Speaker – Page 471

Data Update – Fall 2013 newsletter

UNINSURED AND UNDERINSURED

According to the latest estimate from the Congressional Budget Office, the Affordable Care Act (ACA) will leave 31 million Americans without insurance in 2023, about 5 million more than would have remained uninsured if the ACA’s Medicaid expansion had not been made voluntary. The demographic composition of the uninsured won’t change much under the ACA; most will be non-Hispanic, white, low-income working-age adults. The majority (around 80 percent) will be U.S. citizens. 4.3 million children and nearly 1 million veterans will remain uninsured (Congressional Budget Office, May 14, 2013; Nardin et al, “The Uninsured After Implementation Of The Affordable Care Act: A Demographic And Geographic Analysis,” Health Affairs, 6/6/13, reprinted on page 13).

• In 2012, 84 million adults – 46 percent of those aged 19 to 64 – did not have health insurance coverage for the entire year or had such high out-of-pocket costs that they were considered underinsured, up from 61 million in 2003. Underinsurance was deﬁned as being insured all year but experiencing one of the following: out-of-pocket expenses of 10 percent or more of income; out-of-pocket expenses equal to 5 percent or more of income if low income (<200 percent of poverty); or deductibles equal to 5 percent or more of income.

Three-fourths of working-age adults with incomes less than 133 percent of poverty (i.e. less than $14,856 a year for an individual or $30,657 for a family of four) – an estimated 40 million people – were uninsured or underinsured in 2012. Fifty-nine percent of adults earning between 133 percent and 249 percent of poverty (between $14,856 and $27,925 for an individual or between $30,657 and $57,625 for a family of four) – 21 million people – were uninsured or underinsured. People with incomes under 250 percent of poverty accounted for 72 percent of the total number of Americans who were uninsured or underinsured in 2012.

On the plus side, the proportion of young adults ages 19–25 who were uninsured fell from 48 percent to 41 percent between 2010 and 2012, due to a provision in the 2010 Affordable Care Act allowing young adults to stay on a parent’s health insurance until age 26.

In 2012, 80 million people reported that, during the past year, they did not go to the doctor when sick or did not fill a prescription due to cost, up from 63 million in 2003. In 2012, 41 percent of working-age adults, or 75 million people, had problems paying their medical bills or were paying off medical bills over time, up from 58 million in 2005. In addition, an estimated 28 million adults used all of their savings to pay off bills and 4 million adults had to declare bankruptcy in the previous two years. (2012 Biennial Health Insurance Survey, Commonwealth Fund)

• High and rising deductibles are driving up underinsurance. Five years ago, 12 percent of workers faced a deductible of at least $1,000 for single coverage. Today more than one-third of workers do, according to the Kaiser Family Foundation’s 2012 survey of employer-sponsored plans. Increasingly, a high-deductible plan is the only insurance offered on the job, even at big firms (Andrews, Kaiser Health News, 5/20/13).

In one of the largest studies of its kind, 36.3 percent of the uninsured reported problems with medical bills in the first half of 2012. Overall, 20.3 percent of families, 54.2 million people, had difficulty covering their medical expenses. (Cohen et al, “Problems Paying Medical Bills: Early Release of Estimates From the National Center for Health Statistics,” June 2013).

• Fifty-eight percent of patients who use an out-of-network provider in the hospital do so involuntarily, according to a recent survey. A visit was considered involuntary if it was due to a medical emergency (68 percent of involuntary contacts) or the physician’s out-of-network status was unknown at the time of contact (31 percent of involuntary contacts). Fifteen percent of patients who saw an out-of-network physician as an outpatient did so involuntarily, but this is likely an underestimate because it didn’t include people for whom an in-network provider was unavailable. Out-of-network care is costly and is only minimally covered by private insurance, adding to already burdensome expenditures for high-deductibles and coinsurance (Kyanko et al, “Out-of-Network Physicians: How Prevalent are Involuntary Use and Cost Transparency,” HSR, June 2013).

• Uninsured hospitalized neonates have mortality 2.6 times higher than their insured counterparts, according to a new study. Of 4,318,121 neonates discharged in 2006, 5.4 percent were uninsured. 9.5 percent of all neonates who died were uninsured. Not surprisingly, five serious conditions, low birth weight, intraventricular hemorrhage, hypoxia, necrotizing enterocolitis, and congenital malformation, were the strongest predictors of mortality (adjusted odds ratio from 13.7 – 3.1). Lack of insurance had an adjusted odds ratio of 2.6, greater than most other clinical conditions. Compared with insured neonates, uninsured neonates received significantly fewer inpatient resources. Similar death outcome results were observed using data from 2003 and 2009 (Morris, F. “Increased Risk of Death among Uninsured Neonates,” Health Services Research, August 2013).

RACIAL AND SOCIOECONOMIC INEQUALiTY

• Although black seniors live, on average, half as far from a high-quality hospital as white seniors, they are between 25 percent and 58 percent more likely to receive surgery at lower-quality hospitals. Additionally, black seniors in the most segregated areas are between 41 percent and 96 percent more likely than white seniors to have surgery at the lower-quality hospitals, an analysis of Medicare data from 2005 to 2008 found. For coronary artery bypass, the odds were 48 percent higher; for lung cancer resection, 41 percent higher; and for abdominal aortic aneurysm repair, 96 percent higher. Blacks living in regions with more residential racial integration are no more likely than whites to receive care in low-quality hospitals. The authors note that lack of resources may cause low-quality and that policies such as pay-for-performance, bundled payments, and nonpayment for adverse events may divert resources away from low-quality hospitals, further reduce quality, and exacerbate racial disparities (Dimick et al, “Black Patients More Likely Than Whites To Undergo Surgery At Low-Quality Hospitals In Segregated Regions,” Health Affairs, June 2013).

• A new measure of poverty that takes medical expenses and social programs into account – the Supplemental Poverty Measure (SPM) – found that seniors are much worse off than previously thought. The SPM poverty rate for seniors is 15 percent compared to the standard rate of 9 percent, mostly due to the shrinking proportion of seniors’ health care costs covered by Medicare (Matthews, “Senior poverty is much worse than you think,” Washington Post, 5/20/13).

• A study of Florida’s “Welfare-to-Work” social experiment found a higher mortality rate among recipients whose welfare benefits were limited to 24-36 months than among recipients of traditional, non-time-limited welfare. Among the 1,611 participants in the group pressured to get jobs, 4.7 percent died by 2011 versus 4.2 percent among the 1,613 people who remained on traditional welfare, a statistically significant 20 percent difference. Earlier studies had reported that time limits led to higher employment but had not looked at health outcomes (Muennig et al, “Welfare Programs That Target Workforce Participation May Negatively Affect Mortality,” Health Affairs, June 2013).

The U.S. poverty rate increased from 11.3 percent in 2000 to 15.1 percent (50 million people) in 2010. The federal poverty limit in 2012 was $11,170 for an individual and $23,050 for a family of four.

In 2011, 1.65 million U.S. households were living in extreme poverty, defined as less than $2 a day per person. Those households include 3.55 million children, and account for 4.3 percent of all non-elderly households with children, up from 1.7 percent in 1996. Increasing extreme poverty is a long-term trend (“Safety Net Hospitals at Risk Report,” Alvarez & Marsal Healthcare, 4/16/13; Matthews, Millions of Americans live in extreme poverty. Here’s how they get by,” Washington Post, 5/13/13).

• Between 2000 and 2009, only 7.9 percent of unauthorized immigrants benefited from public-sector health care expenditures (receiving an average of $140 in benefits per person per year), compared to 30.1 percent of U.S. natives (who received an average of $1,385) (Stimpson et al, “Unauthorized Immigrants Spend Less Than Other Immigrants And US Natives On Health Care,” Health Affairs, 6/12/13).

• Between 2009 and 2011, average real income per family grew modestly by 1.7 percent but the gains were uneven. The incomes of the top 1 percent grew by 11.2 percent while the incomes of the bottom 99 percent shrunk by 0.4 percent. This has troubling health implications because there is substantial evidence that income inequality is associated with worse population health (Saez, “Striking it Richer: The Evolution of Top Incomes in the United States,” Econometric Laboratory Software Archive, 1/23/13).

COSTS

• Health spending for 2013 is projected to total $2.92 trillion, 18.2 percent of GDP, or $9,807 per capita, up 4.0 percent from 2012. Health inflation dropped to a historic low of 3.9 percent in 2009, and is expected to average 5.7 percent between 2014-2021 as the ACA is implemented (Keehan et al, “National Health Expenditure Projections: Modest Annual Growth Until Coverage Expands And Economic Growth Accelerates,” Health Affairs, June 2012).

The Milliman Medical Index estimated that the cost of health care services for a typical family of four with an employer-sponsored preferred provider plan, is $22,030 in 2013, up 6.3 percent since 2012. That includes an employee contribution to the premium of $5,544 and out-of-pocket expenses of $3,600, for a total employee share of $9,144, up 6.5 percent from 2012. It also includes an employer contribution of $12,886 which is indirectly paid by the employee through forgone wage increases (“Milliman Research Report,” Milliman Medical Index, 5/23/13).

• For-profit hospitals typically submit higher bills to Medicare than do nonprofit facilities. In contrast, public hospitals typically bill Medicare less than either nonprofit or for-profit hospitals, according to data released by Medicare on the costs of hospital procedures at 3,300 hospitals (Meier, McGinty and Creswell, “Hospital Billing Varies Wildly, Government Data Shows,” New York Times 5/8/13).

• Forty-three percent of the Massachusetts state budget is going to health care this year. The $15.1 billion health tab funds the Medicaid program, subsidized insurance under the 2006 health care reform law, premiums for state employees’ health insurance, and public health programs (Norton, “Health care, education consume 63 percent of planned state budget,” State House News Service, July 6, 2012)

MEDICARE

• A record 14.4 million Medicare beneficiaries, 28 percent of all beneficiaries, are enrolled in Medicare Advantage (MA) plans in 2013, up nearly 10 percent from 2012. Since 2010, enrollment in Medicare Advantage plans has grown by 30 percent in spite of predictions that the payment reductions enacted under the ACA would reduce enrollment. Why didn’t enrollment fall? CMS subsequent awarded “quality bonuses” to nearly all plans plus a 5.5 percent upward “adjustment” to MA payment rates. These actions have offset ACA mandated payment reductions and kept MA plans profitable (Kaiser Family Foundation, “Medicare Advantage 2013 Spotlight: Enrollment Market Update,” 6/10/13).

• Medicare Advantage plans profit by selectively enrolling and retaining healthy beneficiaries and disenrolling the expensively ill (“cherry-picking and spitting out the pits”). A new study finds that disenrollment to traditional fee-for-service (FFS) Medicare from Medicare Advantage plans continues to occur disproportionately among high-cost beneficiaries. Disenrollees incurred $1,021 per month in Medicare payments, compared with $798 in predicted payments (ratio of actual/predicted=1.28, p < 0.001 (Riley, “Impact of Continued Biased Disenrollment from the Medicare Advantage Program to Fee-for-Service,” Medicare & Medicaid Research Review, 2012: Vol. 2, No. 4).

