PNHP

Don’t forget the underinsured

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Don’t forget the underinsured

High Out-of-Pocket Medical Spending among the Poor and Elderly in Nine Developed Countries

By Katherine Baird
HSR, August 2016

Objective:  The design of health insurance, and the role out-of-pocket (OOP) payments play in it, is a key policy issue as rising health costs have encouraged greater cost-sharing measures. This paper compares the percentage of Americans spending large amounts OOP to meet their health needs with percentages in eight other developed countries. By disaggregating by age and income, the paper focuses on the poor and elderly populations within each.

Principal Findings:  The United States is not alone in exposing large numbers of citizens to high OOP expenses. In six of the other eight countries, one-quarter or more of low-income citizens devoted at least 5 percent of their income to OOP expenses, and in all but two countries, more than 1 in 10 elderly citizens had high medical expenses.

Conclusions:  For some populations in the sample nations, health insurance does not provide adequate financial protection and likely contributes to inequities in health care delivery and outcomes.

From the Results

In five nations, more than ten percent of individuals lived in households with high medical spending (United States, Poland, Israel, Switzerland, and Russia), and only in France (2.9 percent) did less than five percent of the population incur high OOP expenses.

From the Discussion

This study provides some of the best comparative evidence to date of the variation within and between countries of the percentage of citizens exposed to high OOP medical expenses. The results foremost underscore the very high financial burden that using health care places on many Americans.

But unlike other studies, I also find that high spending among poor and elderly Americans is equally common among their counterparts in many other countries. In seven of the nine countries (United States, Japan, Australia, Poland, Israel, Russia, and Switzerland), one-quarter or more of poor citizens devoted at least 5 percent of their income to OOP expenses; and in all nine countries, at least one-in-ten poor citizens did. Underinsurance rates among the elderly were somewhat lower than among the poor, yet the results show that one-in-four elderly citizens had high OOP expenditures in Switzerland, Russia, Poland, and Israel, while more than 15 percent did in Australia, Slovenia, Japan, and the United States.

From the Conclusions

The finding that the United States is not an outlier when it comes to the financial burden resulting from health care consumption in the sample of countries here highlights the fact that health insurance in many countries is commonly porous: high levels of OOP spending frequently occur in many countries despite universal insurance and the existence of policies that supposedly limit citizens’ financial exposure. The complicated nature of health care and health insurance benefits; the complex ways in which consumers respond to insurance benefits and their limits; and finally the often significant health risks not covered by insurance policies: all of these combine to leave large numbers of people across many countries devoting considerable resources to meeting their health care needs. Considering the evidence, then, solving the problem of the uninsured in the United States will most likely leave standing the separate one of underinsurance, unless policy seeks to tackle them both.

http://www.hsr.org/hsr/abstract.jsp?aid=54961134754

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Comment:

By Don McCanne, M.D.

Underinsurance – excessive out-of-pocket expenses for health care – results in financial hardship not only in the United States but also in other developed nations as well. Of the nine nations in this study, only France has insurance that is adequate to prevent financial burdens from out-of-pocket spending.

During reform processes, there is always a struggle on how to make insurance affordable. When the Affordable Care Act was crafted, to keep insurance premiums down it was decided that the benchmark plan would have an actuarial value of only 70 percent – the patient would be responsible for covering an average of 30 percent of the bill. It was obvious that this was too much of a burden for most individuals so they provided subsidies for out-of-pocket expenses for low-income individuals and placed a cap on out-of-pocket spending for covered benefits, but not for out-of-network care. This has left too many exposed to the very high deductibles that were required to keep the actuarial value down to 70 percent.

Yet France, with a per capita spending on health care near the OECD average, has shown us that patient cost sharing is not necessary to slow health care spending. Other studies have shown that, not only does cost sharing frequently create financial hardship, it also causes patients to forgo beneficial health care services. Both are bad, and they are avoidable.

The lesson is that getting everyone insured is not enough. We also need to eliminate underinsurance. We need to keep that in mind when we enact a single payer national health program – the improved in an Improved Medicare for All. There are too many in the policy community who accept, as blind faith, the necessity of high deductibles, so it will be a battle.

The tradeoff between equity and efficiency in health care financing

NBER Working Paper 22440
Demand Heterogeneity in Insurance Markets: Implications for Equity and Efficiency

By Michael Geruso
National Bureau of Economic Research, July 2016

Abstract

In many markets insurers are barred from price discrimination on consumer characteristics like age, gender, and medical history. By themselves, such restrictions are known to exacerbate adverse selection problems. But the conventional wisdom — widely reflected in policy — is that with regulatory tools like premium subsidies, it is possible to address selection and induce efficient plan choices without price-discriminating. In this paper, I show why this conventional wisdom is wrong: As long as different sets of consumers (men and women, rich and poor, young and old) differ in their willingness-to-pay for insurance conditional on the losses they generate, then price discrimination across such groups is welfare-improving. The conventional wisdom is wrong because it implicitly assumes a one-to-one mapping from insurable risk to insurance valuation. I show that demand heterogeneity that breaks this one-to-one relationship is empirically relevant in a consumer health plan setting. Younger and older consumers and men and women reveal strikingly different demand for health insurance, conditional on their objective medical spending risk. This implies that these groups must face different prices in order to sort themselves efficiently across insurance contracts. The theoretical and empirical analysis highlights a previously unexplored, but fundamental, tradeoff between equity and efficiency that is unique to selection markets.

http://www.nber.org/papers/w22440

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Comment:

By Don McCanne, M.D.

Individuals vary in their preference for insurance and willingness to pay for it. Michael Geruso explains that insurance pricing that takes preference into consideration is welfare-improving and thus efficient. Yet efforts to improve equity by compensating for price discrimination result in a tradeoff between equity and efficiency. Do we care?

What the majority of us want is a health care system that is accessible to all and funded equitably based on ability to pay. Using the analogy of the tradeoff between equity and efficiency, a system funded by progressive taxes would be highly equitable but might be terribly inefficient because wealthier individuals might not have a preference to pay higher taxes.

