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FOR IMMEDIATE RELEASE
August 27, 2015

Contact:
Mark Almberg, PNHP communications director, 312-782-6006, mark@pnhp.org

Hospitals’ growing practice of re-labeling Medicare patient readmissions as “observation stays,” or treating returning Medicare patients in the emergency room, has allowed many hospitals to skirt Medicare’s financial penalties for poor-quality performance that were mandated by the Affordable Care Act, researchers say.

However, such practices, while aiding a hospital’s bottom line, constitute a form of gaming that frequently leaves patients worse off financially.

Those are some of the key findings of a study published today by the Health Affairs Blog titled “Quality Improvement: ‘Become Good At Cheating And You Never Need To Become Good At Anything Else’” by Drs. David Himmelstein and Steffie Woolhandler, professors at the City University of New York School of Public Health and lecturers at Harvard Medical School.

The authors write: “In most cases, observation patients receive care in a regular inpatient unit, and get treated just like other inpatients. And in many cases, observation stays stretch out to several days: in 2012, 26 percent lasted two nights and 11 percent at least three. But from Medicare’s point of view, this is outpatient care, which leaves patients responsible for more of the bill, and ineligible for Medicare-paid rehab or skilled nursing care.”

Citing data from the Medicare Payment Advisory Commission’s March 2015 report to Congress, they note that between 2006 and 2013, “observation stays increased by more than half of the total apparent decline in total Medicare admissions during that seven-year period.”

They add that data from the Centers for Medicare and Medicaid Services (CMS) show that “between 2010 and 2013, 36 percent of the claimed decrease in readmissions was actually just a shift to observation stays.”

The authors also note that besides the upsurge in observation stays, an increasing number of recently discharged Medicare patients are being treated in emergency departments (ED) without being admitted.

Citing CMS data, they write: “For patients discharged after heart attacks, the urgent return rate has actually risen slightly; the reported 1.8 percent fall in readmission is more than offset by a 0.7 percent increase in observation stays and a 1.2 percent increase in ED visits.”

The authors note that some hospitals have undoubtedly reduced readmissions by providing better care, while others are clearly engaged in this gaming behavior.

More broadly, however, they assert that Medicare’s readmission penalties are part of a growing number of pay-for-performance measures that show no evidence of having improved outcomes, and which can actually promote cheating, undermine doctors’ and nurses’ intrinsic motivation to do good work, and vitiate quality improvement tracking.

Himmelstein commented: “Medicare and private insurers say they’re paying for quality. But often they’re just rewarding hospitals for stretching the truth and avoiding the most difficult patients. Pay-for-performance schemes are forcing hospitals to spend billions more on new paperwork, and doctors to spend hours each day checking boxes to comply with the new reporting requirements.”

In addition to their academic posts, Himmelstein and Woolhandler practice primary care medicine in New York City. They are also co-founders of Physicians for a National Health Program, an organization of 19,000 doctors who advocate for a single-payer national health insurance program.

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“Quality Improvement: ‘Become Good At Cheating And You Never Need To Become Good At Anything Else,’” by David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H. Health Affairs Blog, August 27, 2015.

The blog article is available at the links above and at the Health Affairs Blog website:

http://healthaffairs.org/blog/2015/08/27/quality-improvement-become-good-at-cheating-and-you-never-need-to-become-good-at-anything-else

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Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 19,000 doctors who support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.

FOR IMMEDIATE RELEASE, June 23, 2015
Contact: Mark Almberg, (312) 782-6006, mark@pnhp.org

Unauthorized immigrants pay billions more into Medicare’s Hospital Insurance Trust Fund each year than they withdraw in health benefits, according to research from Harvard Medical School, the Institute for Community Health and the City University of New York School of Public Health at Hunter College. The study appeared last Thursday as an “online first” article in the Journal of General Internal Medicine.

In 2011 alone, unauthorized immigrants paid in $3.5 billion more than they utilized in care.  Unauthorized immigrants generated an average surplus of $316 per capita to the Trust Fund, while other Americans generated a deficit of $106 per capita. The authors conclude that reducing unauthorized immigration would worsen Medicare’s financial health.