• Insurers that sell Medicare Advantage plans received $5.1 billion in overpayments between 2010 and 2012 due to upcoding, according to a new report from the Government Accountability Office. The insurers receive higher payments for members with certain medical diagnoses, so Medicare Advantage plans have an incentive to maximize their members’ diagnoses (Overland, “CMS overpaid Medicare Advantage plans by $5.1B,” FierceHealthPayer, 3/6/13).

The ACA is cutting $36.2 billion in funding for safety-net hospitals over the next five years on the premise that the ACA will result in fewer individuals receiving uncompensated care. Medicaid Disproportionate Share Hospital (DSH) payments are the largest source of federal funding for uncompensated care, with fiscal year 2011 allotments totaling nearly $11.3 billion. The ACA cuts $14.1 billion from Medicaid DSH payments between 2014 and 2019, resulting in a 50 percent reduction by 2019 compared to the baseline.

Medicare DSH payments are somewhat smaller, totaling $10.8 billion in 2010. Between 2014 and 2019, Medicare DSH payments to hospitals are being cut by $22.1 billion, a 28 percent reduction. Hospitals qualify for Medicare DSH payments through a complex formula that assesses the share of a hospital’s patients who are low income. Beginning in FY 2014, base Medicare DSH payments to hospitals are being cut by 75 percent. Hospitals that continue to treat large number of uninsured individuals are supposed to see smaller cuts (Davis, “Q & A Disproportionate Share Hospital Payments and the Medicaid Expansion,” National Health Law Program, July 2012).

MEDICAID

• In 2008, Oregon held a lottery for uninsured low-income adults to determine eligibility for Medicaid coverage. It accepted only 10,000 out of 89,824 applicants on a waiting list, launching the first randomized controlled trial of Medicaid coverage. The most recent results show that Medicaid provides partial financial protection. The incidence of catastrophic expenditures (over 30 percent of household income) for families was reduced from 5.5 percent in the uninsured group to 1.0 percent in the Medicaid group, while the proportion having to borrow money to pay medical bills or to walk away from the bills was reduced from 24 percent to 10 percent. However, the proportion reporting any medical debt was only reduced from 57 percent to 44 percent. Those receiving Medicaid used more health care, especially preventive services, and had a 30 percent reduction in depression. Blood pressure was also reduced, although that improvement did not achieve statistical significance, perhaps because fewer than 400 hypertensives were in the study (Baicker et al, “The Oregon Experiment – Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine, 5/2/13).

• The largest Medicaid managed-care operator in D.C., Chartered Health Plan, which was responsible for providing care for over 100,000 AmeriHealth enrollees, collapsed in May. The plan leaves more than $60 million of unpaid medical bills and leftover claims, about 70 percent of which is owed to hospitals. AmeriHealth enrollees and providers in Chartered are being shifted to a new plan, Thrive Health Plan. The city has proposed settling at around $18 million, meaning providers would receive less than 30 cents of every dollar owed (DeBonis, “D.C.’s Medicaid upheaval puts health-care providers in a tight spot,” Washington Post, 5/25/13).

ACA WATCH

• HHS Secretary Kathleen Sebelius has been asking health industr y executives for large donations to assist in the ACA’s implementation. Operating on what officials have described as a “shoestring budget,” HHS has given 11 states more than $1.5 billion to help set up their exchanges as well as invested, as of March 2013, $394 million in information technology services to run “federally facilitated exchanges” in 25 more states. The Congressional Budget Office estimates that federal agencies will need between $5 billion and $10 billion to get the law up and running over the next decade (Kliff, “Budget request denied, Sebelius turns to health executives to finance Obamacare,” Kaiser Health News, 5/10/13. GAO-13-601 Federally Facilitated Health Insurance Exchanges; RWJ Health Policy Brief, “Federally Facilitated Exchanges,” 1/13).

Big business may get off the hook for some ACA mandates

• Under pressure from the business community, a key feature of the ACA, the employer mandate (the requirement that employers with 50 or more employees provide health coverage to employees who work 30 or more hours per week or pay a $2,000 per-employee fine) has been delayed until 2015. The Obama administration said the delay was necessary in order to simplify the complicated reporting requirements under the law, and give businesses more time to adjust coverage. During the delay, employers will also be exempt from the $3,000 per-employee fine for each worker who receives a subsidy to purchase coverage on the health exchanges. Although most large firms either self-insure or provide insurance already, workers at firms that don’t provide coverage will be forced to apply for Medicaid or subsidies on the exchanges. The individual mandate, the requirement that individuals purchase coverage or pay a fine of $95 or 1 percent of income, whichever is greater, is still due to go into effect January 1, 2014 (The penalty rises to $695 or 2.5 percent of income in 2016). Since data on employment and insurance coverage will be unavailable in 2014, the government will not be able to verify applicants’ incomes, needed to determine subsidies on the health exchanges, or tell if someone is being honest when they say they have employer sponsored health insurance on their taxes.

According to The Wall Street Journal, large employers are not subject to the ACA’s requirement that employers offer “minimum essential benefits.” According to a strict reading of the ACA, only policies sold on the health exchanges to individuals and small businesses must meet the minimum essential benefits requirement, leaving out 130 million of the more than 160 million people with private insurance. A few large firms in the restaurant, retail and hospitality industries are working with insurers to design inexpensive “skinny” plans, with premiums under $50 a month, to replace their old “mini-med” plans, which had benefit caps as low as $2,000. The new plans won’t have caps but may only cover preventive services and a few doctors’ visits, excluding coverage for hospitalization, emergency care, prescription drugs, and other essential benefits.

Though firms could still face a $3,000 per employee fee – starting in 2015 – if any employees opt-out of their employer plan to get subsidized coverage through the exchanges, the risk of massive opt outs is minimal because even with federal subsidies those policies are expensive. A full-time worker earning $9 an hour would have to pay as much as $70 a month for a “silver” plan, even with the subsidies, according to the Kaiser Family Foundation. At $12 an hour, the workers’ share of the premium would rise to as much as $140 a month. At this point it is still unclear how many employers will try the “skinny plan” strategy and whether or not regulators will outlaw it (Weaver and Mathews, “Employers Eye Bare-Bones Health Plans Under New Law,” The Wall Street Journal, 5/19/13).

• Another strategy that large employers could use to circumvent the mandate is to shift workers to part-time status (defined as working less than 30 hours a week). Already the nation’s largest movie chain, Regal Entertainment Group, with more than 500 theaters in 38 states, is cutting back workers’ hours to avoid paying for health care. Similarly, the state of Virginia mandated that all part-time state employees (many of whom teach in community colleges) work no more than 29 hours per week. Youngstown State University in Ohio recently announced a 29 hour per-week part-time limit and placed employees on notice that they would be fired if they worked more than the maximum (Pollack, “States Cutting Employee Hours To Avoid Obamacare Costs,” Fox News, 2/9/13; Chiaramonte, “Nation’s Biggest Movie Theater Chain Cuts Workweek, Blaming Obamacare,” Fox News, 4/15/13).

In a letter to Democratic leaders, the presidents of three large unions, the Teamsters, the United Food and Commercial Workers, and UNITE HERE wrote that the ACA will destroy “the foundation of the 40 hour work week that is the backbone of the American middle class” and “the very health and well-being of our members.” Union-run multi-employer insurance plans (also known as Taft-Hartley plans) provide continuity of coverage in industries where job turnover is high and employment is often intermittent. The plans, which cover about 26 million people, are at risk of destabilization if employers cut workers’ hours to avoid the employer mandate or shift them into lower-cost, subsidized plans sold on the exchanges. Under the ACA’s current provisions, multi-employer plans are not eligible for the subsidies for coverage available to working people (138 percent to 400 percent of poverty). Hence the union plans won’t be able to compete to cover workers in their industry with incomes under 400 percent of poverty. Although their multi-employer plans aren’t eligible for federal subsidies, they will be subject to the same taxes as other private plans, such as the $63 per-person tax to support the reinsurance pool for the exchanges (each year for three years) and the “Cadillac” tax (see below). Two more unions, the International Brotherhood of Electrical Workers and the Laborers’ International Union of North America, are also speaking out about the need for an “equitable fix” to the ACA (Single Payer News, 7/17/13, www.unionsforsinglepayer.org; Bogardus, “Unions break ranks on ObamaCare,” The Hill, 5/21/13).

• Beginning in 2018, a new 40 percent excise tax, the “Cadillac Tax” will be levied on employers that offer plans that cost more than $10,200 for an individual or $27,500 for a family. Citing the threat of the tax, large employers are cutting benefits and raising co-pays and deductibles. Since 2009, the percentage of workers in plans with a deductible of at least $2,000 has doubled to 14 percent. Now more than a third of workers are in plans with an annual deductible of at least $1,000. Although the tax doesn’t begin until 2018, employees are starting to feel the squeeze with some deductibles as high $6,000. The Congressional Budget Office estimates that the government will collect $80 billion in taxes on high premium plans between 2018 and 2023 (Abelson, “High-End Health Plans Scale Back to Avoid ‘Cadillac Tax,’” New York Times, 5/27/13).

• Meanwhile, the administration says the small business exchanges, which offer tax credits to qualifying companies, are still on schedule, although they have delayed a rule that required the exchanges to offer more than one plan. Workers at small businesses were supposed to be able to select from two or more plans. (Mary Agnes Carey, KHN, 7/2/13).

Medicaid expansion won’t remedy access problems

Only 23 states are currently committed to expanding their Medicaid programs under the ACA (a 2012 Supreme Court ruling on the ACA made the Medicaid expansion optional). Arkansas received approval to use its Medicaid funds to buy private insurance policies for Medicaid beneficiaries on the exchange, a move that will divert funds to overhead and profits and away from care; several other states are interes ted in following suit. Some 5.7 million low-income residents in states that are not expanding their Medicaid programs won’t be eligible for any assistance gaining health coverage. They make too much to qualify for their state’s current Medicaid program and too little to qualify for a federal subsidy on the exchanges, available to people making 138 percent to 400 percent of poverty. A person supporting a family of four who works full time at a job that pays $14 hour will qualify for a subsidy, but if they make $10 an hour, under current law, they will not (Pear, “States’ Policies on Health Care Exclude Some of the Poorest,” New York Times, 5/24/13).

• The ACA was supposed to hike Medicaid primary care payments nationally by an average of 73 percent, to the same level as Medicare’s, in 2013 and 2014. Due to administrative delays, only a handful of states, including Maryland, have begun paying doctors at the higher rates. However, the increase may not draw many new physicians into the program. In 2009, Washington, D.C., increased Medicaid rates to all doctors to the same level as Medicare but failed to see a major increase in participation, possibly because poor people are concentrated in neighborhoods where few doctors practice (Pugh, “Most doctors still reject Medicaid as program expansion nears,” McClatchy News, 5/13/13; Galewitz, “Increase in doctors’ pay for Medicaid services off to a slow start,” Washington Post, 5/18/13).

Exchanges – Failing to fix the insurance market

• The majority of the $1.8 trillion cost of the ACA over the next decade, $1.1 trillion, is going to subsidize the purchase of private insurance (the rest is for the Medicaid expansion) (CBO, “May 2013 estimate of the effects of the Affordable Care Act on Health Insurance Coverage,” Table 1 and Table 2).

