether an issuer meets the “reasonable access” standard, CMS will focus most closely on those areas which have historically raised network adequacy concerns. These areas may include the following:

• Hospital systems,

• Mental health providers,

• Oncology providers, and

• Primary care providers.

If CMS determines that an issuer’s network is inadequate under the reasonable access review standard, CMS will notify the issuer of the identified problem area(s) and will consider the issuer’s response in assessing whether the issuer has met the regulatory requirement and prior to making the certification or recertification determination.

Section 4. Essential Community Providers

Essential community providers (ECPs) include providers that serve predominantly low-income and medically underserved individuals (includes federally qualified health centers, Ryan White HIV/AIDS Providers, Title X Family Planning Clinics, Tribal and Urban Indian Organization Providers, Disproportionate Share Hospital (DSH) and DSH-eligible Hospitals, Children’s Hospitals, Rural Referral Centers, Sole Community Hospitals, Free-standing Cancer Centers, Critical Access Hospitals, STD Clinics, TB Clinics, Hemophilia Treatment Centers, Black Lung Clinics, and other entities that serve predominantly low-income, medically underserved individuals).

i. Evaluation of Network Adequacy with respect to ECP

Because the number and types of ECPs available vary significantly by location, CMS intends to propose in rulemaking an approach to evaluating QHP Applications for sufficient inclusion of ECPs for the 2015 benefit year.

If finalized, we intend for certification year 2015 to utilize a general ECP standard whereby the application would first have to demonstrate that at least 30 percent of available ECPs in each plan’s service area participate in the provider network.

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/dr…

In an effort to improve the function of health plans being offered through the Federally-facilitated Marketplaces (insurance exchanges), CMS has issued a Draft Letter providing guidance to Qualified Health Plans (QHPs) as they apply for certification or recertification of their plans. From CMS’s 51 page letter, two of the issues presented warrant our special attention: 1) network adequacy for the QHPs, and 2) network inclusion of Essential Community Providers (ECPs).

The Affordable Care Act (ACA) very intentionally included limited provider networks as a tool to reduce health care spending. QHPs could negotiate lower payment rates by offering physicians and hospitals exclusivity – exchanging lower fees for higher volume, while excluding the other physicians and hospitals in the community. The insurers seemed to think that they were given carte blanche and trimmed these back to narrow networks or even ultra-narrow networks. The insurers’ bargaining leverage with the few providers that sign on is even greater, plus these narrow networks further reduce spending since patients have greater difficulties accessing care because of transportation problems and difficulties obtaining appointments with overbooked providers. Patients losing their established health care providers not only have the right to be angry, but that can also be disruptive to the care of those in ongoing treatment programs for more serious problems. Disruption of care, impairing access, and depriving patients of choice of their care are opposite of the policies that reform should bring us.

The CMS Letter states that “a provider network must maintain a network that is sufficient in number and types of providers,” and that “issuers will be required to submit a provider list that includes all in-network providers and facilities” so that CMS can “evaluate provider networks using a ‘reasonable access’ review standard.”

Well, that’s a nice process. Sufficient providers? Reasonable access standard? Every community is different. How many hospitals and physicians would be needed in each network, and, furthermore, how do you choose which ones are to be anointed? Is this another one of those public-private partnerships burying corruption under the banner of market efficiency? Further, what about the next year when it turns out that the selected providers were not so hot after all? Do you then turn to the providers who were rejected? Not if they closed shop and left town. Disrupting the community health care infrastructure is the opposite of the policies that reform should bring us.

Since tens of millions will remain uninsured it is essential that ECPs be supported. The uninsured will have to rely largely on federally qualified health centers, disproportionate share hospitals, critical access hospitals, rural referral centers and other institutions that have traditionally provided care to the poor and uninsured. In many communities, these institutions also provide services to insured individuals, including especially those with Medicaid. Sometimes these sites are chosen by patients because of impaired access to mainstream providers, sometimes for convenience, and sometimes because of patient preference, especially when these sites have always been the individual’s source of care.

So what is the new proposed CMS rule on ECPs? For 2015, CMS would require that “at least 30 percent of available ECPs in each plan’s service area participate in the provider network.” The reciprocal? The health plans can exclude up to 70 percent of essential community providers from its networks! ACA reduced the funding for safety-net institutions since “everybody would be insured” so their care could be paid for through the plans. Yet when the beneficiaries use these essential community providers, the insurers do not have to pay for care provided by 70 percent of these ESSENTIAL institutions. Defunding essential community providers is the opposite of the policies that reform should bring us.