Payroll taxes are the major revenue source for the Trust Fund, which mostly pays hospital bills. Unauthorized immigrants often pay these taxes, usually under a borrowed or invalid Social Security number. Unauthorized immigrants are mostly working age, have high rates of labor force participation, and hence contribute substantial payroll taxes. Medicare outlays for unauthorized immigrants are low because they are ineligible for Medicare benefits.

The study authors examined Medicare Trust Fund contributions and expenditures for each year from 2000 through 2011. They analyzed data from the Census Bureau’s Current Population Survey to calculate tax contributions, and used the Medical Expenditure Panel Survey to determine medical expenses paid by Medicare.

The study found that immigrants contributed a surplus of between $2.2 billion and $3.8 billion per year, or a total of $35.1 billion from 2000-2011. Had unauthorized immigrants neither contributed to nor withdrawn from the Trust Fund during those 11 years, it would become insolvent in 2029 – one year earlier than currently predicted.

“For years I have seen my unauthorized immigrant patients be blamed for driving up health care costs,” said lead author Dr. Leah Zallman, a faculty member at Harvard Medical School, researcher at the Institute for Community Health and primary care physician at Cambridge Health Alliance. “Yet few acknowledge their contributions. Our study demonstrates that in one large sector of the U.S. health care economy, unauthorized immigrants actually subsidize the care of other Americans.”

Senior author Dr. Steffie Woolhandler, professor of public health at City University of New York and lecturer in medicine at Harvard, said: “The numbers contradict the myth that unauthorized immigrants are a drain on the health system. Reducing immigration would worsen Medicare’s financial woes.”

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“Unauthorized Immigrants Prolong the Life of Medicare’s Trust Fund,” by Leah Zallman, M.D., M.P.H., Fernando A. Wilson, Ph.D., James P. Stimpson, Ph.D., Adriana Bearse, M.S., Lisa Arsenault, Ph.D., Blessing Dube, M.P.H., David U. Himmelstein, M.D., Steffie Woolhandler, M.D., M.P.H. Journal of General Internal Medicine, June 18, 2015.

A PDF of the article is available to media professionals upon request from Mark Almberg at mark@pnhp.org.

Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 19,000 doctors who support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.

FOR IMMEDIATE RELEASE
May 27, 2015

Contact:
Mark Almberg, PNHP communications director, mark@pnhp.org

The Affordable Care Act will add more than a quarter of a trillion dollars to the already very high administrative costs of U.S. health care through 2022, according to a study published Wednesday at the Health Affairs Blog.

Drawing on the “National Health Expenditure Projections for 2012-2022,” released in July 2014 by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), the authors – Drs. David U. Himmelstein and Steffie Woolhandler – calculated yearly estimates for private insurance overhead and government program administration costs both with, and without, the effects of the ACA.

Using estimates from the Congressional Budget Office, they also calculated the ACA’s coverage and cost.

“Between 2014 and 2022, the ACA will add $273.6 billion in new administrative costs over and above what would have been expected had the law not been enacted,” said Himmelstein. “That’s equivalent to $1,375 per newly insured person per year, or 22.5 percent of total federal expenditures for the program.”

Himmelstein and Woolhandler write: “Nearly two-thirds of this new overhead – $172.2 billion – will go for increased private insurers’ administrative costs and profits,” while the rest of the added overhead “is attributable to expanded government programs, i.e. Medicaid. But even the added dollars to administer Medicaid will flow mostly to private Medicaid HMOs, which will account for 59 percent of total Medicaid administrative costs in 2022.”

They observe that while insuring 25 million additional Americans, as the CBO projects the ACA will do, “is surely worthwhile,” the administrative costs of doing so “seem awfully steep, particularly when much cheaper alternatives are available.”

By way of alternatives, they point to traditional Medicare, which runs for about 2 percent overhead. Were the 22.5 percent overhead figure associated with the ACA to drop to traditional Medicare’s level, the U.S. would save $249.3 billion by 2022, they say.

The overhead rates of universal, single-payer systems such as Taiwan’s or Canada’s are even lower, closer to 1 percent, they write, adding that if the U.S. were to adopt a single-payer system, the savings on bureaucracy and paperwork would amount to about $375 billion annually, enough to provide high-quality, first-dollar coverage to all Americans.

“In health care, public insurance gives much more bang for each buck,” they write.