The efficiency that we actually want to see is greater value in our health care purchasing through eliminating much of the administrative waste that occurs in our dysfunctional financing system. The economist’s construct of efficiency as representing a measure of individual preference should be a negligible consideration when we have the ability to create a health care financing system that is equitable – fair – for everyone regardless of ideological preference.

Obama on Obamacare

President Obama’s new paper defending the Affordable Care Act only shows why we need single-payer health care

By Adam Gaffney, M.D.
Jacobin, July 26, 2016

“Obama on Obamacare” would have been a catchier title for “United States Health Care Reform,” the scholarly paper the president published in the Journal of the American Medical Association earlier this month. Garnering widespread coverage because of its novelty (“call him scholar-in-chief,” noted Fortune) and for its call for a “public option” to further improve the American health-care system, Obama’s article should interest us more for what it left out.

The president begins his review of the Affordable Care Act (ACA) with a brief discussion of its roots — including the profound shortcomings of the pre-ACA landscape — before proceeding with a largely rosy, albeit data-based, discussion of progress made under the law.

He splits his assessment into two categories — its expansion of insurance coverage, and its reforms of the “health-care delivery system.” Both show the limits of the recent attempts at reform and the broader Democratic Party political vision.

The Uninsured

As Obama fairly describes, the ACA resulted in a substantial decline in the number of uninsured Americans over the past five years. Using recently released figures, he cites a drop from 16 percent in 2010 (when the law was passed) to barely over 9 percent in 2015 (after its main provisions were implemented) — a change that amounts to around twenty million more insured people today as a result of the ACA.

Being uninsured is an obvious injustice. It squeezes the resources of those who can least afford it at the worst possible time, and it takes thousands of lives a year. A major reduction in the rate is a good thing.

But there  more to be said. First, Obama barely mentions the more than twenty-five million individuals who — it is estimated — will remain uninsured in the foreseeable future. Nor does he address the stark class- and race-based inequalities in uninsurance that remain.

Uninsured in 2015
“Health Insurance Coverage: Early Release of Estimates from the National Health Interview Survey, 2015,” National Health Interview Survey Early Release Program (2016). Note: Uninsured as defined at time of interview; see source for methodology.

While real universal health care will admittedly not resolve all health inequalities (which stem from many factors), a rudimentary first step would be to ensure that neither race nor class prevents patients from seeing a doctor.

A second point to be made about declining uninsurance is that it comes predominantly from the law’s Medicaid expansion: under the ACA, everyone whose income falls below 138 percent of the federal poverty level became eligible to enroll in Medicaid, although a 2012 Supreme Court decision allowed states to decline to participate.

In an editorial accompanying Obama’s article, Stuart Butler of the Heritage Foundation quips that the ACA might be better called the “Medicaid Expansion Act,” a development he sees as “troubling.” His orientation towards this aspect of the law is wrong, however: as the largest source of new insurance coverage, the ACA’s Medicaid expansion is actually its best provision.

However, while we no doubt should fight to implement Medicaid expansion in the nineteen states that have ruthlessly refused to (at the cost of much bloodshed), we should also bear in mind the program’s shortcomings, which Obama neglects.

Medicaid often provides good health-care access, but it can also become a lower-tier program for lower-income and disproportionately minority individuals. Thanks to Medicaid’s lower provider reimbursements, people enrolled in the program far too often cannot avail themselves of the same medical providers as those with private insurance or Medicare. It thus contributes to health-care segregation.

Similarly, those with narrow network plans — private insurance plans that limit them to particular providers and exclude them from prominent hospitals — also suffer. Again, Obama does not mention this problem in his paper.

One issue Obama does briefly address is the frequently heard critique that the ACA has bolstered the rise of health-care cost-sharing: the payment due at point of use that includes things like copayments, deductibles, and coinsurance. High cost-sharing means the underinsured frequently avoid going to needed doctor’s appointments, having important tests run, or even visiting the emergency room. When they do, they are often left with punishing bills.

While admitting that deductibles have been rising, Obama asserts that the rate of increase has not changed. But he misses the point: the argument isn’t that the ACA created “underinsurance” — it’s that it didn’t reduce it, much less eliminate it, which should be our real goal.

Underinsured by age 
S.R. Collins et al., “The Problem of Underinsurance and How Rising Deductibles Will Make It Worse — Findings from the Commonwealth Fund Biennial Health Insurance Survey,” The Commonwealth Fund, (2015). Note: Based on studies of 2003, 2005, 2010, 2012, and 2014 data only. See source for underinsurance definitions and methodology.

The Hidden HMO

The next section of Obama’s paper deals with how ACA reforms have changed the health-care delivery system. Though uninsurance and underinsurance more directly impact patients, this part of the law has massive ramifications for the overall political economy of health care. Obama notes:

Before the ACA, the health-care system was dominated by “fee-for-service” payment systems, which often penalized health-care organizations and health-care professionals who find ways to deliver care more efficiently, while failing to reward those who improve the quality of care.

He proceeds to discuss what is often referred to as “value-based” health care, a benign-sounding framework that is currently on track to restructure how the nation’s entire medical sector is financed.

Value-based health care might be best described as the “Great Wonks’ Hope” for health-care reform in the United States (and increasingly in high-income nations globally, where US policy innovations have huge influence). According to the Harvard Business Review, it “shift[s] the focus from the volume and profitability of services . . . to the patient outcomes achieved.”

The premise here — pay for quality, not quantity — seems commonsensical. And tellingly, value-based health care has even earned that ever-elusive bipartisan support. Its approach includes pay-for-performance (P4P) programs and encourages “alternative payment models” like accountable care organizations (ACOs). Both of these play a prominent role in the ACA.

P4P — “paying for results” — no doubt sounds exceedingly reasonable, particularly for anyone who has experienced poor, neglectful, or inhumane treatment. However, in both concept and practice, pay-for-performance threatens the health-care system in the same way such rubrics have been a disaster for American education.

In schools, financial incentives and disincentives are wielded to “encourage” (or, more accurately, to punish) teachers into raising their students’ test scores. Sometimes, this entails vicious mass firings based on algorithm-derived scores with dubious merit.