• Twenty-seven percent of uninsured, non-elderly adults with incomes in the tax credit range (138 percent to 400 percent of poverty) lack checking accounts. But most health plans on the exchanges will only be able to accept electronic transfers to pay premiums, setting up an access barrier for the “unbanked.” African Americans and Hispanic Americans are over 40 percent more likely to be without checking accounts relative to whites of similar income. Also, as many as 5 million veterans and other Americans who receive federal benefits on prepaid debit cards may not be able use those same cards to pay their premiums for federally subsidized insurance (Varney, “How Will The ‘Unbanked’ Buy Insurance On The Exchanges?” Kaiser Health News, 5/20/13).

The ACA is supposed to limit out-of-pocket costs to $6,350 for an individual and $12,700 for a family (excluding premiums and spending on uncovered services, e.g. more than a few visits of physical therapy). But many plans have separate administrators for pharmacy and other benefits, and they will not be required to combine their tallies of members’ out-of-pocket spending until 2015. Plans with no drug spending limit – the norm – won’t have to cap out-of-pocket drug costs at all (Andrews, “Federal Rule Allows Higher Out-Of-Pocket Spending For One Year,” Kaiser Health News, 6/11/13).

• The three lowest-priced silver plans available on California’s exchange will cost $321 monthly. The bronze plan’s price is less steep (depending on where you live, see below) but it comes with a $5,000 deductible for an individual ($10,000 for a family) and very high (50 percent) cost-sharing for many services. For example, a person would have to pay 50 percent of the bill for an inpatient stay, even to have a baby; 50 percent for emergency care, unless it resulted in an admission; 50 percent for diagnostic tests like CT scans and MRIs; and $120 for an urgent care visit (Lieberman, “Obamacare Exchange Watch: Low Healthcare Costs or California Dreaming?” OpEd News, 6/7/13).

Premiums on the California exchange vary dramatically by location. For the same health coverage from the same insurer, a 40-year-old resident in rural Mono County will pay $150 a month more in premiums (nearly 60 percent more) than an individual in Los Angeles County. The cost of the lowest level of coverage, bronze, for a 25-year-old ranges from $147 to $274 per month depending on location (Sanders, “Geography affects premiums on California health insurance exchange,” The Sacramento Bee, 6/5/13).

• Many plans sold on state health exchanges won’t cover bariatric surgery or other treatments for weight loss. Although Medicare and two-thirds of large employers in the U.S. cover bariatric surgery, the states have signaled insurance companies in over two dozen states to exclude the treatment (Varney, “Obamacare Insurance Won’t Cover Weight-Loss Surgery In Many States,” Kaiser Health News, 5/27/13).

INTERNATIONAL

• In a recent poll, 65 percent of the Swiss population favored single payer over their current system in which about 60 highly regulated private insurers sell “basic coverage” on a nonprofit basis. A referendum on single payer is likely in 2014 or 2015 (Daily Kos, “Swiss voters want to ditch their ObamaCare, replace with single payer,” 6/24/13).

• Per capita spending increased during 2000–10 by 1.2 percentage points of gross domestic product (GDP) in Germany, 1.5 percentage points in France, 2.6 percentage points in the U.K. and Canada, and 3.9 percentage points in the United States (“Health Care Cost Containment Strategies Used In Four Other High-Income Countries Hold Lessons For The United States,” Health Affairs, April 2013).

• The Gini coefficient, which measures relative inequality within a nation (higher means greater inequality), was 0.499 for the U.S. before taxes and transfers, and 0.380 after taxes and transfers, in 2010. The average Gini coefficient for OECD countries after taxes and transfers (0.316) was substantially lower than in the U.S. but still alarming. Between 2007 and 2010, income inequality in OECD countries increased by more than it had in the previous 12 years. The welfare state cushioned the impact of the global economic crisis for many, but spending cuts on health and social programs risk causing greater inequality and poverty in the years ahead. (“Growing risk of inequality and poverty as crisis hits the poor hardest,” OECD Publishing, http://bit.ly/18Kba0d, 5/15/13).

• An average of 73 percent of all health spending was publicly financed in EU member states in 2010. Public financing accounted for over 80 percent in Sweden, Denmark, Norway, the Netherlands, and the U.K. (“Health at a Glance: Europe 2012,” OECD, 11/16/12, http://www.oecd.org/health/healthataglance/europe).

Over a lifetime, tax payments to fund the Canadian health system are modestly progressive, with the most affluent quintile paying a slightly higher share of their income (8 percent) than the least affluent quintile (6 percent). Only the highest income group pays substantially more in taxes than they receive in care (3 percent of average income). Taxes for care paid by middle- and upper-middle-income groups were very close to their health care utilization costs. Health care utilization costs for the lowest quintile were equivalent to 24 percent of average income, demonstrating that this group would face hardship paying for care without Canada’s single-payer health program (“Publicly Financed Health Care in Canada: Who Pays and Who Benefits Over a Lifetime?” Canadian Institute for Health Information, May 2013).

CORPORATE MONEY AND CARE

• Aetna’s CEO Mark Bertolini announced that the firm intends to reduce its already limited provider networks by one-half to three-fourths for plans they market on the exchanges. The firm will also continue to favor “margins over membership” and will pull out of the exchanges if they do not “develop favorably” or if “they ask for unreasonable rates” (Quote of the Day, Don McCanne, on 2013 Q1 Earnings Conference Call with Mark Bertolini – Chairman, CEO and President of Aetna, and Shawn Guertin – Chief Financial Officer of A etna, 4/30/13).

• Private equity firms invested $4 billion in 2012 in health and medical services, including urgent care clinics, up from $3.5 billion in 2011. Urgent care clinics, one of the fastest growing areas of investment, generate average EBITDA (earnings before interest, tax, depreciation, and amortization) margins of about 20 percent (Abrahamian, “Analysis: Private equity funds rapid growth of walk-in clinic,” Reuters, 5/21/13).

• The Department of Justice is suing Vitas Healthcare and Vitas Hospice, the nation’s largest hospice chain, for submitting tens of millions of dollars in fraudulent Medicare claims over than a decade. In 2011, Vitas Hospice, founded by Florida Senate president Dan Gaetz, received $856 per patient per day from Medicare, compared to the usual rate of $652 per day (Kennedy, “Florida Senate president’s former hospice company sued by feds for alleged Medicare fraud,” Associated Press, 5/9/13).

In 2012, CEOs at the nation’s six largest insurance companies received $83.3 million in pay. WellPoint’s Angela Braly topped the list with $20.6 million, followed by UnitedHealth Group’s Stephen Hemsley ($13.9 million), Aetna’s Mark Bertolini ($13.3 million), Coventry Health Care’s Allen Wise ($13 million), Cigna’s David Cordani ($12.9 million), and Health Net’s Jay Gellert ($10.2 million). Aetna also spent $201,093 on Bertolini’s personal use of corporate aircraft and around $16,000 to upgrade the executive’s home security system. The company said it did this “in light of concerns regarding the safety of Mr. Bertolini and his family as a result of the national health care debate” (AFL-CIO Executive Pay Watch, accessed on 6/25/13; Murphy, “Aetna Chairman CEO Compensation Climbs 26 percent,” ABC News, 4/8/13).

Richard Bracken, the CEO of Hospital Corporation of America (HCA), a chain of 135 for-profit hospitals, was the second highest paid CEO in 2012. His compensation was $38.6 million (“The Highest Paid C.E.O.’s,” New York Times, 4/5/13).

• For-profit hospices are twice as likely as nonprofit hospices to have at least one restrictive enrollment policy to avoid potentially high-cost patients. Patients with serious illnesses may need complex and expensive palliative treatments, but only one-third of hospices will enroll patients who are receiving palliative chemotherapy, and only one-half will enroll patients receiving total parenteral nutrition. (Carlson, “Unusual billing patterns spur probe of inpatient hospice care,” Modern Healthcare, 5/6/13; Carlson et al, “Hospices’ Enrollment Policies May Contribute to Underuse of Hospice Care in The United States,” Health Affairs, December 2012).

BIG PHARMA

• The 11 largest global pharmaceutical companies made a combined $711 billion in profits over the last decade and paid their CEOs a total of $1.57 billion, according to corporate filings. In 2012 alone the drug companies’ CEOs drew total compensation of $199.2 million. In 2006, the first year of the Medicare prescription drug law, the pay of the CEOs jumped by $58.9 million. The top earners in 2012 were Johnson & Johnson’s William Weldon, who took in $29.8 million, and Pfizer’s Ian Read, who received $25.6 million. By comparison, half of all Medicare beneficiaries had less than $22,500 in annual income (Rome, “Big Pharma CEOs Rake in $1.57 Billion in Pay,” Health Care for America Now, 5/8/13).

• The CEO of the giant drug distributor McKesson, John Hammergren, has a pension worth $159 million. The Wall Street Journal called it “almost certainly the largest in corporate America.” Hammergren has been one of the highest-paid executives in the U.S. in recent years, receiving over $130 million in 2011 alone, and more than $355 million in cash and stock over the past seven years (Mark Maremont, Wall Street Journal, 6/24/13).

• Federal prosecutors have charged Novartis with providing illegal kickbacks to over 20 pharmacies to promote the use of Myfortic (mycophenolate sodium), an immune suppressant used to help prevent rejection of transplanted kidneys. Myfortic competes with the Roche drug CellCept (mycophenolate mofetil) and, since 2009, with generic versions of CellCept. Prosecutors say in their lawsuit that Medicare and Medicaid paid tens of millions of dollars in claims for Myfortic that were influenced by kickbacks. In one example, Novartis paid $650,000 to Bryant’s Pharmacy in Batesville, Ark. Bryant’s submitted 8,300 claims for more than $3.2 million to Medicare Part B. Myfortic sales in the United States were $239 million in 2012, up 20 percent from 2011 (Pollack, “U.S. Accuses Novartis of Providing Kickbacks,” New York Times, 4/23/13).

• The U.S. Supreme Court ruled that drug companies that pay a competitor to delay marketing copies of their products to settle a patent dispute, a practice known as “pay for delay,” can be sued for violating antitrust laws. The Federal Trade Commission estimates that pay-for-delay deals raise health care costs by $3.5 billion annually. There were 40 “pay for delay” deals over patent disputes in 2012, up from 28 the year before, involving brand-name drugs with over $8.3 billion in sales, according to the FTC. Patent disputes often arise when brand-name drug companies seek to extend their 20-year patent monopolies for another 20 years by obtaining “secondary” patents on slightly modified versions of the drug or a change in how the drug is administered (Savage, Los Angeles Times, 6/18/13; Norman, Politico, 3/12/13).

• The Office of Fair Trading in London has accused GlaxoSmithKline of market abuse in a “pay for delay” scheme. The firm is accused of making substantial payments to three generic drugmakers to delay introducing generic versions of its antidepressant paroxetine between 2001 and 2004. If convicted, the firm could be fined up to 10 percent of its worldwide sales of the drug, which amounted to 26.4 billion pounds in 2012 (Hirschler, “OFT accuses GSK over ‘pay-for-delay’ drug deals,” Reuters, 4/19/13).

• Fraud by pharmaceutical firms is accelerating. In the first half of 2012, drug companies paid penalties of $6.6 billion to settle 19 cases of illegal marketing, price-gouging, and other violations. Between 2002 and 2011, drug manufacturers paid $22.1 billion to settle 202 allegations of illegal marketing, price-gouging of government programs and other violations, most of them in the past five years (Almashat S. and Wolfe S., “Pharmaceutical Industry Criminal and Civil Penalties: An Update,” Public Citizen, 9/12).

