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U.S. Health Care Could Be More Like Denmark’s

By Steffie Woolhandler
Room for Debate, The New York Times, October 20, 2015

In last week’s Democratic debate, when Bernie Sanders cited Denmark as a role model for the United States to follow, Hillary Clinton was quick to point out that “we are not Denmark.”

The United States isn’t Denmark, but it can, like Scandinavia, implement changes to its health care system that save money, cover everyone and help us live longer.

In the 1950s, U.S. health statistics were world class: infant mortality rate among the lowest, life expectancy among the highest, and health costs about average. One by one, other nations — not just Denmark and Sweden, but Australia, Britain, Canada and Taiwan, to name a few — adopted national health programs. By the end of the 20th century, the U.S. was the lone hold out for private, for-profit health insurance, and its health statistics lagged behind dozens of countries. Meanwhile, costs soared to twice the average in other wealthy nations.

For Americans, national health insurance would mean comprehensive coverage, a free choice from a smorgasbord of any doctor or hospital and lower costs. Other countries have seen huge savings by evicting private insurers and the reams of expensive paperwork they inflict on doctors and hospitals. Aetna keeps 19 cents of every premium dollar for overhead and profit, leaving only 81 cents for care. And U.S. hospitals devote 25.3 percent of total revenue to administration, reflecting the high cost of collecting patient copayments and deductibles, and fighting with insurers.

Obamacare will direct an additional $850 billion in public funds to private insurers, and boost insurance overhead by $273.6 billion. Yet it will leave 26 million uninsured and similar numbers with such skimpy coverage that a major illness would bankrupt them. Most Americans have coverage that limits their choice of doctors and hospitals, and inflicts steep financial penalties when they stray “out-of-network” by accident or necessity.

In contrast, insurance overhead in single-payer programs (and fee-for-service Medicare) takes only 1 percent to 2 percent. In these programs, hospitals don’t need to bill each patient; they’re paid a lump sum budget, the way we fund fire departments, sharply cutting hospital administrative costs. Moving to a single-payer system would save about $400 billion annually on paperwork and administration — enough to ensure every American top coverage.

Messages like “We are not Denmark” insist we put blinders on and refuse to learn from others. That reasoning would have us ignore innovations like vaccination or CT scanners (British inventions), echocardiograms (a Swedish one) or cardiac stents (first used in France). A single-payer reform — like the one advocated by the 20,000 members of Physicians for a National Health Program — could save thousands of American lives each year. That’s as American as apple pie.

http://www.nytimes.com/roomfordebate/2015/10/20/can-the-us-become-denmark/us-health-care-could-be-more-like-denmarks

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Comment:

By Don McCanne, MD

We need to be sure that the fundamentals do not get lost in political rhetoric. The fact is that health system performance in the United States has lagged behind many other nations while our costs have soared to twice the average of wealthier nations. Bernie Sanders says that we can learn from Denmark (meaningful rhetoric). Hillary Clinton says that we are not Denmark, but we are the United States of America (dismissive rhetoric). Steffie Woolhandler says that saving lives through single-payer reform would be as American as apple pie (Yankee Doodle Dandy rhetoric).

So how about a little Yankee Doodle Dandy? James Cagney or Mickey Rooney – you choose: https://www.youtube.com/watch?v=StDpLge_ITM

Where else but in America could we choose which Yankee Doodle Dandy we prefer? And we can even choose health care for all if we were willing to give up our uniquely American health care system, as dysfunctional as it is. But that would mean adopting policies of health care justice already in use in other nations. Apple pie anyone?

PNHP does not take any position on candidates or political parties. Rather we support the policy of health care justice for all through single payer reform.

The Efficiency Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits

By Mark Duggan, Jonathan Gruber, Boris Vabson
The National Bureau of Economic Research, October 2015
NBER Working Paper No. 21650

Abstract

There is considerable controversy over the use of private insurers to deliver public health insurance benefits. We investigate the efficiency consequences of patients enrolling in Medicare Advantage (MA), private managed care organizations that compete with the traditional fee-for-service Medicare program. We use exogenous shocks to MA enrollment arising from plan exits from New York counties in the early 2000s, and utilize unique data that links hospital inpatient utilization to Medicare enrollment records. We find that individuals who were forced out of MA plans due to plan exit saw very large increases in hospital utilization. These increases appear to arise through plans both limiting access to nearby hospitals and reducing elective admissions, yet they are not associated with any measurable reduction in hospital quality or patient mortality.