Though monitoring quality metrics is no doubt important, basing payment on performance metrics — which are determined by a multiplicity of factors outside the control of the doctor or hospital (or teacher or school) — is a technocratic solution to a complex problem that far too often penalizes those who care for the disadvantaged. This ultimately harms their patients (and students).

Doctors’ more privileged economic and political position — as compared to teachers — has thus far largely forestalled such measures’ implementation for the medical profession. Things may be beginning to change, however: under the Medicare Access and CHIP Reauthorization Act of 2015, passed with bipartisan support last year, a substantial portion of physicians’ Medicare reimbursement will soon be set by how they score on a variety of quality metrics — unless they join an ACO or something similar, where payment will be determined by both performance scores and spending.

Which brings us back to ACOs. As Obama notes, his administration’s goal has been to direct half of all Medicare reimbursements toward ACOs or similar “alternative payment models” by 2018. So what are ACOs, and why should anybody care?

“Some people say ACOs are HMOs [health maintenance organizations] in drag,” as one policy scholar told Jenny Gold of Kaiser Health News. Like HMOs, ACOs are organizations of hospital systems and/or physician practices that share risk with insurers, meaning that the medical providers financially benefit when they reduce spending on patient care.

There are admittedly differences, including P4P-type requirements that ostensibly help maintain the quality of care. But depending on how things go, some ACOs could prove as unpopular with the public as the corporate HMOs of the 1990s, which were widely (and correctly) perceived as exploitative penny-pinchers.

In any event, ACOs’ actual track record of significantly reducing costs is paltry: as Kaiser Health News recently reported, their net savings for Medicare has so far been a big zero.

Similarly, although Obama points to some positive examples, little evidence suggests that P4Ps have any effect on health-care outcomes. Just last week, for instance, a study published in the Lancet described how the biggest P4P program on the planet — which applied to nearly the entire United Kingdom, was funded at enormous cost, and provided large financial incentives — had no impact whatsoever on mortality among the conditions it specifically targeted.

Obama is excessively optimistic — in all fairness, like seemingly everyone else in the health policy community — that ACOs and P4P will take us to a value-based health-care promised land.

The Public Option?

As he gets closer to the end of his paper, Obama turns to calls for further reform. Some of these are entirely reasonable — though also entirely inadequate — but his return to a public option has received by far the most attention. Regardless of how one feels about the public option in theory, it’s worth acknowledging how entirely peripheral such a reform, at least as Obama describes it, would be in practice.

Obama asserts that the ACA’s marketplaces — the online “exchanges” where those who are otherwise uninsured buy so-called Obamacare plans — serve the vast majority of enrollees well, because competition among plans keeps premiums within a reasonable range. However, 12 percent of enrollees, he notes, reside in areas where only one or two insurers operate. In these areas, competition falters.

Enter the public option. Congress should consider, he states:

[A] public plan to compete alongside private insurers in areas of the country where competition is limited. Adding a public plan in such areas would strengthen the Marketplace approach, giving consumers more affordable options while also creating savings for the federal government.

In other words, this “public option” would have no impact on anyone currently insured through their employer, and a theoretical impact only for the tiny minority of Obamacare marketplace enrollees who reside in areas with fewer than three insurers.

Even there, its potential benefit is questionable for various other reasons, like the fact that a public option could become the refuge of the sickest. (If this were to happen, the public option would functionally subsidize the private insurance industry by taking on the more costly patients, becoming less and less affordable in the process).

Those hoping that the public option will deliver the dream of universal, equitable, and comprehensive health care with first-dollar coverage for all are set for the disappointment of their lives if — and when — such a public option is passed.

Finally, Obama takes a soft swipe at single payer, noting that its proponents — like conservatives who proclaim vouchers as the answer to everything — fail to see the value in a more balanced, public-private, American-style approach to public policy.

On the one hand, this isn’t quite fair: under single payer, though health-care funding would be basically entirely public, most care would still be delivered by private (albeit not-for-profit) hospitals and providers. On the other hand, his dismissal of single-payer is a loud and clear political message, reinforcing the Democratic Platform Committee’s recent, dismal rejection of the plan.

Their rejection is particularly galling because — according to a recent Gallup poll — an overwhelming majority (73 percent) of Democratic-leaning voters support single payer, together with some 58 percent of Americans overall.

It must be awkward for prominent liberals who disagree with said majorities. A policy idea that commands extremely strong support from their own base — and the public at large — has to be unironically declared a political impossibility, a pleasant-sounding but fanciful health-care castle in the sky. That they have been successful with this strategy so far says virtually nothing about single payer’s practicality or merits, and much about the anemia of American democracy.

Adam Gaffney is a physician whose work has appeared in Salon, Dissent, and In These Times. He blogs at theprogressivephysician.org.

https://www.jacobinmag.com/2016/07/obama-obamacare-aca-single-payer-health-hospitals/

RAND exploration of single payer alternatives

Exploring Single-Payer Alternatives for Health Care Reform

By Jodi L. Liu
Pardee RAND Graduate School Dissertation, May 2016

Abstract

The Affordable Care Act (ACA) has reduced the number of uninsured and established new cost containment initiatives. However, interest in more comprehensive health care reform such as a single-payer system has persisted. Definitions of single-payer systems are heterogeneous, and estimates of the effects on spending vary. The objectives of this dissertation were to understand single-payer proposals and to estimate health care spending under single-payer alternatives in the United States.

Single-payer proposals are wide-ranging reform efforts spanning financing and delivery, but vary in the provisions. I modeled two sets of national scenarios – one labeled comprehensive and the other catastrophic – and compared insurance coverage and spending relative to the ACA in 2017. First, I estimated the effects of utilization and financing changes, and then I added the effects of “other savings and costs” relating to administration, drug and provider prices, and implementation.