Big Brother Health Care

Workplace wellness programs, a $6 billion industry, are not effective either financially or clinically, according to an evaluation by RAND. Researchers analyzed data from about 600 large employers, and medical claims data from the Care Continuum Alliance. Participants in wellness programs lost an average of only 1 pound over three years, saw no significant reductions in cholesterol levels, and did not generate any significant reduction in health care costs. Nonetheless, under the ACA, employers can penalize workers up to 30 percent of premiums based on their lack of participation in a corporate wellness program. Penalties can rise up to 50 percent for smokers who don’t participate in tobacco cessation programs (Munro, “RAND Corporation Briefly Publishes Sobering Report On Workplace Wellness Programs,” Forbes, 5/28/13; Jost, “Implementing Health Reform: Workplace Wellness Programs,” Health Affairs, 5/29/13).

Employees of CVS Caremark, the nation’s largest drugstore chain, must disclose their weight, height, body fat and blood pressure or pay a $600-a-year fine. CVS says they need the information to improve their employees’ health through preventive measures and providing incentives to be healthier, but critics fear that the data could be used to discriminate against unhealthy or disabled workers (Hamilton, “Report: CVS Caremark demands workers disclose weight and health info,” Los Angeles Times, 3/20/13).

H OSPITALS AND ACOs, INC.

• As part of the ACO movement, health systems are increasingly buying or developing their own insurance plans to sell directly to employers. One of the nation’s largest nonprofit hospital operators, Englewood, Colo.-based Catholic Health Initiatives (CHI), which operates over six dozen hospitals in 17 states, has acquired a majority stake in Soundpath Health, a Washington-state-based insurer for $24 million, and is looking for other insurers to acquire.

CHI is not alone in jumping into the insurance game. The Detroit Medical Center and its nonprofit parent Vanguard Health Systems recently acquired ProCare Health Plan, a Detroit-based Medicaid HMO, for $6 million. Massachusetts’ largest (and most expensive) hospital and physician network, Partners HealthCare System, acquired Neighborhood Health Plan, a nonprofit insurer with 240,000 enrollees. Partners is providing grants to more than 50 community health centers affiliated with the insurer. Another Massachusetts health system, Steward Health Care System, is planning to sell a health plan called “Steward Community Choice.” The plan will be administered by a nonprofit HMO, Tufts Health Plans, and will target small businesses. Two of Atlanta’s largest health care providers, Piedmont Healthcare and WellStar Health System, are planning to jointly launch an insurer by the end of 2013 (Evans, “Cutting out the middleman,” Modern Healthcare, 3/25/13, Patricia Kirk, “As ACO movement gathers momentum, hospitals and health systems see opportunities in providing health insurance,” Dark Daily.com, 7/13/13).

• The nonprofit Cleveland Clinic, which owns eight hospitals in Ohio along with several out-of-state facilities, is forming an “alliance” with one of the nation’s largest for-profit hospital operators, the 135-hospital chain Community Health Systems Inc. (CHS), based in Franklin, Tenn. The Cleveland Clinic will help some CHS hospitals with their cardiovascular services – and allow CHS to use their famous name in advertising – while CHS will help the Cleveland Clinic with the “operational efficiency” of their nonprofit hospitals. The two companies said they will share data for research and also participate in future joint ventures that could include acquisitions. The Mayo Clinic created the Mayo Clinic Care Network in 2011 which now includes 16 member hospitals and health centers while the MD Anderson Cancer Center now has 11 members in an ever-growing network. It’s a “health care version of the franchise arrangements common in other industries” according to The Wall Street Journal (Mathews, WSJ, 3/11/13).

• The Centers for Medicare and Medicaid Services flagship cost-control effort, the Pioneer Accountable Care Organization

(ACO) Model, produced negligible savings in its first year. Of 32 participating organizations with 670,000 beneficiaries (out of 425 ACOs nationally), only 13 produced savings, 2 lost money, 2 dropped out, and 7 more are planning to switch to another Medicare program with no risk attached to it (the Medicare Shared Savings Program). Some quality gains were reported, such as improved cholesterol control for diabetes patients, but given that the organizations were told in advance about the 15 measures that would be used to determine if they met quality standards, they may simply represent teach-to-the-test gains. Cigna, Aetna and United, along with other insurers, have announced they expect to develop hundreds more ACOs in the future (Don McCanne, “Pioneer Accountable Care Organizations Disappoint,” Quote of the Day, 7/16/13, archived at www.pnhp.org)

Tenet is acquiring Vanguard Health Systems for $4.3 billion, including the assumption of $2.5 billion in Vanguard debt. The acquisition will boost the number of Tenet hospitals from 49 to 79 and add new markets such as Chicago and Detroit as well as deepen its reach into Texas. Tenet, which paid nearly $1 billion in fines for fraud and patient abuse in the mid-1990s while operating as National Medical Enterprises, and paid another $1.7 billion in penalties between 2002 and 2006 to settle charges of improper Medicare billing, unnecessary cardiac procedures, kickbacks, and other claims, says it is going to step-up its acquisitions of hospitals in the coming period (Mathews, Wall Street Journal 6/24/13; “Lest We Forget: Tenet Healthcare Settlement Payments, 1994-2007,” http://bit.ly/14ScVHi, accessed on July 18, 2013).

• Studies show that hospital mergers significantly increase hospital prices. According to a report by the Robert Wood Johnson Foundation, “the magnitude of price increases when hospitals merge in concentrated markets is typically quite large, most exceeding 20 percent.” A chart of some recent studies is reprinted below. (Gaynor and Town, “The Synthesis Project, The Impact of Hospital Consolidation – Update,” Robert Wood Johnson Foundation, 6/9/12).

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Data Update – Fall 2013 newsletter

UNINSURED AND UNDERINSURED

RACIAL AND SOCIOECONOMIC INEQUALiTY

COSTS

MEDICARE

MEDICAID

ACA WATCH

• HHS Secretary Kathleen Sebelius has been asking health industry executives for large donations to assist in the ACA’s implementation. Operating on what officials have described as a “shoestring budget,” HHS has given 11 states more than $1.5 billion to help set up their exchanges as well as invested, as of March 2013, $394 million in information technology services to run “federally facilitated exchanges” in 25 more states. The Congressional Budget Office estimates that federal agencies will need between $5 billion and $10 billion to get the law up and running over the next decade (Kliff, “Budget request denied, Sebelius turns to health executives to finance Obamacare,” Kaiser Health News, 5/10/13. GAO-13-601 Federally Facilitated Health Insurance Exchanges; RWJ Health Policy Brief, “Federally Facilitated Exchanges,” 1/13).

Big business may get off the hook for some ACA mandates

Medicaid expansion won’t remedy access problems

Only 23 states are currently committed to expanding their Medicaid programs under the ACA (a 2012 Supreme Court ruling on the ACA made the Medicaid expansion optional). Arkansas received approval to use its Medicaid funds to buy private insurance policies for Medicaid beneficiaries on the exchange, a move that will divert funds to overhead and profits and away from care; several other states are interested in following suit. Some 5.7 million low-income residents in states that are not expanding their Medicaid programs won’t be eligible for any assistance gaining health coverage. They make too much to qualify for their state’s current Medicaid program and too little to qualify for a federal subsidy on the exchanges, available to people making 138 percent to 400 percent of poverty. A person supporting a family of four who works full time at a job that pays $14 hour will qualify for a subsidy, but if they make $10 an hour, under current law, they will not (Pear, “States’ Policies on Health Care Exclude Some of the Poorest,” New York Times, 5/24/13).

Exchanges – Failing to fix the insurance market

INTERNATIONAL

CORPORATE MONEY AND CARE

BIG PHARMA

Big Brother Health Care

HOSPITALS AND ACOs, INC.

• The Centers for Medicare and Medicaid Services flagship cost-control effort, the Pioneer Accountable Care Organization

There's gold in the Obamacare chaos, but for whom?

Here Come the Exchanges…And an Opportunity to Turn Chaos Into Gold

By Lisa Suennen
Venture Valkyrie, October 6, 2013 The new health instance exchanges (HIXs) create a direct relationship between consumers and health insurers in a way that has never existed before, and with that comes the need to fundamentally disrupt traditional methods of delivering health insurance products. Not since the advent of employer-paid health insurance after World War II or the start of the Medicare program in 1966 has there been such a broad-scale opportunity for health system transformation. There are few markets that are mandated by law to include virtually every single American man, woman and child, making the opportunity particularly juicy to investors. For those entrepreneurs who figure out how to transfer the secret sauce from cheeseburgers that impair health to insurance-related products and services that improve it, the next few years offer an opportunity to turn market confusion into gold. Among the biggest opportunities are investments in technologies and services that power the new healthcare exchanges. Venture-backed companies, such as GetInsured.com, have emerged to provide the various state-sponsored exchanges with the back-end technology that enable comparison-shopping, financial transactions and enrollment support essential to operating the HIX marketplaces. But while state and federal healthcare insurance exchanges are the main topic of conversation this week, much of the real action has and will continue to take place in private exchanges serving the large and small employer market, particularly as employers do the math and figure out it may be in their financial best interest to end their role as benefit plan intermediaries. Private HIXs: The Big Innovation Opportunity There are important differences between public and private exchanges that make the investment opportunity particularly good on the private side. Most importantly, private exchanges can more broadly customize and personalize the products offered, as well as the consumer experience itself. And this is key, because for the very first time, health insurance companies are being forced to sell directly to the consumer marketplace when they have previously sold almost exclusively to businesses. This fundamental change in orientation opens up an increasing demand for innovation to help health insurers shift their gaze from the group to the individual. The first great investment opportunity afforded by the changing healthcare marketplace has been in the private HIXs themselves. One of the first healthcare exchanges to receive venture funding was Extend Health in 2007, well before anyone had ever heard of the Affordable Care Act. Psilos Group, the investment firm where I work, was the lead investor in Extend Health, which is currently serving hundreds of thousands corporate retirees at companies like General Motors, GE, IBM, and FedEx. When Psilos invested in Extend Health, the company was one of the only private exchanges in the country. Last year, we realized more than a 10x return when Towers Watson acquired Extend Health for $435 million. Aon Hewitt, another large health benefits administration company, acquired Senior Educators, a competing venture-backed private exchange, delivering a 3x-5x return to the company’s investors. Towers’ and Aon’s new business units are prime examples of how private healthcare insurance exchanges will radically reshape the way Americans shop for healthcare insurance. We have seen a large wave of private HIX companies and related technology-enablers follow their footsteps through venture capital’s doors. Educating the Consumer Unfortunately, the HIXs are far more mysterious to consumers than should be the case. As a result, the HIXs also need new products and services that help educate and engage consumers of all types, whether they are from underserved populations or being dropped from their Blue Chip employer’s Cadillac health plan. In a post-reform environment, there will be an even greater need for educational tools and “plain-English” translation of medical and insurance information to help consumers make good choices and manage their new-found clinical and financial accountability, as well as customer service capabilities when they fall short of the mark. Each of these areas is ripe for innovation and investment. Filling the Toolbox As HIXs become an increasingly common way for people to buy insurance, they will require a whole new array of capabilities to respond to consumer demands. Consumer decision-support and personalization tools are necessary to help millions of new customers select the best plan and take best advantage of its features. The HIXs need everything from call centers to enrollment, shopping and financial software–to serve tens of millions of people efficiently. There is also an increasing need for financial services products that help people pay their insurance premiums, especially those who do not have credit cards or bank accounts or who live paycheck to paycheck. Some may not get adequate subsidies or have consistent-enough regular income to pay the new required monthly premiums exactly on schedule and those people will need special credit facilities. For those enrolled in high deductible health plans, which now serve more than 1/3 of the U.S. insured population according to the Kaiser Family Foundation, there will be further demand for financial products to manage the different buckets of money that come into play as healthcare services are utilized. Let’s Not Forget the Care Itself A companion investment opportunity is consumer-facing engagement technologies and services that help people make better self-triage decisions about where and when to get care in oder to maximize the value of their chosen health plan. For instance, a consumer might save money and time by using a nursing hotline for self-triage in non-critical situation or telemedicine services when the only locally available alternatives are high cost and hard to access. New products that encourage compliance with medication regimens or allow people to be treated at home instead of in the hospital are also gaining currency and investment interest from the venture capital community. Turning Chaos Into Gold While much of the U.S. populace sees chaos as they watch Obamacare unfold, the investment community sees opportunity to prosper. Times of massive system transformation, such as we are in today, pave the way for new market entrants and disruptive technologies a la Clayton Christensen’s stories about other industries that have endured dramatic change. The HIX and associated products and services that are catalyzed by their existence may just be the NetFlix to the old insurance model’s Blockbuster. In a world where such disruptive innovation might also bring about a healthier populace, it is a fine time to be an investor who can do well by doing good. (Lisa Suennen is a co-founder and Managing Member of Psilos Group, a healthcare-focused venture capital firm with approximately $600 million under management.) http://www.venturevalkyrie.com/2013/10/06/here-come-the-exchanges-and-an-opportunity-to-turn-chaos-into-gold/5779