Himmelstein and Woolhandler are professors at the City University of New York School of Public Health at Hunter College and lecturers in medicine at Harvard Medical School. Their long-term research interests include the administrative costs of U.S. health care. They co-founded Physicians for a National Health Program.

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“The Post-Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs,” by David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H. Health Affairs Blog, May 27, 2015.

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Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 19,000 doctors who support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.

FOR IMMEDIATE RELEASE
March 12, 2015

Contact:
Mark Almberg, PNHP communications director, 312-782-6006, mark@pnhp.org

Despite claims by the Obama administration that the Affordable Care Act will reduce health insurance companies’ spending on overhead, thereby channeling a greater share of consumers’ premium dollars into actual patient care, insurers’ financial filings show the law had no impact on the percentage of insurer expenditures on such things as administration, marketing and profits.

That’s the chief finding of a team of researchers, including two prominent physicians on the faculties of the City University of New York’s School of Public Health and Harvard Medical School, in an article published Wednesday in the peer-reviewed International Journal of Health Services.

Examining U.S. Securities and Exchange Commission filings of nine large insurers, and using a constant definition of what constitutes an insurer’s “medical loss ratio” or MLR – i.e. actual spending on payments to doctors, hospitals, pharmacies, etc. – the researchers found that the weighted average MLR in the three years after the new ACA regulations took effect (2011-2013) was 83.05 percent, compared to 83.04 percent in the three years prior to the reform.

The ACA sets limits on insurers’ overhead, mandating an MLR of at least 80 percent in small-group markets and 85 percent in the large group market. However, the Obama administration changed the traditional yardstick by which the MLR is measured.

The new way of calculating the MLR allows insurers to classify most expenditures on “quality improvement” initiatives and the updating of coding systems as medical expenditures, and allows them to subtract most taxes, regulatory fees and “community benefit” spending.

“Rather than go along with the administration’s moving of the goal posts to the apparent advantage of the insurers, we stuck with the traditional way financial analysts and insurance firms calculate MLR, namely, by dividing total medical payments by total premium income,” said Benjamin Day, the study’s lead author.

“What we found is that there’s been no significant change in the insurers’ MLR since the implementation of the new regulations.”

MLRs fell at four firms – UnitedHealth, Humana, Aetna and WellCare – and increased slightly at four others and markedly at one (Centene, a major managed Medicaid contractor).

Day continued: “Although the MLR requirements forced insurers to pay rebates of $1.1 billion in 2011 and $504 million in 2012 – payments that were touted by the Department of Health and Human Services as a major boon to consumers – these rebates constituted less than 0.1 percent of private insurance company revenues and appear to have had no overall impact on MLRs.”

Day, whose published research includes articles on labor history and health care reform, currently serves as executive director at Healthcare-NOW, a national coalition of groups advocating for a single-payer health care system.

Senior author Dr. Steffie Woolhandler, professor at the City University of New York’s School of Public Health at Hunter College and co-founder of Physicians for a National Health Program, said a number of factors might explain why the ACA hasn’t raised MLRs.

“Most plans already met the MLR requirement from 2007-2009, even without the MLR redefinition in the ACA,” Woolhandler said. “Moreover, self-insured employer plans, which accounted for 60 percent of all covered workers in 2011, were entirely exempt from the MLR requirement. In addition, a number of exemptions and adjustments were granted to a wide spectrum of plans and to several states, temporarily nullifying the new mandate.”

Woolhandler observed that traditional Medicare’s overhead is about 2 percent, i.e. 98 percent of Medicare’s spending goes toward medical care. “The ACA is too lenient on private insurers, sets too low a bar for their payments for actual care, and provides them with too many loopholes.

“The lesson is clear,” she said. “We need to adopt a publicly financed, improved Medicare for All.”

“The Affordable Care Act and Medical Loss Ratios: No Impact in First Three Years,” Benjamin Day, M.A., David U. Himmelstein, M.D., Michael Broder, B.A., Steffie Woolhandler, M.D., M.P.H. International Journal of Health Services, Vol. 45, No. 1 (January 2015).

The full text of the article is available at the links above or from Mark Almberg at mark@pnhp.org.

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The International Journal of Health Services (joh.sagepub.com) contains articles on health and social policy, political economy and sociology, history and philosophy, ethics and law in the areas of health and health care.

Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 19,000 doctors who support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.