Due to coverage of all legal residents and low cost sharing and prior to adjusting for other savings and costs, the comprehensive scenario increased national health care expenditures by $435 billion and federal expenditures by $1 trillion relative to the ACA. The range of the net effect of the other savings and costs in the literature was $1.5 trillion in savings to $140 billion in costs, with a mean estimate of $556 billion in savings. If this mean estimate was applied to the comprehensive scenario, national expenditures would be $121 billion lower but federal expenditures would still be $446 billion higher relative to the ACA. The catastrophic scenario also covered all legal residents but increased overall cost sharing, resulting in a reduction in national expenditures by $211 billion and federal expenditures by $40 billion even before adjusting for other savings and costs. Average household spending on health care in both sets of scenarios could be more progressive by income than spending under the ACA.

I also developed an interactive, web-based cost tool that allows the savings and cost assumptions to be adjusted by any user. As the debate on how to finance health care for all Americans continues, this study provides increased transparency about economic evaluations of health care reform.

http://www.rand.org/pubs/rgs_dissertations/RGSD375.html

Full Dissertation (Free download – 157 pages):
http://www.rand.org/content/dam/rand/pubs/rgs_dissertations/RGSD300/RGSD375/RAND_RGSD375.pdf

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Comment:

By Don McCanne, M.D.

For her doctorate dissertation at Pardee RAND Graduate School, Jodi Liu has produced a superb paper on single payer reform. Single payer supporters will want to download this paper, and I’ll explain why.

There remains some confusion as to the precise definition of single payer, and she shows us why by presenting the variations in twenty-five specific proposals, including, of course, the Proposal of the Physicians’ Working Group for Single-Payer National Health Insurance – the 2003 version by Woolhandler, Himmelstein, et.al. Since PNHP supports a relatively precise, comprehensive model of single payer, many of the models she discusses we would not label as single payer, though we can see why others would (Vermont H 202 as an example). Because of this variation in design, it is difficult to state precisely what impact a generic single payer program would have. Each one is different.

She selects two sharply contrasting versions for specific analyses of health care spending: a comprehensive single payer proposal, the American Health Security Act (S 1782) of Sen Bernie Sanders and Rep Jim McDermott, and the Health-Insurance Solution, a “single payer” plan of catastrophic health insurance as proposed by Kip Hagopian and Dana Goldman. Although you can learn much on how not to design a single payer system from her analysis of the Hagopian/Goldman model, here we’ll mention only her findings on the Sanders/McDermott model since it is fairly similar to the PNHP proposal.

She first determines the increased spending that would occur by covering everyone with comprehensive benefits (actuarial value 98 percent). She then determines the effect of other savings and costs that are supported by published policy studies, such as the reduction in administrative waste and the greater value obtained through monopsonistic health care purchasing.

It will come as no surprise that her estimate of the mean net savings in national health expenditures would be about $121 billion under this proposal. The federal portion of spending would be about $446 billion higher than under ACA, but that is actually desirable because the proposed federal taxes would be more equitable that the fragmented funding system we have under ACA. She points out that the mean estimate of savings resulting from the other savings and costs according to the policy literature would be about $550 billion, but the range of the estimate would be between a savings of $1.5 trillion to increased costs of $114 billion. The wide variation in the interpretation of the policy literature explains to some extent the reason why various analysts have come up with very different results when analyzing single payer models.

People frequently ask what it would cost them if we had a single payer system, and they want to compare that to their current insurance premium. There are far too many variables to answer that without having a final markup of single payer legislation, plus most people do not realize how much they are paying for health care besides their insurance premiums and cost sharing, especially considering that over 60 percent of health care spending is paid through our tax system.

But people can get a good idea of average percent in personal savings by checking Figure C.2 in the Appendix of this paper. It shows that both the comprehensive base proposal (Sanders/McDermott) and the comprehensive alternative proposal (John Conyers HR 676) would provide significant savings for everyone except those over 1000 percent of the federal poverty level ($253,000 for a family of four).

Another great feature of this study is that the author has created an interactive Cost Tool which is “to improve the transparency of the estimates by disaggregating the effects and allow users to view, in real time, the results of adjusting the assumptions underlying the effects.” Although there still may be differences in opinions about the impact given to the various adjustments, it does bring us closer to understanding the overall financial impact of single payer reform. Although the Tool is not yet up on the Internet, in a personal communication Jodi Liu says that she hopes to have it available soon.

At any rate, this study shows once again that a well designed, comprehensive single payer system really would provide health care for everyone without increasing health care spending over the current level under ACA, based on the mean estimate of the financial impact of single payer.

So, again, download this paper now. It will be very helpful in your future advocacy for single payer.

Insurers automatically enrolling their clients in private Medicare Advantage plans

Some Seniors Surprised To Be Automatically Enrolled In Medicare Advantage Plans

By Susan Jaffe
Kaiser Health News, July 27, 2016

Only days after Judy Hanttula came home from the hospital after surgery last November, her doctor’s office called with bad news: Records showed that instead of traditional Medicare, she had a private Medicare Advantage plan, and her doctor and hospital were not in its network.

Neither the plan nor Medicare now would cover her medical costs. She owed $16,622.

After more than five hours making phone calls, she learned that because she’d had individual coverage through Blue Cross Blue Shield when she became eligible for Medicare, the company automatically signed her up for its own Medicare Advantage plan after notifying her in a letter. Hanttula said she ignored all mail from insurers because she had chosen traditional Medicare.

With Medicare’s specific approval, a health insurance company can enroll a member of its marketplace or other commercial plan into its Medicare Advantage coverage when that individual becomes eligible for Medicare. Called “seamless conversion,” the process requires the insurer to send a letter explaining the new coverage, which takes effect unless the member opts out within 60 days.

Medicare officials refused recently to name the companies that have sought or received such approval or even to say how long the Centers for Medicare & Medicaid Services has allowed the practice. Numerous insurers, including Cigna, Anthem and other Blue Cross Blue Shield subsidiaries, also declined to discuss whether they are automatically enrolling beneficiaries as they turn 65.

(David Lipschutz, a senior attorney at the Center for Medicare Advocacy) said giving beneficiaries the chance to opt out doesn’t adequately safeguard consumers. An insurer’s notification letter can easily be mistaken or overlooked in the deluge of marketing materials seniors receive.