From the introduction

The growing privatization of Medicare has been motivated by potential efficiencies from the Medicare management provided by private insurance companies. This is a particularly interesting topic in the context of Medicare Advantage, where private insurers provide coverage side-by-side with the government system.

… we find that there is a substantial rise in inpatient hospital utilization after MA plan exit. We estimate that previous MA enrollees see their utilization of the hospital rise by about 60%, when moving back to the traditional FFS plan. This estimate is comparable to the corresponding estimate of 65% from the RAND Health Insurance Experiment of the 1970s, which randomly assigned patients to managed care plans. The finding is robust to specification checks and appears to be long-lasting, so that it does not simply reflect pent-up demand that caused a temporary increase in utilization. The increases appear across all types of hospitalizations, but are particularly pronounced for elective visits. We also find substantial reductions in the average distance traveled to the hospital when patients exogenously switch from MA to FFS following plan exit. This suggests that the mechanisms for lowering costs under MA plans are both reduced hospital availability and greater restrictions on elective care.

From 3.3 Quality Impacts

To measure the quality of care at the hospital level, we turn to two sets of standardized measures from the CMS Hospital Quality Initiative database. The first set of metrics consists of process measures…

Using these measures, we do not see any consistent evidence of moving to higher quality hospitals, as seven of the nine measures are insignificant; further, one of the significant coefficients suggest higher quality (improved process for pneumonia) while the other suggests lower quality (worse outcomes for heart failure). Moreover, all of the coefficients are very small relative to mean values and precisely estimated, ruling out meaningful impacts.

We next turn to more direct process measures of outcomes created from our discharge data. One such measure, the 60-day hospital readmission rate… Another measure, preventable hospitalizations…

When MA plans exit, we find that both measures rise – that is, plan exit does not appear to be translating to more efficient care on net that is lowering readmissions or preventable admissions. The odds of readmission, conditional on an initial hospitalization, rises by about 15% among those initially in MA plans after plans exit. Meanwhile, the odds of a given hospitalization being preventable rises by 10%. By these measures, therefore, quality is falling for those initially enrolled in MA following the exit of MA plans.

Finally, we examine the impact on mortality… Both estimates are in fact positive, suggesting that plan exit leads to higher mortality, although neither estimate is significant.

The results from this section appear to indicate that there is a sizeable inefficiency in transitioning elders out of Medicare Advantage into the FFS program. Utilization of, and spending in, the hospital rises substantially, with no consistent indication of quality improvement (although travel to the hospital is greatly reduced). If anything, we find a reduction in quality, with readmissions, preventable hospitalizations and mortality (the last insignificantly) increasing after the shift out of managed care plans.

From the Conclusions

The role of private players in public insurance is the subject of a central debate in U.S. public policy. This debate is perhaps most heated around the role of Medicare Advantage plans. Advocates claim that the higher efficiency of such private options should push the government towards expanding the role of managed care plans. Opponents point to the sizeable positive selection faced by these plans (and their high baseline reimbursement, even independent of selection) to claim that they are over-reimbursed and are costing, rather than saving, government dollars.

Central to this debate is the question of whether MA plans actually deliver care more efficiently. Our paper contributes to the literature on this point in two important ways. First, we make use of data that tracks the treatment of both traditional Medicare (FFS) recipients and MA enrollees. Second, we make use of exogenous variation in MA availability, arising from county-level exit of MA plans. Using these empirical advantages, we document sizeable increases in hospital inpatient utilization along many dimensions when MA plans exit a county. Hospital inpatient utilization rises by 60%, and total charges by more than 50%. We find that MA insurers may achieve this by reducing the use of the hospital for elective and emergency cases, and also by increasing the distance that a patient needs to travel to the nearest hospital. Moreover, we find no evidence that this is accompanied by reduced quality of care for Medicare patients when enrolled in MA; quality indicators, if anything, deteriorate when MA plans exit.