Comment:

By Don McCanne, M.D. Only in America do we have an outrageously priced health care system that, by design, brings more gold to our venture capitalists and other one-percenters, while creating greater financial barriers for those who actually need health care. Instead of a public national health program which would have worked well for the people, our politicians insisted on leaving control in the private sector. The private sector will always go for the gold and leave everyone else behind. Lisa Suennen i s correct that we need disruptive innovation, but she totally misses the goal. It is the private insurance industry that needs disruption, but not to heap more gold on the investors, but rather to improve affordability and access to health care for all of us. The private insurers are doing the opposite – shifting more costs onto our backs while using narrower networks to further limit our access. Let’s disrupt them!

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Insurance headaches not new

By Bruce L. Wilder, M.D.
Pittsburgh Post-Gazette, Letters, Oct. 12, 2013 In “Physicians Brace For Insurance-Induced Headaches,” (Oct. 3), the writer might have pointed out that “insurance-induced headaches” are not a new phenomenon. About 20 years ago, a large ophthalmology practice in Pittsburgh had almost 100 different insurers to deal with. Whether the headaches will be worse may be a matter of debate, but the problem is much older than Obamacare. President Barack Obama at one time supported a single-payer system. Most patients want a single-payer system, and there is some evidence that most physicians may want single-payer. Bruce L. Wilder, M.D., M.P.H., J.D., works in Oakland, Pittsburgh’s academic and health care center. http://www.post-gazette.com/stories/business/opinion/letters-to-the-business-editor-101213-707237/#ixzz2hXKBfXhz

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Obamacare deductibles may cause sticker shock

Insurance companies are requiring higher out-of-pocket expenses to pay for complying with new rules

By Peter Frost
Chicago Tribune, Oct. 13, 2013 Adam Weldzius, a nurse practitioner, considers himself better informed than most when it comes to the inner workings of health insurance. But even he wasn’t prepared for the pocketbook hit he’ll face next year under President Barack Obama’s health care overhaul. If the 33-year-old single father wants the same level of coverage next year as what he has now with the same insurer and the same network of doctors and hospitals, his monthly premium of $233 will more than double. If he wants to keep his monthly payments in check, the Carpentersville resident is looking at an annual deductible for himself and his 7-year-old daughter of $12,700, a more than threefold increase from $3,500 today. “I believe everybody should be able to have health insurance, but at the same time, I’m being penalized. And for what?” said Weldzius, who is not offered insurance through his employer. “For someone who’s always had insurance, who’s always taken care of myself, now I have to change my plan?” Many Illinoisans buying health coverage on their own next year will face a similar dilemma spurred by the health care overhaul: pay higher monthly insurance premiums or run the risk of having to shell out thousands more in deductibles for health care if they get sick. To promote the Oct. 1 debut of the exchanges, the online marketplaces where consumers can shop and buy insurance, Obama administration and Illinois officials touted the lower-than-expected monthly premiums that would make insurance more affordable for millions of Americans. But a Tribune analysis shows that 21 of the 22 lowest-priced plans offered on the Illinois health insurance exchange for Cook County have annual deductibles of more than $4,000 for an individual and $8,000 for family coverage. Those deductibles, which represent the out-of-pocket money consumers must spend on health care before most insurance benefits kick in, are higher than what many consumers expected or may be able to stomach, benefit experts said. By comparison, people who buy health insurance through their employer have an average individual deductible of just more than $1,100, according to the Kaiser Family Foundation. Although millions of Americans will be eligible for federal assistance to help offset some of those costs, millions will not, underscoring one of the trade-offs wrought under the law’s goal to ensure most people have access to health insurance. “It’s been major sticker shock for most of my clients and prospects,” said Rich Fahn, president of the Northbrook-based insurance broker Excell Benefit Group. “I’m telling (clients) that everything they know historically about health plans has changed. They either have to pay more out-of-pocket or more premiums or both. It’s an overwhelming concern.” Plans with the least expensive monthly premiums — highlighted by state and federal officials as proof the new law will keep costs low for consumers — have deductibles as high as $6,350 for individuals and $12,700 for families, the highest levels allowed under the law. Because the federal website that runs the Illinois exchange remained largely inoperable as of late last week, the Tribune used data from websites of four of the five insurers that will offer plans in Cook County on the marketplace. One insurer, Coventry Health Care, did not have plans available on its website last week but provided data to the Tribune. Insurers say the price and cost hikes result from new benefit mandates, additional taxes levied as part of the law and a requirement that they can no longer deny coverage to people with pre-existing medical conditions. The vast majority of insurance plans for 2014 must include a list of 10 essential health benefits, some of which, like maternity care, weren’t necessarily included in all health plans a year ago. The law also includes mandatory coverage of mental health and substance-abuse treatment, prescription drugs and rehabilitative care. All preventive care, including annual physicals and routine immunizations like flu shots, must be covered at no cost. Further, insurers are required to take all applicants, regardless of whether they have pre-existing medical issues that may have locked them out of coverage in the past. And they’re prohibited from charging their oldest, sickest members any more than three times as much as their youngest, healthiest members, causing premium prices to rise for many younger people. Costs associated with those mandates are passed along to all members of a health plan. Considering those factors, “the rates are actually quite reasonable,” said Kelly Sullivan, a spokeswoman for the Illinois health insurance marketplace. Under the law, most of the estimated 15 million Americans who bought plans individually this year, like Weldzius, will have to choose new insurance coverage that meets federal guidelines. Because of the myriad changes to most plans, “it’s hard to know whether you’re really going to be able to compare like policies” from year-to-year, said Karen Pollitz, a senior fellow with the nonprofit Kaiser Family Foundation. The health care law established four broad categories of coverage — platinum, gold, silver and bronze — for which premiums vary based on the amount of out-of-pocket health care expenses consumers are required to pay. Bronze plans have the lowest monthly premiums, but they cover only 60 percent of projected medical costs. Platinum plans have higher premiums but cover 90 percent of medical costs. State officials expect most consumers to select either bronze or silver plans because monthly costs are lower. To develop the new plans that meet the federal coverage levels, insurers in Illinois took two distinct routes. Land of Lincoln Health, a new nonprofit insurer, opted to design most of its bronze and silver plans with lower annual deductibles in exchange for higher monthly premiums. All of its plans also offer a broad range of providers, though certain discounts are available for using a selection of them. “When we sat down and looked at how to design our plans, we felt it was very important for consumers to not be afraid to use their health coverage,” said Dan Yunker, Land of Lincoln’s chief executive. “We can’t have people not using their health plan because they can’t afford it when it’s time to use it.” Meanwhile, the state’s dominant insurer, Blue Cross and Blue Shield of Illinois, was able to offer plans with lower monthly premiums by crafting narrower networks of doctors, specialists and hospitals. The least expensive “Blue Choice” plans offered by Blue Cross, which carry the lowest monthly premiums in Cook County, contract with 4,100 primary care providers in the Chicago metro area. That compares with about 15,775 providers in its largest preferred provider network, according to company data. The “Blue Choice” network also includes 57 acute-care hospitals versus 213 in the larger network. People who choose to go to an out-of-network hospital or physician will foot the entire bill, in most cases, and those expenses typically are not applied toward annual deductibles. The network “was created to offer a most cost-effective and affordable network of physicians and hospitals without compromising quality,” said Steve Hamman, the insurer’s senior vice president of network management. Company data show that patient outcomes are actually slightly better in its narrower network, he said. Some plans offered by Humana Inc. and Coventry also have narrow networks. Insurers and brokers recommend people carefully study narrow-network plans to ensure their preferred doctor and hospital are included. “Y ou have to be very careful about choosing a plan with a smaller network … or there will be some big surprises,” Fahn said. Insurance brokers and health care experts also urge caution for consumers who choose plans with higher deductibles. “Yes, rates are really low, but that’s like saying, ‘Here’s a free car,’ but if it costs you $500 a month to run, it’s not really a free car,” said Dave Stumm, executive vice president at Stumm Insurance, a Chicago-based brokerage. Fahn calls the bronze plans “smoke-and-mirrors catastrophic plans,” which don’t provide benefits until and unless something bad happens — a car wreck, a major surgery or a chronic illness. For many low-income Americans, the law offers some help, though how much will vary by the individual. The vast majority of the uninsured — an estimated 80 to 90 percent, according to the Congressional Budget Office — who buy coverage on the exchanges will qualify for federal subsidies in the form of tax credits. Those who make up to 400 percent of the federal poverty level (about $46,000 for an individual and $94,200 for a family of four) will be eligible for the subsidies to help offset the cost of premiums. Further, people with incomes up to 250 percent of the federal poverty level (about $28,700 for an individual and $58,900 for a family of four) will qualify for cost-sharing subsidies that will reduce deductibles, in some cases substantially. Brokers say they worry most about people who qualify for lower subsidies or none at all. Those with more modest incomes might not have enough in savings to pay for medical expenses. They “could get slammed if they get sick,” said Pollitz, of the Kaiser Family Foundation. “They just won’t have the money. They just won’t.” A potential consequence could be that some individuals may not seek medical care beyond routine office visits when they should, dissuaded by the specter of having to pay for it out of pocket. “They’ll just live without,” Pollitz said, “kind of like they do now.”