“The right to opt out doesn’t exist if they didn’t get the notice or if they did get the notice but didn’t understand it,” he said.

http://khn.org/news/some-seniors-surprised-to-be-automatically-enrolled-in-medicare-advantage-plans/

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Comment:

By Don McCanne, M.D.

We have provided numerous examples wherein CMS has provided the private Medicare Advantage plans with an unfair advantage over the traditional Medicare program, at a considerable cost to taxpayers. This is yet one more example. In a secretive process, CMS is allowing private insurers to automatically enroll their current clients in their Medicare Advantage plans without requiring them to opt in. Patients must understand what is happening and then take specific action to opt out if they would prefer to be enrolled in the traditional Medicare program.

The is one more step towards privatization of Medicare and the transition to a premium support program (voucher equivalent, with declining purchasing value over time). This is supported by anti-government conservatives and many neoliberals, but, worse, it is with the complicity of CMS.

Once we have a dominant market of competing private Medicare plans, the egalitarian nature of the Medicare program will have been irreparably damaged, and with it our hopes for an improved Medicare for all will have been dashed. The more complex the privatization of Medicare becomes, the greater the resistance to single payer since it “will not be feasible” to dismantle the administratively complex, expensive private health care financing system. So why is it now feasible for us to dismantle our efficient and less costly public Medicare program?

The feasibility argument of the privatizers is a con job. The longer we wait to move to single payer, the worse will be the transition.

Orszag and Emanuel do not seem to understand bundled payments

Saving Money on Cardiac Care

By Peter R. Orszag
Bloomberg View, July 25, 2016

The federal government’s own actuaries are once again pessimistic that America’s health-care costs will continue their slow growth. Thankfully, their boss, Sylvia Burwell, the secretary of Health and Human Services, is working hard to prove them wrong.

A key driver of this Medicare spending deceleration has been the health-care market’s expectation that the payment system is shifting toward value-based payments — that is, paying doctors, hospitals and other providers based on how well they treat medical problems rather than on how many services they provide.

At this point, it’s crucial to fulfill the market’s expectations. If the system now fails to move quickly away from fee-for-service payments, many recent efficiency efforts are likely to be dropped.

A big question is how. The most promising, and practical, path forward is to set up a cascading array of “bundled payments” — that is, all-inclusive reimbursement for specific episodes of care.

The bundled payments must be mandatory, as is Medicare’s bundle for hip and knee surgery — itself an historic step. Making the shift voluntary for hospitals and doctors leads to watered-down incentives, in an attempt to encourage participation. And weak incentives lead to disappointing outcomes.

Which brings us to Secretary Burwell’s important announcement Monday. She is building on the hip and knee bundle, not only by expanding into other forms of orthopedics but, importantly, by introducing mandatory bundles in cardiac care.

Medicare will pay a set fee for coronary artery bypass grafts, a form of surgery that improves blood flow to the heart. The agency will also pay a set fee for the care involved in responding to a heart attack.

The Medicare actuaries may question whether these new bundles can save much money, but that’s not too surprising; they’ve been missing the boat on the changing dynamic in health-care payments for years.

The bundled payments illustrate how the system is changing for the good. Secretary Burwell has just made it vividly clear to everyone in health care that the days of paying for volume are ending.

http://www.bloomberg.com/view/articles/2016-07-25/saving-money-on-cardiac-care-ir2iwfit

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Medicare doubles down on bundled payments

By Dan Diamond
Politico Pulse, July 26, 2016

With all eyes on the Democratic convention, CMS on Monday made a key move to secure the party’s signature health reform: It introduced its second bundled mandatory payment program, this one focused on cardiac care.

The bundled payment program is the latest big initiative in the Obamacare effort to bend the health cost curve. It’s also positioned to play a crucial role as the White House tries to tie 50 percent of Medicare payments to alternative care models by 2018. Liberal experts say they can’t get there with accountable care organizations and voluntary models alone, and that mandatory bundled payment programs are proven successes.

The decision to make both mandatory programs eligible as Advanced APMs under MACRA is intended to entice physicians to participate.

For veterans of the White House fight over Obamacare, Monday’s news felt like a valedictory. “Finally,” said Zeke Emanuel, who served as a White House aide and pushed for mandatory bundled payments to be included in the Affordable Care Act. (Cost controls like bundled payments were left out, in part, to minimize the law’s effect on the health care industry.) “I’m glad they drank my Kool-Aid.”

http://www.politico.com/tipsheets/politico-pulse#ixzz4FXIuha3F

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Comment:

By Don McCanne, M.D.

The bureaucrats are fixated on the meme that we can reduce spending by paying for the value of health care rather than the volume. They have been disappointed with models such as accountable care organizations, and they are now turning to MACRA and its alternative payment models (APMs), with a renewed surge of interest in bundled payments.

The concept behind bundled payments is that, by assigning a single fee to a given intervention such as a joint replacement, you will motivate physicians to not spend money on portions of the care that are not really necessary. Medicare, as the payer, gets the advantage of a discounted price, and the physicians and hospitals get to keep whatever they save beyond the discount.

Does this really reduce volume? The joint replacement will be done regardless, so what volume will be reduced? Doing only a cursory pre-op exam, missing the ejection murmur and omitting the pre-op cardiac consult? Send a patient home earlier when it is possible that the post-op status might not be fully stabilized? Cut back on rehabilitation, risking a less favorable long term outcome? These might reduce volume, but they certain bring into question quality and thus value.

Now they want to pay a set bundled payment for a heart attack. The clinical course of a heart attack is highly variable and could involve only a few or a great many interventions. Under a bundled payment, the physicians and hospital are bearing the risk of the high costs of a potentially complicated, protracted course. Isn’t it the role of the insurer, in this case Medicare, to pool risk? Shifting that risk to the health care delivery system creates the potential for either a reduction in important beneficial health care services, or exposing the delivery system to potential monetary losses and the risk of insolvency – neither of which are desirable.