… our results suggest that there are large efficiencies from ensuring that at least some managed care option is available to enrollees. This could occur through a premium support system of the type discussed in CBO (2013), which would set up competitive exchanges through which private plans could compete with the government option. Alternatively, the government could establish a monopoly MA provider for each area, and auction off the number of MA slots for the area, in that way minimizing the reimbursement of MA plans while ensuring MA plan availability.

http://www.nber.org/papers/w21650

Comment:

By Don McCanne, M.D.

We will likely hear more about this study. The reports will certainly say that private Medicare Advantage (MA) plans provide greater efficiency and lower costs by reducing unnecessary hospitalizations and elective care. We may even hear that they do this while increasing quality and reducing mortality. With a more careful analysis of this article and with additional thought input, these conclusions do not seem to be warranted.

This study was of hospital utilization in regions where the sole MA plan picked up stakes and left the region. Why would a plan pull out of a region? Simply because the business prospects did not seem favorable (code language for not enough profits).

These plans were successful in reducing access to hospitals, partly by using hospitals that were a greater distance away, requiring greater travel for patients. They were also able to use managed care techniques (prior authorization, etc.) in a manner that reduced elective and emergency admissions. Even though the MA plans were paid more than what was being spent on traditional fee-for-service (FFS) Medicare patients, it still wasn’t enough, and they bailed out.

After the plans left, the patients were hospitalized at a greater rate, and costs went up. The authors of this study suggest that these hospitalizations occurred because the FFS Medicare program is not as efficient in preventing them as were the private MA plans. But couldn’t this be explained by the business success of MA plans in preventing patients from having care that was appropriate? Isn’t it more likely that chronic conditions – ubiquitous in this group – became worse and thus more expensive through the neglect imposed by the MA plans?

The authors try to dismiss this possibility by looking at measurements of quality and mortality. They report that “quality indicators, if anything, deteriorate when MA plans exit.” Yet from the CMS Hospital Quality Initiative database, they report, “we do not see any consistent evidence of moving to higher quality hospitals, as seven of the nine measures are insignificant; further, one of the significant coefficients suggest higher quality (improved process for pneumonia) while the other suggests lower quality (worse outcomes for heart failure).” By these measures, there was no quality difference.

On the other hand, they report that hospital readmissions and preventable hospitalizations both rose after the MA plans exited. They interpret this as evidence of lower quality in the traditional FFS Medicare program. But every clinician knows that readmissions and preventable hospitalizations represent a sicker patient population. Rather than being evidence of poorer quality it is much more likely that this is further confirmation of the well established adage that Medicare Advantage patients go into the plan healthy and come out sick.

They use mortality estimates that are not statistically significant to suggest that plan exit leads to higher mortality. Even if the data were powered to show an increase in mortality, is it not true that sicker populations have a higher mortality rate?

This study has the same flaws as many other studies being produced today that are supportive of the private insurance industry. They look at only a minuscule portion of potential outcomes of health care. They show that the differences of what they did measure are almost or sometimes even completely negligible. Then when drawing conclusions between the choices of whether additional care is inefficient or is beneficial, they choose the conclusion that supports the private insurance industry, even if it is a non sequitur.

In their conclusion, they suggest that the “large efficiencies” from the managed care option warrant consideration of the premium support proposal that would privatize Medicare (convert it into a market of private plans). A better interpretation of their data, based on what is best for the patient, rather shows us that we should end the experiment with private Medicare Advantage plans since they prevent patients from receiving care that they should have.

How Many Individuals might Have Marketplace Coverage at the End of 2016?

Department of Health and Human Services, October 15, 2015

Last year, the Secretary of Health and Human Services projected that 9.1 million consumers would be enrolled through the Marketplaces for individual coverage at the end of 2015. We expect that figure to be the starting point for the third open enrollment period.