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Beyond the spin, some facts about the Affordable Care Act

The ACA will actually hinder efforts towards adopting a single-payer system, writes health care reform advocate.

By Margaret Flowers, M.D.
Al-Jazeera, Oct. 14, 2013

On the first day that the new health insurance exchanges went into effect as part of the new health law, the Affordable Care Act (ACA), I was caught off guard by a question asked by Bruce Dixon of the Black Agenda Report. I was prepared to detail the complexities of the ACA, but Dixon’s only question was: “What would it be like if this was the first day of a single-payer health system?” Most media outlets in the US are solely focused on the ACA – either promoting it as a positive step or calling for its repeal. This limited debate misses the facts that a single payer health system, also called Medicare for all, would both resolve the fundamental failings of our current system and is the solution favored by most Americans.

What we are hearing in the US is fear-mongering from extreme right-wing groups, who have gone so far as to shut down our government in their attempt to remove funding for the health law, and deceptions from Democrats and their front groups about the virtues of the ACA. This is what happens when a basic issue such as health care is determined by politics instead of policy. In fact, the ACA was born in a right-wing think tank, the Heritage Foundation, and is only supported by “progressives” because it was passed by a Democratic president.

I suspect this manufactured confusion may sort itself out over time as more people discover that having health insurance in the US doesn’t guarantee access to necessary care. In the meantime, I will try to cut through the spin and hyperbole to explain why the ACA is not a step in the right direction and what health care would look like if we implemented a publicly-financed “Medicare for All.”

Here are the top three facts that need to be addressed:

* The rise of health care costs are slowing, but not because of the ACA.

* More people will have health insurance but that doesn’t mean they will have access to health care.

* The ACA further privatizes our health care system, which is the opposite of single payer.

White House spokesperson Jay Carney stated numerous times recently that the slowing of the rise of health care spending in the United States is a result of the Affordable Care Act. In fact, the slowing of total health care spending actually began after the economic crisis of 2008, which was prior to the ACA being signed into law in 2010. As I wrote earlier this year, the slowing of health care spending was due to self-rationing. As more of the cost of health care is shifted onto the individual, we see less utilization of health services.

For example, a recent report found that low-income workers with health plans that required high out-of-pocket payments in Massachusetts did not go to the emergency department for serious medical conditions because of the costs. They had 25 to 30 percent fewer visits, whereas high income workers with similar plans did not reduce their visits. A health survey from 2012 found significant increases in the number of people who did not get care because of the cost (80 million total), who had difficulty paying medical bills (75 million) and who went into bankruptcy as a result (4 million over 2 years).

It is not likely that the ACA will have a positive effect on health care spending, by which I mean making health care more affordable. As economist Dean Baker writes, we will continue to pay high prices for medications, medical devices and physicians. Although there are proven methods to control health care costs such as simplified administration, global budgets and negotiating bulk prices, none of them were included in the ACA. In fact, the ACA increases our already enormous administrative costs by adding new levels of administration to our health system.

While it is true that because of the ACA more people will have health insurance in the US, what is not discussed is that tens of millions of people will still be without health insurance of any kind. There are 48 million people without insurance and that number is expected to fall to 31 million in 2019. Although historically in the US, estimates of new coverage are always overblown. At the state level, similar new programs that were predicted to lead to universal coverage fell far short of their goals and ultimately failed completely. Even though, because of the ACA, young adults up to the age of 26 can stay on their parent’s health plans, this has had only a tepid effect. The percentage of 19 to 26 year olds without insurance has fallen from 48 to 41.

Health insurance does not equate to health care

In the US, having health insurance does not guarantee access to necessary health care. The ACA will increase the number of people who have inadequate insurance which requires high out-of-pocket costs and does not cover all necessary services. This trend towards underinsurance has been growing steadily over the past decade so that currently about one-third of employer-based health insurance and half of individual plans are high-deductible plans. It is expected that in 2014, 44 percent of major US companies will only offer high-deductible health plans.

The ACA has significantly lowered the bar for what is considered to be adequate health insurance coverage. On the new health insurance exchanges, plans are offered based on four tiers. The Platinum plans will pay for 90 percent of covered care and Bronze plans, the lowest tier, will pay for 60 percent of covered services. It is important to distinguish that these levels are only for covered services because people don’t usually understand that they will have to pay for uncovered services and out-of-network services. Unfortunately, the use of out-of-network services is often involuntary and occurs without being known at the time of care, especially in emergency situations.

Subsidies are being offered to help people purchase insurance. These exist on a sliding scale for people who earn 133 to 400 percent of the Federal Poverty Level (FPL). If an uninsured person earns below 133 percent of the FPL and lives in one of the 26 states that did not expand their Medicaid programs, that person is likely to be out of luck. And the subsidies only apply to the Silver plans, which cover 70 percent, or to higher level plans. Because t he subsidies are believed to be inadequate, it is expected that many people will choose the least expensive Silver or Bronze plans.

Subsidies can only be used to purchase plans in the state or federal exchanges. Employees will not qualify for subsidies to purchase insurance offered by their employer; but if what their employer offers costs above a certain percentage of their income, they can purchase insurance on the exchange and possibly receive a subsidy. Some employers will stop offering insurance and will instead provide what is called premium support, or funds that can be used for buying insurance. And some employers will decrease their employee’s hours below the 30-hour per week threshold that relieves them from the mandate to provide insurance or pay a penalty. These actions will push more people into the exchanges.

Pre-existing caveats

Insurance companies have a long history in the US of skirting regulations that interfere with profits. So, while insurers can’t exclude sick people, they can avoid areas where there are sick people. For example, several of the large insurance companies are selling plans on only a small number of exchanges, preferring to sell plans mostly to businesses instead. And companies that sell plans on the exchanges are restricting their networks. They avoid hospitals that care for complicated patients and keep the number of doctors in their plans low, making it more likely that people will have to go out of network and pay more of the costs of care.

And while companies can’t charge more to people with health problems as individuals, they can charge up to three times more based on age and can charge more in geographic areas where the population has more health problems or the costs of care are higher. It is expected that if a company finds they can’t make enough profit in a particular area, they can just pull their plans from that area. These are some of the most obvious ways that insurers will game the system. The largest insurance companies assisted with writing the law and then with the regulations that accompanied it, so we will see what other tactics they employ as time goes on.

The new health system is complex by design because that inhibits transparency and accountability. Imagine what we would be seeing right now if instead of the ACA, we had passed HR 676, also known as Expanded and Improved Medicare for All. This would have created a single publicly funded non-profit universal and comprehensive national health insurance. Overnight, everyone living in the US would be eligible for care without financial barriers. Any person who showed up to a health facility for care would be admitted because they would be automatically enrolled. Every person would have the right to receive the care they need rather than the care they can afford.

Some people believe that the ACA is a step towards a Medicare for all health system, but it actually takes us towards greater privatization of our health system which is the opposite direction. Over a trillion dollars of public funds will go directly to private insurance companies to subsidize the purchase of inadequate health plans. Nothing was done to stem the tide of large health corporations that are acquiring and consolidating health facilities. And since the ACA was passed in 2010, our public insurances, Medicaid and Medicare, have become more privatized. Private Managed Care organizations are taking over Medicaid plans. And Medicare Advantage plans, private insurance plans that are more expensive than traditional Medicare, were supposed to be curtailed by the ACA but have actually grown by more than 30 percent.

We have not changed the fundamental problem with the health care system in the US: that health care is treated as a commodity to be bought on the market rather than as a good that all people need. In fact, the dominant message in the mass media is that the ACA has created a health insurance marketplace as if this is a good thing for patients. The United States is the only industrialized nation that uses a market-based health system and it has clearly failed. The US spends the most by far on health care and has low life expectancies and poor health outcomes to show for it. I often say that if our health system was a medical experiment, it would have to be stopped for ethical reasons.

Perhaps television comedian Jon Stewart summed it up the best when he recently said, “I don’t understand the idea of staying with a market-based solution for a problem where people can’t be smart consumers. There are too many externalities in health care that I honestly don’t understand, why businesses would jump at the chance to decouple health insurance from their responsibility, and why the government wouldn’t jump at the chance to create a single-payer that simplifies this whole gobbledygook and creates the program that I think America deserves.”

Only a single payer, Medicare for all health system will begin to correct the many problems with the health care system in the United States. Grassroots groups across the country continue to organize support for Medicare for all. And just as similar groups did in Canada and Mexico, we believe that one day we will succeed as well. We aspire to join the ranks of civilized countries who understand that a healthy population makes a better society and is best achieved through national health insurance.

Margaret Flowers, MD, served as Congressional Fellow for Physicians for a National Health Program and is on the board of Healthcare-Now. She is co-director of It’s Our Economy and co-host of Clearing the FOG Radio Show.

http://www.aljazeera.com/indepth/opinion/2013/10/beyond-spin-some-facts-about-affordable-care-act-2013101483653308300.html

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The government shutdown and the disconnect on health care

By Andrew D. Coates, M.D., F.A.C.P.
WAMC Northeast Public Radio, Oct. 11, 2013 I’d like to offer some thoughts this week about the discussion over health care in Washington. We’re heading into the second week of the federal government shutdown, in which the right wing of Congress has demanded that President Obama step back from his health reform. This reveals to me the shocking disconnect between the center-stage discussion in Washington and the everyday discussion we have at our kitchen tables, at our jobs, and with our friends. Back in February 2009, the president hit a note of urgency when it came to health care reform. He said before Congress, “Let there be no doubt, health care reform cannot wait. It must not wait. And it will not wait another year.” At that time the president tapped in to popular sentiment, because everyone knows that our health care system is broken, that on a world scale it is mediocre and even disgraceful. Too many undignified medical encounters take place simply because money is involved, where it never should be in the first place. And yet the debate in Washington seems to me to prove the thesis that there’s a 1 percent and a 99 percent. Because the debate in Washington is among, on the one side, a right wing that believes there should be no government intervention in health care whatsoever. This side believes that some individuals deserve to be sick, even deserve to die – that they deserve to go without health care because of the choices they may have made in their lives. Meanwhile, on the other side – among the “left” of the 1 percent – there’s an idea that any government intervention could be a good thing, even if it’s government intervention to manipulate a profit-driven health insurance marketplace in a way that recruits more customers for private health insurance companies. So this debate about where the government should be, and its proper role, becomes intense in Washington. Meanwhile, the government is profoundly involved in the health care system. In fact, a majority of health spending in the United States of America comes from taxpayers. A majority of spending already comes from public sources. And so the debate makes little sense. It reminds me of 2009, when the right wing was yelling “Government takeover!” and the left wing was yelling “Public option!,” and neither the right, nor the left, was talking about something that was included in the president’s Affordable Care Act. So where will things end up? I believe that this country has great promise as a democracy, and that no modern democracy can afford to neglect the health needs of its population. We have everything it takes for a first-class, outstanding medical system for every person in the United States. We have wonderful nurses. We have excellent and highly trained doctors. We have terrific research and hospitals ready to go. What we don’t have is public control over the financing. Heath care costs rise, and rise again. Doctors are blamed, technology is blamed, all kinds of excuses are made, but in the final analysis, nobody will say what the real cause, underlying it all, is. Underneath it all, health care is becoming an industry. It’s becoming a business. And there are myriad new forces within the system, each trying to extract their tiny profit, and this drives all of us crazy. But it also drives prices and costs ever upward. It doesn’t have to be this way, and everybody knows that. So when the discussion takes place in Washington, the disconnect kicks in. The 99 percent of us continue to have those undignified experiences. The consequences, of course, are grave in the short run. But in the long run, I believe that we will together build the kind of health system worthy of us as a people. Dr. Andrew Coates practices internal medicine in upstate New York. He is president of Physicians for a National Health Program. You can listen to Dr. Coates’ radio broadcast here: http://wamc.org/post/coates-political-divisions-harm-health