Perhaps an even more important issue is the fallacy that you can bundle most care and thus make strides in bending the cost curve. Think of the  current proposals to bundle coronary artery bypass grafts and to bundle care for a heart attack – one might work some of the time, but the other has outcomes that are too variable. Now think of other hospital admissions – such as workup of a protracted fever, diagnosis and management of an HIV positive patient who has symptoms of a potentially serious but undiagnosed complication, or perhaps a child with fatigue and weight loss. The costs and outcomes are highly variable. How can you bundle those? Or think of the multitude of patients presenting in a ten minute office visit with a set of complex clinical symptoms that would require extensive workups. How do you bundle those?

To get to the goal of fifty percent of Medicare payments being tied to APMs, you are going to have to figure how how to bundle the large numbers of common clinical presentations, like the sore throat that turns out to be due to acute leukemia, or the routine family planning visit in a patient who feels ill that day and turns out to have diabetic ketoacidosis, or the chronic headache patient who has a focal motor seizure in front of you during the visit. What would otherwise be routine medical visits are often not bundable but are better handled on a fee-for-service basis. That makes the point that most health care is provided in a relatively fixed volume. It is really difficult to reduce the volume for patients who actually need care, and that’s almost all patients. Besides, in most instances we really don’t know how to measure value and convert that into a fixed fee. Volume is relatively fixed, and value is what we all strive for anyway.

Peter Orzag and Ezekiel Emanuel don’t listen to others, not even the Medicare actuaries, but they should be able to figure out these obvious fundamentals. Since they haven’t, maybe it’s them who have been drinking Zeke’s Kool-Aid.

Since it’s really cost that they are concerned about we should move forward with reform that has been proven repeatedly to slow the rate of health care inflation – a single payer national health program. Peter and Zeke need to abandon their false meme that single payer is “not feasible.” What isn’t feasible is expecting to fix our dysfunctional health care financing system with “bundled payments.”

Why the Demand for ‘Medicare for All’ Won’t Go Away

And why these days of injustice must come to an end

By Claudia Fegan, M.D.
Common Dreams, July 26, 2016

As the chief medical officer of Chicago’s historic public hospital, I confront on a daily basis the reality of our country’s failure to provide universal access to health care: the steady flow of patients turned away from other hospitals because they are uninsured or have Medicaid, which pays too little; and the legion of insured patients who come to us too late because they couldn’t afford $50 co-payments or $3,500 deductibles.

That’s what drove me and thousands of other doctors to propose a sweeping single-payer, improved-Medicare-for-all reform in the June issue of the American Journal of Public Health. The reform we propose would cover all Americans for all needed care, eliminate premiums, co-payments and deductibles, and be paid for through taxes.

Why now? Didn’t we get to universal coverage with the Affordable Care Act? The simple answer is no.

A plan that leaves 29 million people uninsured – more people than live in Illinois, Iowa and Indiana combined – is not OK.

A plan that leaves 31 million more underinsured – with deductibles and co-payments they can’t afford – is not OK.

A plan that enriches insurers with hundreds of billions of taxpayers’ dollars – and empowers them to impose draconian restrictions on patients – is not OK.

We know single payer works. It works in Canada and many other nations, where health care costs are half the $10,500 per capita that we pay, and people live years longer than we do.

For what we’re now spending we could have Canada deluxe: a free choice of any doctor and any hospital, and no co-payments or deductibles, like they have; but without the waits for high-tech specialty care that some Canadians experience.

Single-payer reform would be painful for insurance companies and Big Pharma, but a simple tonic for patients and doctors.

Under the ACA, each year millions of patients must navigate a bureaucratic thicket of insurance exchanges that offer thousands of plans with opaque and varying coverage restrictions. Millions more – those with employer-based plans – face annual changes to their plans, usually resulting in greater patient cost sharing.

In contrast, enrollment in Medicare-for-all would be virtually automatic, and coverage complete. And patients would no longer face restrictive provider networks.

Single payer would free doctors from the paperwork burden imposed by insurers that saps our time and morale. Our Canadian colleagues spend only minutes each week dealing with billing and administrative hassles; we spend, on average, about 10 hours.

Doctors would no longer waste time getting prior approvals for care that’s obviously necessary, or find that patients can’t afford a vital medication because it’s in a drug tier that requires a monstrous co-payment.

Until this election season, during which we saw the release of deeply flawed, tendentious studies purporting to show that “Medicare for All” would be prohibitively expensive, virtually every serious analyst – the Congressional Budget Office, the Government Accountability Office, and a potpourri of private consultants – acknowledged that single-payer reform could provide universal, first-dollar coverage for about what we’re now spending, and save money in the longer term.

Eliminating the financial barriers to care would result in increased care. But the costs of that care would be fully offset by huge savings on bureaucracy and drugs.

Cutting out the insurance company middlemen would save hundreds of billions on their overhead and profits, and even more on the paperwork they impose on doctors and hospitals. And, as in Canada and Europe, a single public payer could use its buying clout to negotiate large discounts from drug makers.

The simple fact is we can afford universal, comprehensive coverage if we do it right.

I recognize that single payer faces stiff political headwinds, but political climates change. It helps that surveys show the majority of the public and physicians clearly feel its time has come.

My father, a labor union organizer and photographer, took the picture of Emmett Till’s body the night his mother requested the casket be opened so the public could see what they had done to her baby. That photo became an icon of the civil rights movement, part of the upsurge that began to change America.

Eight years from the day Emmett Till was lynched, my father stood behind Dr. King’s shoulder and photographed the massive crowd that stood before him on National Mall as he gave his “I Have a Dream” speech.

Within months, Congress passed the Civil Rights Act – soon to be followed by the Voting Rights Act, as well as Medicare and Medicaid.

Soon thereafter, Dr. King said: “Of all the forms of inequality, injustice in health is the most shocking and inhuman.”

I continue to witness that injustice every day. A single-payer reform would end it.