The few good polices contained in ACA do not begin to offset all of the terrible policies that already characterize our dysfunctional health care system – policies that were left in place because of the highly flawed design of ACA.

There is something we can do about it. First, it is essential that everyone has a solid foundation in knowledge about social insurance. Once we have that, it will be so obvious that we need a universal, publicly financed and publicly administered program of social insurance for health care, something like an improved Medicare that covers everyone. For those who missed yesterday’s Quote of the Day on “Social Insurance” by Marmor et al, click on the link below, read the message, and then buy the book.

https://pnhp.org/news/2014/february/social-insurance-what-you-need-to…

Social Insurance: America’s Neglected Heritage and Contested Future

By Theodore R. Marmor, Jerry L. Mashaw and John Pakutka
(Published by CQ Press, October 15, 2013))

The United States has a relatively comprehensive system of social insurance. Our programs of social provision begin with a bedrock assumption: family income will generally come from work wages or salaries, deferred compensation in the form of pensions, or investments in financial markets (roughly speaking, invested savings, although inheritance plays a small part for many families). We live and work in a vibrant market economy.

We recognize, however, that over the life cycle of any individual there are risks to adequate income from temporary or long-term inability to work and inadequate reserves to withstand major shocks, such as catastrophic medical expenses.

****

The overall lesson is clear: America’s social welfare programs directed at family economic security are complex compromises. They represent balances among visions of social welfare goals and understandings of the proper location of public responsibility. They also reflect compromises among conceptions of governmental and individual and private responsibilities and governmental and market allocation of goods and services. The complex nature of American social programs is hardly an accident. It is the outcome of the forces – political, economic, social, and philosophical – that shaped policy judgements at critical junctures in American history, that is, the point at which these programs were enacted, amended, or reformed.

****

Heterogeneity and complexity are not necessarily bad things in themselves. They may be the results of differing political preferences, differing local conditions, or the differing needs of various populations. Heterogeneous arrangements may also provide opportunities for experimentation and learning that are beneficial in the long run. But looking at the now so-called universal access to health insurance in the United States, it is difficult to perceive whether any of these values are being served. Moreover, the heterogeneity and complexity in these arrangements provide quite different levels of access to health insurance for different populations, a situation that is almost certain to lead to serious administrative difficulties and public misunderstandings. Whereas the relatively simple structure of Medicare, both in its coverage and financing, has led to immense popularity and very substantial improvements in the economic security of American seniors, both Medicare’s “modernization” in the Medicare Modernization Act of 2003 and the complex and administratively challenging provisions of the Affordable Care Act of 2010 raise all-too-obvious possibilities for health system cost inflation, citizen and provider dissatisfaction, and continued political struggle. “Universal coverage” is to be applauded from the perspective of increasing Americans’ economic security, but program design matters.

****

Social insurance programs engage most of the electorate precisely because they cover common risks and insure most of the population. And because practically everyone is both a contributor and a potential beneficiary, the politics of social insurance tends to be of the “us-us” rather than the “us-them” form. Each individual’s sense of earned entitlement or deservingness makes reneging on promises in social insurance programs politically costly. Each individual’s responsibility to contribute to the common pool makes extravagant promises of “something-for-nothing” future benefits less politically attractive.

****

The common pool feature of Medicare cannot plausibly be a cause for fiscal concern. The experience of other industrial democracies has repeatedly demonstrated the superior capacity of more universal social insurance programs to restrain growth in overall medical expenditures. Any comparison of growth in health expenditures of the United States and social insurance nations such as Germany, the Netherlands, and France would show American expenditures to have grown more rapidly in recent decades. And these are countries with both older populations and more widespread and intensive use of health care than in the United States. (The simple facts in the previous sentence are so little appreciated that we suggest you read the sentence again.) Countries with older populations, greater use of medical care, and, in addition, equal or better health results do a better job of restraining medical inflation than the United States. None of them rely on competition of individual responsibility as a major cost-control device.

****

It is hard to argue, and we will not, with the motivation of the ACA’s sponsors and supporters. Broadening health insurance coverage to include more than 50 million uninsured Americans is a worthy goal – as is any attempt to get a handle on cost inflation in health care expenses in the United States. But we believe that the idea that these goals are best pursued through market-mimicking and means-tested social provision is profoundly misguided. Fragmented risk pools will not promote either perceptions of fairness or us-us politics in the provision of health insurance. And patient choice and competition among insurers has no demonstrated record of cost control in medical care either in the United States or elsewhere in the developed world. The MMA and the ACA modernize health insurance in the United States by moving further toward the health insurance models that have long been available in private markets. Both statutes seem to imagine that health care economics works like the market for breakfast cereals and that individual choice in risk bearing is the solution to concerns about both quality and efficiency. We know of no evidence that could sustain these beliefs.