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Medicare for all would be good for business

By the Editorial Board
Inside Tucson Business, Oct. 11, 2013 The nasty fight over Obamacare that has shutdown our country and threatens to destroy the world if the U.S. defaults on its loans is seen as a liberals vs. conservatives battle. Liberals see it as compromise legislation that finally found a way to bring millions of uninsured Americans under a health insurance umbrella through expanded indigent health care rolls and mandated insurance purchases by businesses and individuals. Conservatives, who used to be pro-business Republicans, see Obamacare as a hideous government takeover of the national health system. It’s neither. It’s a sloppy wet kiss to the U.S. health insurance industry. Which could be seen as pro-business, assuming you’re in the health insurance business or own stock in one. It also has the potential to be pro-business in that it could unintendedly relieve American businesses of the burden of subsidizing their workers’ health insurance. The Affordable Care Act is so complicated it was bound to be beleaguered by the law of unintended consequences. One of the most prominent has been the 30-hour rule, in which companies with more than 50 workers must offer any employee working more than 30 hours a week subsidized health insurance. That has prompted some employers, mostly small franchisers who hire mostly part-time workers, to cut maximum employee hours to 29 to avoid the mandate. But while that has been cause for a lot “I told you so” shouting on conservative media, it hasn’t proved to be very prevalent. While there are anecdotal incidents of a few hundred companies saying they’ll cut worker hours, it’s a drop in the bucket in the massive American workplace. Moreover, a survey of American employers last month by an international human resources foundation found that 69 percent of companies planned to continue to offer their employees health insurance subsidies after the federal-run health insurance exchanges open next year. So clearly, some companies will continue to offer a subsidy. Which creates another law of unintended consequences. If the company offers the employee the subsidy, and the subsidy is less than 9.5 percent of the employee’s household income, the employee is mandated by the ACA to purchase the insurance through the employer even if the employee could buy cheaper insurance through the exchange. That’s perverse and unfair. But, the employer could help out their employee by ceasing to offer insurance subsidies at all, forcing the employee to purchase insurance through the exchange and likely receiving a federal taxpayer subsidy in the process, making their insurance costs even cheaper. That’s what has some fiscal conservatives whipped into a lather. Once employers and employees figure out how to beat the shell game, they will. And the taxes the ACA imposes are insufficient to cover the full cost of 100 million or more Americans qualifying for a federal subsidy for health insurance. But that’s no different than that unfunded Medicare Part D drug coverage passed under the Bush Administration, which itself was a sloppy kiss to the pharmaceutical industry. It didn’t destroy the country, it just made it poorer. Obamacare will do the same thing, it won’t destroy the country, it will just make it poorer. But it could make business more profitable. The largest cost of business is labor and one of the largest labor costs is health care insurance. American businesses should not be in the business of helping their employees buy health care. That should be the responsibility of the employee. After all, employers don’t help pay for their employees’ housing or food. The only reason employers do it is because everyone else does it. You had to do it to be competitive because competitors could better recruit and retain employees if they offered health care insurance and you didn’t. But now, it might be more competitive to stop offering health care since an employer wouldn’t be throwing their employees into the ravages of the uninsured wilderness – Obamacare would be there to catch them. But even if that would be good for business, it wouldn’t necessarily be good for the country, or health care. One of the great failings of Obamacare is that it doesn’t solve the primary problem, which too many people believe to be the millions of uninsured. The primary problem with American health care is the runaway costs that are crushing the country. The reasons for those double-digit cost increases year after year are legion: Expensive diagnostic systems and tests; reflexive and defensive medicine caused by unconstrained malpractice claims; fee-for-service medicine in which a doctor doesn’t get paid unless he or she “does” something to the patient, like order a test; distorted health insurance markets caused by massive tax subsidies (paying premiums with pre-tax income); and the rise of medical specialization in which patients have to see specific doctors for specific problems, among other reasons. There is a solution out there that could be good for the country, good for Americans and good for American business. And that’s single payer insurance. That’s right, Medicare. If everyone in the country received Medicare, everyone in the country becomes responsible for their own health care consumption. It’s not a panacea, to be sure. One of the risks of nationalizing health insurance is the urge to then nationalize health care provision. The fear is that if Americans view their health care as “free,” paid for by the government, they’ll get as much as they want, or worse, more than they need. And in fact, health care providers would encourage them to do so because it would mean money in their pockets. Nationalized health care provision is then seen as the counter to that. But Medicare has been able to function for more than 50 years without having to resort to nationalized health care by a regime of strict payment controls and regulations. Another drawback is we would have to add to Medicare what it currently doesn’t have, a tax to pay for it. All of that would be hard to do. Perhaps impossible in the current political climate. But there is no question it would be a boon to American business. Employer health insurance subsidies cost American employers nearly $1 trillion a year. Some of the savings would be eaten up by a new Medicare tax, but that tax would be spread among all Americans meaning employers would still see significant savings just in the absent subsidy alone. But there would be additional, ancillary savings. Most American businesses, on top of paying the insurance subsidy, spend hundreds of billions of dollars a year just managing their employees’ health insurance plans. Whole armies of human resources and benefits employees are needed to manage health care plans. American hospitals and doctors’ offices spend billions on staff and technology to keep track of all the insurance plans patients have, filling out forms and fighting with insurance companies to get paid. All of that goes away with single payer. Those savings would more than offset the tax to pay for it. Obamacare could save American employers billions. Medicare for all could save it more than a $1 trillion. That’s a lot of potential profit. And isn’t that what it’s all about? http://www.insidetucsonbusiness.com/opinion/editorials/medicare-for-all-would-be-good-for-business/article_d74b674a-31f6-11e3-b381-001a4bcf887a.html

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Editorial – Inequality for All

Inequality for All

By Don McCanne, qotd editor
Quote of the Day Editorial, October 11, 2013 Yesterday, my wife Sandy and I had the pleasure of joining a group from our local chapter of the League of Women Voters in viewing the new documentary, Inequality for All, featuring former Labor Secretary Robert Reich. The lesson of the film did not escape those attending. The last couple of decades have left low- and middle-income people behind while all of the workers’ gains in productivity have moved up to the very wealthiest. This is an important issue for those who support single payer reform – improved Medicare for all. The average health care costs for the typical working family of four are now over $22,000 while the median household income is $50,000. If everyone is going to have the health care that they need, some of that wealth flowing upwards needs to be redirected to health care, and to other social needs as well. Some of the wealthy one-percenters do understand this. Featured in the documentary was entrepreneur and venture capitalist Nick Hanauer. The following link is to a six minute TED video in which Nick explains the phenomenon and why it is important to us. (For political reasons, TED removed this video from its website, but it is still available through YouTube.) http://www.youtube.com/watch?v=bBx2Y5HhplI In our dinner discussion after viewing Inequality for All, some commented that, though the film explained the problem well, it seemed to leave off any plan for action. It does not require much intuitiveness to think of what actions we might take, though the website for the film does help us by discussing six categories for action: * Raise the minimum wage
* Strengthen workers’ voices
* Invest in education
* Reform Wall Street
* Fix the tax system
* Get big money out of politics Inequality for All: http://inequalityforall.com For those who would like to learn more, Berkeley Professor Emmanuel Saez, who was also featured in the documentary, has published extensively on this topic. Many of his papers – several co-authored by Thomas Piketty – can be downloaded from his website: http://elsa.berkeley.edu/~saez/

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"Where-to-compete" decisions for insurers

Where To Compete In A Post-Reform World

By Shubham Singhal, senior partner in McKinsey’s Detroit office
Health Affairs Blog, September 30, 2013 The power of “where-to-compete” decisions, particularly in an industry in as much flux as US health insurance, is enormous. Our analyses suggest that the bottom-line performance differential between a payor who selects a market-average portfolio across businesses and geographies and an identical payor who instead selects a top-quartile portfolio is likely to be almost twofold. Across industries, McKinsey research shows that the majority of the performance differential among corporations results from their alignment with “rising tide” markets rather than from share gain within less attractive markets. Furthermore, we have found that there are three “macro” approaches that can enable companies to thrive during major industry disruptions: refocus their portfolio on more attractive businesses, build one or two large new businesses, or radically transform their business model. The first two rely squarely on where-to-compete decisions. The last approach is not for the faint of heart. Thus, today’s payors must carefully choose which markets they want to concentrate their resources on to win. The choices made will be critical not only within the payors’ core health-plan business but also in adjacent areas within the healthcare value chain. *** Given the disruptive changes in the healthcare industry, payors that want to thrive over the next few years will need to develop the discipline to make and act on where-to-compete decisions. They will need insights into where growth and margin will be earned, the foresight to determine when inflections points in the market might happen, a clear view of their own competitive advantages and capabilities (which would give them the ability to win and earn a superior return), the fortitude to make tough resource-allocation decisions, and the agility to alter their course as the market shifts. Acquiring the needed discipline is challenging but necessary. The upside from getting where-to-compete decisions right is substantial enough to demand top management’s attention — and the downside is potentially fatal. http://healthaffairs.org/blog/2013/09/30/where-to-compete-in-a-post-reform-world/

Marketplace Plans Vary Widely In Costs, Within Counties And Across The Country

By Jordan Rau and Julie Appleby
Kaiser Health News, October 4, 2013 Consumers shopping in the new health insurance marketplaces will face a bewildering array of competing plans in some counties and sparse options in other places, with people in some areas of the country having to pay much more for the identical level of coverage than consumers elsewhere. Nationwide, 18 percent of counties have only one insurer offering plans and 33 percent of counties have only two insurers competing, the KHN analysis found. http://www.kaiserhealthnews.org/Stories/2013/October/04/Marketplace-plans-variation-counties-and-nation.aspx?utm_source=intop&utm_medium=email&utm_campaign=101013

Comment:

By Don McCanne, M.D. Private insurers are a totally different animal than public health coverage programs, and this “where-to-compete” industry advice typifies that difference. Public programs, such as Medicare, make every effort to deliver health care to those that need it. Private insurers make every effort to ensure the success of their business model. Mimicking Willie Sutton’s famous strategy to rob banks because that is where the money is, private insurers “carefully choose which markets they want to concentrate their resources on to win.” The Kaiser analysis shows that one-third of counties have only one or two insurers offering plans. According to the McKinsey advice, for the insurers covering those counties, the decision is “potentially fatal.” The Affordable care Act has put the wrong people in charge. We can change that. Fix Medicare and then provide it for everyone. Let’s replace “where-to-compete” with “where-to-provide-care.”

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Republicans’ biggest misunderstanding about Obamacare

The right hates the new healthcare law because they think its reach will be universal. The problem is the opposite.