Claudia Fegan, M.D. is national coordinator of Physicians for a National Health Program and also president of the Chicago-based Health and Medicine Policy Research Group. She is a co-author of “Universal Healthcare: What the United States Can Learn from Canada and a contributor to 10 Excellent Reasons for National Health Care.”

http://commondreams.org/views/2016/07/26/why-demand-medicare-all-wont-go-away

If we really want fair and less expensive health care, it’s single payer

By Samuel Dickman, M.D., and Steffie Woolhandler, M.D., M.P.H.
The Salt Lake Tribune, July 23, 2016

Americans spend twice as much for health care as Europeans or Canadians. Although our cost growth slowed recently, it’s too soon to celebrate: The slowdown has made health care much less equal.

In a study in this month’s Health Affairs, we found that health spending for poor and middle class Americans has stayed virtually flat since 2004, while care for the wealthiest one-fifth of families skyrocketed. By 2012, the wealthy were seeing doctors 40 percent more often than others, and the dollar value of their care exceeded that of the poor by 43 percent. For the first time since the advent of Medicare and Medicaid, the rich — who are far healthier than others — are getting the most care.

What’s behind the troubling increase in health care inequality? For most Americans, copayments and deductibles are going up but incomes aren’t. In job-based plans, deductibles (what patients have to pay before insurance kicks in) now average $1,318. And after that, most people still face big copayments.

As a result, many working families skip care, and those who can’t often find themselves submerged in medical debt.

Overdue medical bills now account for most debts sent to collection agencies, and crowdfunding sites like GoFundMe feature thousands of pleas from families struggling to pay medical bills.

The poor face even greater obstacles. Nineteen states — Utah included — have refused Obamacare’s Medicaid expansion, even though the federal government would pick up almost all of the costs. And even when states expand Medicaid, complex eligibility rules and enrollment procedures keep many needy families out, and many doctors won’t accept Medicaid. Having an insurance card doesn’t mean much if you can’t get into a doctor’s office. Of course, matters are even worse for the 29 million uninsured Americans.

The millions of Americans hit with catastrophic medical bills aren’t just falling through the cracks. They’re being punished by design: The system we’ve built cuts costs by making it more expensive to go to the doctor. Policy leaders have pushed big copayments and deductibles as the right cost-control strategy. But that strategy favors the rich; a $1,318 deductible hits low-wage workers hard, but is barely noticeable for a CEO.

Other countries use more equitable and effective cost control methods. Canada’s single payer, Medicare-for-all system provides universal, first dollar coverage, and has kept costs low and quality high. It saves vast amounts by cutting out private insurance middlemen and the paperwork they inflict on doctors and hospitals and by bargaining to drive down drug prices. These measures could save Americans more than $500 billion annually, enough to cover the 29 million who remain uninsured and eliminate copayments and deductibles for everyone.

In 21st century America, wealth trumps health in determining who gets care. Single payer reform would reverse that inhumane calculus.

Samuel Dickman, M.D., is a native of Salt Lake City and is now a medical intern at San Francisco General Hospital. Steffie Woolhandler, M.D., MPH, is a professor of health policy at the City University of New York.

http://www.sltrib.com/opinion/4138198-155/op-ed-if-we-really-want-fair

Drug firms gouge taxpayers by gaming Part D catastrophic coverage

Pricey Drugs Overwhelm Medicare Safeguard

By Ricardo Alonso-Zaldivar
Associated Press, July 25, 2016

A safeguard for Medicare beneficiaries has become a way for drugmakers to get paid billions of dollars for pricey medications at taxpayer expense, government numbers show.

The cost of Medicare’s “catastrophic” prescription coverage jumped by 85 percent in three years, from $27.7 billion in 2013 to $51.3 billion in 2015, according to the program’s number-crunching Office of the Actuary.

Medicare’s catastrophic coverage was originally designed to protect seniors with multiple chronic conditions from the cumulatively high costs of taking many different pills. Beneficiaries pay 5 percent after they have spent $4,850 of their own money. With some drugs now costing more than $1,000 per pill, that threshold can be crossed quickly.

Lawmakers who created Part D in 2003 also hoped added protection would entice insurers to participate in the program. Medicare pays 80 percent of the cost of drugs above a catastrophic threshold that combines spending by the beneficiary and the insurer. That means taxpayers, not insurers, bear the exposure for the most expensive patients.

Concerns about catastrophic costs undercut the image of Medicare’s prescription program as a competitive marketplace in which private insurers bargain with drugmakers to drive down prices.

“The incentive is to price it as high as they can,” said Jim Yocum, senior vice president of Connecture, Inc., a company that tracks drug prices. Medicare is barred from negotiating prices, “so you max out your pricing and most of that risk is covered by the federal government.”

http://finance.yahoo.com/news/ap-exclusive-medicare-safeguard-overwhelmed-115221318.html

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Comment:

By Don McCanne, M.D.

When the Medicare Part D program covering drugs was designed, conservatives were in control of the government. As a result it was decided that the ideology of competition in the marketplace should be used to improve value rather than using government administered pricing. Today’s message demonstrates once again that markets do not work in health care.

Congress knew that they would have to protect the private insurers from adverse selection – that patients with multiple chronic conditions could place an extra burden on the insurers with whom they enrolled. Thus they established catastrophic coverage with the government (taxpayers) paying 80 percent of the costs over a given threshold. This was not to protect the patients, but rather it was to protect the insurers. That is, it was not to protect the taxpayers who finance much of the program, but rather it was to protect the participants in the marketplace – the drug manufacturers, insurers, and pharmacy benefit managers – using our taxpayer funds.

Under the catastrophic coverage, insurers pay 15 percent, patients pay 5 percent, and the taxpayers pay 80 percent. This allows the drug companies to drive their prices sky high. The 15 percent paid by the insurers is closer to the reasonable price of drugs and so they have less incentive to negotiate better prices, since most of it is being paid by the government anyway. The 5 percent paid by the patient is accepted as a necessary “skin in the game” contribution so patients will not fill prescriptions that they allegedly “do not really need” (a flawed policy concept). The 80 percent paid by taxpayers perpetuates the highly dysfunctional, fragmented financing system in the U.S. – using government money for private solutions – that has driven our health care spending up to levels much higher than all other nations.