We project that in 2016 the year-end effectuated enrollment will be 9.4 to 11.4 million. ASPE’s analysis implies that most of the new Marketplace enrollment for 2016 is likely to come from the ranks of the uninsured, with more than three previously uninsured new enrollees for each one new enrollee who previously had off-Marketplace individual coverage.

http://aspe.hhs.gov/basic-report/how-many-individuals-might-have-marketplace-coverage-at-the-end-of-2016

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Health Insurance Marketplace: Uninsured Populations Eligible to Enroll for 2016

By Kenneth Finegold, Kelsey Avery, Bula Ghose, and Caryn Marks
Department of Health and Human Services, October 15, 2015

People who are uninsured often experience financial barriers to coverage and may place other priorities over obtaining health insurance.

• Only 26 percent of those who are uninsured say that they are doing well financially. Nearly 80 percent have less than $1,000 in savings and about half have less than $100 in savings.
• More than half of people who are uninsured feel financially insecure and half had difficulty affording basic necessities such as food or housing in the past year.
• When asked what they would do if they were to become better off financially, many uninsured people say they would pay down their debt, put money into savings, or make home or car repairs before buying health insurance.

http://aspe.hhs.gov/sites/default/files/pdf/118606/OE3%20QHP-Eligible%20Uninsured_FINAL_v42%20clean.pdf

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Is Obama’s Health Overhaul Losing Steam?

By Ricardo Alonso-Zaldivar
Associated Press, October 15, 2015

The health care law’s historic gains in coverage may be leveling off: The Obama administration announced Thursday it expects only a slight overall increase in enrollment next year.

(Health and Human Services Secretary Sylvia M. Burwell) said it’s getting harder to sign up the remaining uninsured. They tend to be young, managing very tight household budgets, and often unaware they can qualify for taxpayer-financed assistance with their premiums.

Some people who sign up for a plan don’t follow through and pay their first month’s premiums. Others drop out because they can’t afford even their subsidized premiums.

A new research paper from the administration finds that nearly 60 percent of the uninsured were not aware or did not understand that subsidies are available to help with their premiums. Half had difficulty affording basic necessities. And many have other financial priorities – such as paying down debt or making car repairs – before buying health insurance.

Getting and keeping coverage under Obama’s law can be frustrating, especially when it comes to documenting eligibility for benefits. Insurance counselors say they are seeing many people whose subsidies were completely eliminated because of income reporting problems.

http://hosted.ap.org/dynamic/stories/U/US_HEALTH_OVERHAUL_SIGN_UPS

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Comment:

By Don McCanne, MD

Out of a population of about 322 million, 32 million US residents remain uninsured. Because of the complex eligibility requirements for various insurance programs under the Affordable Care Act, there are many reasons that so many remain uninsured. Regardless, this latest data from HHS shows that the success in reducing the numbers who are uninsured is leveling off, and one of the most important reasons is that the Affordable Care Act did not make health insurance affordable for far too many of us.

Four-fifths of the uninsured have less than $1,000 in savings. Half have difficulty affording food or housing. Even if they had more money, many would feel obligated to use it to pay down debt, or to repair their homes, or to repair their automobiles that provide them transportation for employment. They still wouldn’t have enough left to purchase health insurance.

Yet when these people turn 65, they can afford Medicare. The program is automatically funded, primarily through the tax system.

If we improved Medicare, funded it completely through progressive taxes, and then provided it to everyone, not only would it be affordable for all of us, none of us would ever have to make a decision on whether our health care dollars needed to be used for food, housing or any other essentials. Medicare would automatically always be there for all of us.

Covering the Remaining Uninsured: Not Just a Red-State Issue

By Drew Altman
The Wall Street Journal, October 14, 2015

About 32 million people in the U.S. remained uninsured as of early 2015, a Kaiser Family Foundation analysis of federal survey data has found, with about half of them eligible for Medicaid or subsidies under the Affordable Care Act. With the high-profile resistance in some states to Medicaid expansion and the ACA generally, you may think those places are the main obstacle to covering more of the uninsured. But the uninsured remain a problem in both red and blue states.