****

We should not leave this discussion without underscoring the profoundly traditional, indeed conservative, and work-oriented vision that American universalism embraces. It says not that you are entitled because you are part of the nation, although that is surely a plausible vision of universality, but that you are entitled because of your contribution to the nation. Funding is linked to earnings, and entitlement is defined largely by years of work. Hence for Americans, universalistic entitlement has always been a concept tied to, supported by and supporting, a market economy. That the protection of social insurance – and the demand for its expansion – should be thought to be the distinctive position of “liberals” is, to say the least, ironic. That the reform of social insurance should be thought to be best accomplished by moving in the direction of market-like devices that shift risks onto individuals and families already buffeted by the staggering economic uncertainties of a rapidly globalizing economy is, in our view, a serious mistake. “Modernization” in this form misunderstands what social insurance is about.

http://www.cqpress.com/product/Social-Insurance-America-s-Neglected.html

Comment:

By Don McCanne, M.D.

Social insurance defines a nation. Do we join together to protect each other from the many threats of financial disruption, or do we let each individual or family fend for themselves against odds of success? Compared to other nations, the record in the United States has been spotty. What are we doing right, what are we doing wrong, and how can we improve? “Social Insurance,” by Theodore Marmor, Jerry Mashaw and John Pakutka provides the answers.

Americans are very familiar with Medicare and Social Security, and, of course, are quite protective of them. But they are just two programs of social insurance, and they mesh with many other policies designed to protect us against the threat of being born poor, the threat of the early death of the family breadwinner, the threat of ill health, the threat of involuntary unemployment, the threat of disability, and the threat of outliving one’s savings. It is these threats and our current policies toward them that the authors describe, while providing us with an understanding of how we can improve security for all of us.

Everyone should have this book. For individuals already well versed in social insurance, it provides an oversight that organizes thoughts while providing us with clear explanations of the problems and solutions that we can share with others. For the business community, it explains social insurance in terms that astute businesspersons would recognize as smart business decisions on how to address these threats – for themselves and for their employees. For advocates of free markets who are uncomfortable with “government solutions,” it explains how social insurance is an essential component in maintaining a vibrant market economy. For politicians, once the public has a better understanding of social insurance, it shows them that they must abandon deceptive rhetoric and move forward with beneficial reform. For libertarians, well… they should read this to try to understand why people want to be in this together, then, if they still can’t get it, they should dig moats around their castles.

Social Insurance: America’s Neglected Heritage and Contested Future

By Theodore R. Marmor, Jerry L. Mashaw and John Pakutka
(Published by CQ Press, October 15, 2013))

The United States has a relatively comprehensive system of social insurance. Our programs of social provision begin with a bedrock assumption: family income will generally come from work wages or salaries, deferred compensation in the form of pensions, or investments in financial markets (roughly speaking, invested savings, although inheritance plays a small part for many families). We live and work in a vibrant market economy.

We recognize, however, that over the life cycle of any individual there are risks to adequate income from temporary or long-term inability to work and inadequate reserves to withstand major shocks, such as catastrophic medical expenses.

****

The overall lesson is clear: America’s social welfare programs directed at family economic security are complex compromises. They represent balances among visions of social welfare goals and understandings of the proper location of public responsibility. They also reflect compromises among conceptions of governmental and individual and private responsibilities and governmental and market allocation of goods and services. The complex nature of American social programs is hardly an accident. It is the outcome of the forces – political, economic, social, and philosophical – that shaped policy judgements at critical junctures in American history, that is, the point at which these programs were enacted, amended, or reformed.

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Heterogeneity and complexity are not necessarily bad things in themselves. They may be the results of differing political preferences, differing local conditions, or the differing needs of various populations. Heterogeneous arrangements may also provide opportunities for experimentation and learning that are beneficial in the long run. But looking at the now so-called universal access to health insurance in the United States, it is difficult to perceive whether any of these values are being served. Moreover, the heterogeneity and complexity in these arrangements provide quite different levels of access to health insurance for different populations, a situation that is almost certain to lead to serious administrative difficulties and public misunderstandings. Whereas the relatively simple structure of Medicare, both in its coverage and financing, has led to immense popularity and very substantial improvements in the economic security of American seniors, both Medicare’s “modernization” in the Medicare Modernization Act of 2003 and the complex and administratively challenging provisions of the Affordable Care Act of 2010 raise all-too-obvious possibilities for health system cost inflation, citizen and provider dissatisfaction, and continued political struggle. “Universal coverage” is to be applauded from the perspective of increasing Americans’ economic security, but program design matters.