The magic of the marketplace in health care is a fraud. Taxpayers pay far less for drugs purchased by the government for Medicaid and the VA system. Other nations with greater government oversight of their health care systems also pay much less.

With a well designed single payer national health program, our nation’s pharmacy bill would be fair, and everyone would get the drugs they need. With the price of many drugs now exceeding median household income, you would think there would be a demand to fix our health care financing system. You would think so, but where’s the action?

Medicare-style system needed for Americans

By Richard Master
The Morning Call (Allentown, Pa.), Letters, July 19, 2016

Reflecting on the story, “New peak for U.S. health care spending,” that annual U.S. health care cost has surpassed $10,000 per person: That’s an astounding figure that should wake up readers, that our health care system is eating the rest of the U.S. economy alive. Clearly, other countries of the industrialized world deal with health care more effectively.

Vince Mondillo of Easton and I researched and produced “Fix It … Healthcare at the Tipping Point,” a documentary at fixithealthcare.com that describes our administratively complex and costly system. Unfortunately, the Affordable Care Act was a compromise measure that expanded coverage to more citizens but further entrenched commercial insurance companies’ costly practices.

“Fix It” presents the business case, the economic case, for a Medicare-for-all system. Single-payer reform has worked to provide superb care to all citizens in many countries of the industrialized world. It’s not a government takeover but tax-financed, privately delivered health care.

We Americans are unfortunately stuck in the Dark Ages, trying to put a shine on an archaic, complex expensive health care system that works for special business interests (Big Pharma, insurance companies, massive hospital networks and, yes, the media through advertising revenues) but doesn’t work for our society.

Richard Master is CEO of MCS Industries Inc., Palmer Township, and executive producer of “Fix It … Healthcare at the Tipping Point.” He resides in Bethlehem.

http://www.mcall.com/opinion/letters/mc-health-care-spending-master-20160719-story.html

Medicare for all is the way to go

By Bob Balhiser
Helena (Mont.) Independent Record, Letters, July 24, 2016

This letter is in response to Matt Rosendale’s opinion piece whose title asks the question: “Is your health care better now?”

Mine is still good, Matt – I have Medicare! And, I think all Americans should have Medicare. Done right, Medicare for all would provide a net savings of nearly $1 trillion annually by eliminating private health insurance parasites that cause all sorts of added time, effort and expense for doctors, hospitals, clinics and pharmacies, not to mention the HUGE overheads these companies carry.

Below are daily compensation figures for health insurance CEOs in 2013: overhead costs that Medicare is not burdened with.

Aetna – $90,029
WellPoint (now Anthem) – $49,853
Centene – $42,560
Cigna – $39,589
United Health – $35,484

Remember, Matt, these are daily compensation figures. Can you justify what they could possibly do to actually earn that money? Their job is to minimize losses. Do you know what insurance companies call losses? Losses are “claims” that insurers often try to avoid paying because claims cut into their profit margins. Think private health insurers are doing us a favor, Matt? Think again!

Bob Balhiser resides in Helena.

http://helenair.com/news/opinion/readers_alley/medicare-for-all-is-the-way-to-go/article_8a305a26-9c47-5efa-b15b-8bd589fddaee.html

Medical Economics: Obamacare receives a big, fat ‘F’ from physicians

By Joanna Haugen, Jordan Rosenfeld
Medical Economics, July 25, 2016

The Affordable Care Act (ACA) has been a lightning rod for criticism from various healthcare stakeholders, including physicians, since the law’s passage six years ago.

With the upcoming presidential election likely to alter the landscape of “Obamacare”—from simple tweaks by Democrats to outright attempted repeal by Republicans—Medical Economics asked healthcare policy experts and our readers to debate the law’s effect on U.S. physicians.

Our editorial staff, with the assistance of our physician advisers, selected eight provisions and consequences (both intentional and unintentional) stemming from the law.  Policy analysts provided their thoughts on how Obamacare has shaped the last six years. Then we  asked physicians from our editorial advisory board, our 200-member Reader Reactor Panel (comprised of physician readers nationwide who help direct our content), and our e-newsletter subscribers to grade the various elements based on their own experiences.  Each physician ranked each element in terms of how it assisted their day-to-day work as physicians on a score from 0 (not at all) to 10 (extremely helpful). The average of all respondents was used to derive the letter grade. Physicians also offered short justifications for their ranking.

Medicare bonus for primary care physicians
Grade: 33 = F

Medicaid-Medicare parity
Grade: 34 = F

Increased coverage through healthcare insurance exchanges
Grade: 35 = F

Narrow networks
Grade: 29 = F

Accountable care organizations
Grade: 29 = F

Outcomes-based reimbursement
Grade: 28 = F

Physician ratings via the Physician Compare website
Grade: 26 = F

Expansion of health IT
Grade: 31 = F

http://medicaleconomics.modernmedicine.com/medical-economics/news/obamacare-receives-big-fat-f-physicians

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Comment:

By Don McCanne, M.D.

Celebrations of the success of the Affordable Care Act have to be tempered by the knowledge that it leaves too many uninsured, that health care is still not affordable for far too many, and that the benefits of tighter insurance regulation were largely offset by the insurance design changes of excessive cost sharing and restrictive narrow networks. One other goal was to improve payment systems so that patients would receive greater quality at lower costs. So what do physicians think about the implementation and effectiveness of the design changes in the payment system?

In this survey, physicians gave a grade of F to all eight of the design features evaluated. In trying to improve payment systems, the legislators and bureaucrats have certainly botched things up. Not only have they failed to achieve any improvement, they have made things worse. Not only that, they have compounded physician burnout, now affecting over half of all physicians. Having an unhappy physician negatively impacts patient care.

Much blame can be attributed to the focus of the policy community and the MBAs that guide them. Medicine is about taking care of patients, but the policy community approaches it as a business that can be improved by incentives.

Would a single payer system fix this? It would provide a more equitable, efficient and effective financing system, but it would still be subject the whims of legislators and bureaucrats who do not seem to appreciate the sanctity of the physician-patient relationship. Once we have in place a national single payer system, our work is not done.