By Adam Gaffney, M.D.
Salon, Oct. 10, 2013

The battle for universal healthcare is not over. This is not because of the reason you might suspect – that Republicans will obstinately endeavor to obstruct Obamacare in every way they can (though that seems to be the case). Instead, even after the smoke clears from the government shutdown (presumably with the law intact), the battle over universal healthcare will still not be over, but for a more fundamental reason: Obamacare, whatever its advantages (and despite the right’s worst fears), does not create a system of universal healthcare.

Now first, to be clear, this is not to say that Obama’s Affordable Care Act won’t help many people. The uninsured who become eligible for coverage through the expansion of Medicaid, for example, will of course be better off – assuming they don’t live in one of the 20 or more states that have callously elected to deny them this potentially lifesaving opportunity. Additionally, many uninsured who were previously unable to afford private health insurance may now be able to do so, for instance through the new income-based premium subsidies. And most of us will benefit from many of the law’s insurance reforms, like the one that prevents insurers’ from denying us coverage because we are sick.

And at the same time, have no doubt: The various Republican alternatives for American healthcare would be disastrous. Consider the most recent GOP healthcare proposal H.R. 3121, which would gut state insurance regulations, eliminate popular ACA reforms like the ban on “preexisting conditions,” end the Medicaid expansion, and provide tax benefits that would preferentially benefit the wealthy, among other unhelpful proposals that would do nothing to help the uninsured. Conservative “consumer-driven” healthcare dreams, more generally, would in truth be nightmares, radically furthering the transformation of healthcare into yet another commodity, bought by “consumers” in proportion to their means, not provided to patients on the basis of their needs.

Yet these facts don’t change the fundamental fact that the ACA will not create what so many of us want, what the right so fervently fears, and – most important – what so many people really need: true universal healthcare. Why?

First, on a basic level, the ACA is not universal healthcare because though it will reduce uninsurance, it won’t provide universal coverage. According to the Congressional Budget Office’s May 2013 estimates, even by 2020 some 30 million Americans will be left uninsured under the ACA, a number that can only be partially attributed to intransigent Republican state governments that have blocked the expansion of Medicaid in their states.

But even putting aside those 30 million people, the ACA is insufficient because it will not deliver what most of us think of as universal healthcare: a system of equitable and comprehensive care for all, with full protection against the cost of illness. Indeed, on the contrary, underway already is a “quiet revolution” in American healthcare, in the words of Dr. Drew Altman of the Kaiser Foundation, that moves us “from more comprehensive to less comprehensive” health insurance, with patients paying more and more out of pocket every time they get sick. Ironically, even with the ACA going into full effect, “the vision of insurance that they’ve [conservatives] always favored,” as Altman told the New York Times, “with more skin in the game, is the one that’s coming to dominate in the marketplace.”

The data clearly show, for instance, that with each passing year, more and more of the insured are already paying higher and higher deductibles, co-pays, and co-insurance whenever they actually need to use their expensive insurance (despite unsurprising evidence that rising out-of-pocket expenses can deter people from seeking needed medical care). In another disturbing trend, major employers – including Walgreens, Sears and Darden restaurants – seem to be moving away from “fixed benefit” health insurance to “fixed contribution” plans, in which employees receive a lump sum to buy a healthcare plan, with no guarantee that these contributions will keep up with the cost of health insurance in future years. It should be noted that this “quiet revolution” toward higher out-of-pocket expenses and more limited benefits is not of the ACA’s making. At the same time, however, the ACA will do little to reverse it (and, in the case of the new excise tax on “Cadillac” healthcare plans, may even exacerbate it).

Meanwhile, for those not insured by their employer and who buy health insurance on the state exchanges that opened on Oct. 1, “underinsurance” may very well become the norm. The plans on the exchanges will be offered in tiers, with the lowest level – the Bronze plan – only required to have an actuarial value of 60 percent (that is to say, the percent of your average annual healthcare expenses that insurance actually pays for), with out-of-pocket annual expenses (after your premium is paid) reaching as high as $12,700 a year for families (depending on income). Moreover, to keep premiums in check, many of these plans will have significantly limited networks of doctors and hospitals, bringing back memories of 1990s managed care. In Missouri, for instance, the Anthem BlueCross BlueShield Plans sold on the exchange will exclude one of the state’s top hospital systems, thereby denying access to the state’s primary academic medical center and its prominent children’s hospital.

Finally, the ACA most likely won’t significantly bend the overall cost curve of healthcare, mainly because it will more or less leave our existing, fragmented and inefficient system in place. According to the most recent projections, for instance, once the economy recovers, the rate of growth of national health expenditures is expected to rebound to about 6 percent annually. This is better than in some previous years, and in an expanding economy in which growth was being distributed throughout the pay scale, might be entirely acceptable. But insofar as these rising costs continue to be passed on to the average working person – while at the same time gains in economic gro wth continue to accrue solely to the most affluent among us – these rising expenses will simply translate into tighter and tighter household budgets, and therefore even more inequality.

So while what the right says about Obamacare is generally wrong, paranoid or both, and though their own proposals would clearly make things much worse, we can’t pretend that Obamacare will create universal healthcare in the sense that most of us imagine it. We won’t have, that is to say, truly comprehensive healthcare for all, with free choice of doctor and hospital, and without a “sickness tax” in the form of out-of-pocket expenses every time we become ill.

What would a system of true universal healthcare look like? The most feasible and best-studied system for the United States is a form of national health insurance called “single payer,” in which care would be provided by the same mixture of private and public hospitals and physicians that is already in place, but in which a single entity – the government – insures everyone in the country. Medicare is one example of an existing single-payer system, but under a national single-payer system, everyone – not only the elderly – would be covered. Uninsurance would thereby be finally, and entirely, eliminated.

From a quality perspective, the evidence suggests that universal systems perform better – not worse, as is frequently alleged. A January 2013 report from the National Research Council, for instance, showed that the U.S. has essentially the worst health outcomes among 16 wealthy “peer nations,” despite spending about twice as much on healthcare.

Such a system would have other advantages as well. For instance, it would drastically reduce our massive and rising expenditure on healthcare administration, which in 1999 accounted for an estimated 31 percent of all healthcare spending in the U.S., as opposed to a mere 7 percent in Canada. This difference is the predictable result of our highly complex and fragmented system of billing and insurance, which is particularly a problem of the private health insurance industry, which has such additional costs as product design, marketing and profits. Indeed, as much as 85 percent of excess spending on “health administration and insurance” is attributable to the private health insurance system. How, exactly, the health insurance industry contributes to actual healthcare – putting aside its extracting role as unnecessary middleman – remains among the great mysteries of the modern age.

The potential windfall from simplifying this mess could therefore be enormous. According to one recent study, a single-payer system could save the federal government about $592 billion a year. These savings could be used to pay for the cost of eliminating both uninsurance and underinsurance, with everyone receiving comprehensive healthcare without onerous co-pays and deductibles every time they got sick.

Such a system might sound like a dream for some, but it’s not only a dream worth fighting for, but also one that can – with time and determination – be won. The fight for universal healthcare, it is clear, is still far from over: A new stage of that fight, in fact, has only just begun.

Adam Gaffney is a physician and writer in Massachusetts.

http://www.salon.com/2013/10/10/republicans_biggest_misunderstanding_about_obamacare/

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Single-Payer Prescription for What Ails Obamacare

By Amy Goodman
Truthdig, October 9, 2013 “We apologize for the inconvenience. The Marketplace is currently undergoing regularly scheduled maintenance and will be back up Monday 10/7/3013.” You read it right, 3013. That was the message on the homepage of the New York state health insurance exchange website this past weekend. Yes, the Affordable Care Act (ACA), popularly known as Obamacare, is going through difficult birth pains, as the marketplace websites went live only to crash. The government is not giving out numbers, but informed observers speculate that very few people have succeeded in signing up for any of the plans so far. The ACA rollout occurred as Republicans shut down the government in their attempt to defund Obamacare. But their strategy backfired. Had there been no shutdown, all of the attention would have been on the disastrous rollout. The fundamental issue, at the core of the health-care dispute, is typically ignored and goes unreported: The for-profit health-insurance industry in the United States is profoundly inefficient and costly, and a sane and sustainable alternative exists—single-payer, otherwise known as expanded and improved Medicare for all. Just change the age of eligibility from 65 to zero. “When Medicare was rolled out in 1966, it was rolled out in six months using index cards,” Dr. Steffie Woolhandler told me Monday. “So if you have a simple system, you do not have to have all this expense and all this complexity and work.” Woolhandler is professor of public health at CUNY-Hunter College and a primary-care physician. She is a visiting professor at Harvard Medical School and the co-founder of Physicians for a National Health Program, or PNHP. PNHP is an organization with 17,000 physicians as members, advocating for a single-payer health-care system in the U.S. What is single-payer? Critics denounce it as “socialized medicine,” while ignoring that single-payer is already immensely popular in the U.S., as Medicare. A 2011 Harris poll found that Medicare enjoyed 88 percent support from American adults, followed closely by Social Security. Woolhandler explained that with a Medicare-for-all system, “you would get a card the day you’re born, and you’d keep it your entire life. It would entitle you to medical care, all needed medical care, without co-payments, without deductibles. And because it’s such a simple system, like Social Security, there would be very low administrative expenses. We would save about $400 billion [per year].” Dr. Woolhandler went on, rather than “thousands of different plans, tons of different co-payments, deductibles and restrictions—one single-payer plan, which is what we need for all Americans to give the Americans really the choice they want … not the choice between insurance company A or insurance company B. They want the choice of any doctor or hospital, like you get with traditional Medicare.” Monthly premiums in most cases are expected to decrease with Obamacare’s health-exchange systems, which will enhance the transparency and ease of comparison for people shopping for a health-insurance policy. If and when the technical problems are eliminated from the online health insurance exchanges, and people can easily shop, there will likely be a huge number of people buying policies for the first time. The ACA offers important advances, which even single-payer advocates acknowledge: subsidies for low-income applicants will make insurance affordable for the first time. Medicaid expansion also will bring many poor people into the umbrella of coverage. Young people can stay on their parents’ insurance until the age of 26. People with so-called pre-existing conditions can no longer be denied insurance.

While the ACA was deemed constitutional by the Supreme Court, the opinion gave states the option to opt out of the Medicaid expansion, which 26 states with Republican governors have done. A New York Times analysis of census data showed that up to 8 million poor people, mostly African-Americans and single mothers, and mostly in the Deep South, will be stranded without insurance, too poor to qualify for ACA subsidies, but stuck in a state that rejected Medicaid expansion. So, while partisan bickering (between members of Congress who have among the best health and benefits packages in the U.S.) has shut down the government, the populace of the United States is still straitjacketed into a system of expensive, for-profit health insurance. We pay twice as much per capita as other industrialized countries, and have poorer health and lower life expectancy. The economic logic of single-payer is inescapable. Whether Obamacare is a pathway to get there is uncertain. As Dr. Woolhandler summed up, “It’s only a road to single-payer if we fight for single-payer.” Denis Moynihan contributed research to this column. Amy Goodman is the host of “Democracy Now!,” a daily international TV/radio news hour airing on more than 1,000 stations in North America. She is the co-author of “The Silenced Majority,” a New York Times best-seller.

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Marketplace Plans Vary Widely In Costs, Within Counties And Across The Country

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