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Social insurance programs engage most of the electorate precisely because they cover common risks and insure most of the population. And because practically everyone is both a contributor and a potential beneficiary, the politics of social insurance tends to be of the “us-us” rather than the “us-them” form. Each individual’s sense of earned entitlement or deservingness makes reneging on promises in social insurance programs politically costly. Each individual’s responsibility to contribute to the common pool makes extravagant promises of “something-for-nothing” future benefits less politically attractive.

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The common pool feature of Medicare cannot plausibly be a cause for fiscal concern. The experience of other industrial democracies has repeatedly demonstrated the superior capacity of more universal social insurance programs to restrain growth in overall medical expenditures. Any comparison of growth in health expenditures of the United States and social insurance nations such as Germany, the Netherlands, and France would show American expenditures to have grown more rapidly in recent decades. And these are countries with both older populations and more widespread and intensive use of health care than in the United States. (The simple facts in the previous sentence are so little appreciated that we suggest you read the sentence again.) Countries with older populations, greater use of medical care, and, in addition, equal or better health results do a better job of restraining medical inflation than the United States. None of them rely on competition of individual responsibility as a major cost-control device.

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It is hard to argue, and we will not, with the motivation of the ACA’s sponsors and supporters. Broadening health insurance coverage to include more than 50 million uninsured Americans is a worthy goal – as is any attempt to get a handle on cost inflation in health care expenses in the United States. But we believe that the idea that these goals are best pursued through market-mimicking and means-tested social provision is profoundly misguided. Fragmented risk pools will not promote either perceptions of fairness or us-us politics in the provision of health insurance. And patient choice and competition among insurers has no demonstrated record of cost control in medical care either in the United States or elsewhere in the developed world. The MMA and the ACA modernize health insurance in the United States by moving further toward the health insurance models that have long been available in private markets. Both statutes seem to imagine that health care economics works like the market for breakfast cereals and that individual choice in risk bearing is the solution to concerns about both quality and efficiency. We know of no evidence that could sustain these beliefs.

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We should not leave this discussion without underscoring the profoundly traditional, indeed conservative, and work-oriented vision that American universalism embraces. It says not that you are entitled because you are part of the nation, although that is surely a plausible vision of universality, but that you are entitled because of your contribution to the nation. Funding is linked to earnings, and entitlement is defined largely by years of work. Hence for Americans, universalistic entitlement has always been a concept tied to, supported by and supporting, a market economy. That the protection of social insurance – and the demand for its expansion – should be thought to be the distinctive position of “liberals” is, to say the least, ironic. That the reform of social insurance should be thought to be best accomplished by moving in the direction of market-like devices that shift risks onto individuals and families already buffeted by the staggering economic uncertainties of a rapidly globalizing economy is, in our view, a serious mistake. “Modernization” in this form misunderstands what social insurance is about.

http://www.cqpress.com/product/Social-Insurance-America-s-Neglected.html

Social insurance defines a nation. Do we join together to protect each other from the many threats of financial disruption, or do we let each individual or family fend for themselves against odds of success? Compared to other nations, the record in the United States has been spotty. What are we doing right, what are we doing wrong, and how can we improve? “Social Insurance,” by Theodore Marmor, Jerry Mashaw and John Pakutka provides the answers.

Americans are very familiar with Medicare and Social Security, and, of course, are quite protective of them. But they are just two programs of social insurance, and they mesh with many other policies designed to protect us against the threat of being born poor, the threat of the early death of the family breadwinner, the threat of ill health, the threat of involuntary unemployment, the threat of disability, and the threat of outliving one’s savings. It is these threats and our current policies toward them that the authors describe, while providing us with an understanding of how we can improve security for all of us.

Everyone should have this book. For individuals already well versed in social insurance, it provides an oversight that organizes thoughts while providing us with clear explanations of the problems and solutions that we can share with others. For the business community, it explains social insurance in terms that astute businesspersons would recognize as smart business decisions on how to address these threats – for themselves and for their employees. For advocates of free markets who are uncomfortable with “government solutions,” it explains how social insurance is an essential component in maintaining a vibrant market economy. For politicians, once the public has a better understanding of social insurance, it shows them that they must abandon deceptive rhetoric and move forward with beneficial reform. For libertarians, well… they should read this to try to understand why people want to be in this together, then, if they still can’t get it, they should dig moats around their castles.