About half of the remaining uninsured, 16 million people, are in mostly blue states that have expanded Medicaid. The other 16 million are in states that have not expanded Medicaid and where there is strong anti-ACA sentiment. Consider the examples of California and Texas, the states with the largest populations of remaining uninsured, to understand the different challenges.

Remaining uninsured as of 2015:

  California  3,845,000

  Texas       4,425,000

Eligible for Medicaid:

  California  1,428,000

  Texas         493,000

Eligible for tax credit:

  California    623,000

  Texas       1,035,000

Ineligible for financial assistance due to income, employer offer, or citizenship status:

  California  1,795,000

  Texas       2,132,000

In Medicaid “coverage gap”:

  California  (no gap)

  Texas       766,000

Some elements of the remaining uninsured problem are uniquely a red state issue. The most prominent of these are 3.1 million people—or one in 10 of the uninsured—who fall in the “coverage gap” in 20 red states that have chosen not to expand Medicaid coverage. But as the examples of Texas and California demonstrate, progress on covering the remaining 32 million uninsured will depend on action in both red and blue states.

http://blogs.wsj.com/washwire/2015/10/14/covering-the-remaining-uninsured-not-just-a-red-state-issue/

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Comment:

By Don McCanne, MD

Texas should be ashamed. They have the largest number of uninsured individuals in the nation, and yet they have failed to take advantage of the provisions in the Affordable Care Act (ACA) that would grant the state 90 percent of the costs of Medicaid expansion, plus they have failed to provide adequate outreach efforts to enroll individuals in exchange plans where they would be eligible for federal premium tax credits and cost-sharing subsidies. In contrast, California has been aggressive in trying to get as many individuals as possible covered by health insurance of one type or another. How do the results in California (a blue state) compare to those in Texas (a red state)?

In California, 10 percent remain uninsured, whereas in Texas, 16 percent lack insurance. California’s efforts have paid off… for some. But why should California, with its strong support of ACA, still have 3,845,000 people without any insurance? It’s very simple. ACA is a highly flawed model of reform.

Models which build on existing, fragmented, multi-payer systems are the most expensive models of reform, yet they fall short of many of the goals, including universality. Yet the least expensive comprehensive models of reform achieve the goals of universality, efficiency, affordability, equity, improved access, and better health care outcomes. These are the single payer national health insurance and national health service models.

Many suggest that we should celebrate our gains and move forward with incremental patches to the system. There are two problems with this approach. Incremental patches will add significant additional costs to the system, and patches cannot possibly repair the fundamental structural flaws in the financing system. Thus, under ACA, we will always fall short of the goals.

There is a better way. Fix Medicare and provide it to everyone. California would then achieve its goal of reducing its uninsured to zero. Texas would too, even if its politicians were opposed. One thing for sure, once everyone in Texas did have Medicare, the people would be overwhelmingly supportive.

What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics

By Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel, Jonathan T. Kolstad
The National Bureau of Economic Research, NBER Working Paper No. 21632, October 2015

Abstract

Measuring consumer responsiveness to medical care prices is a central issue in health economics and a key ingredient in the optimal design and regulation of health insurance markets. We study consumer responsiveness to medical care prices, leveraging a natural experiment that occurred at a large self-insured firm which forced all of its employees to switch from an insurance plan that provided free health care to a non-linear, high deductible plan. The switch caused a spending reduction between 11.79%-13.80% of total firm-wide health spending ($100 million lower spending per year). We decompose this spending reduction into the components of (i) consumer price shopping (ii) quantity reductions (iii) quantity substitutions, finding that spending reductions are entirely due to outright reductions in quantity. We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services). We then leverage the unique data environment to study how consumers respond to the complex structure of the high-deductible contract. We find that consumers respond heavily to spot prices at the time of care, and reduce their spending by 42% when under the deductible, conditional on their true expected end-of-year shadow price and their prior year end-of-year marginal price. In the first-year post plan change, 90% of all spending reductions occur in months that consumers began under the deductible, with 49% of all reductions coming for the ex ante sickest half of consumers under the deductible, despite the fact that these consumers have quite low shadow prices. There is no evidence of learning to respond to the true shadow price in the second year post-switch.

From the Conclusion

In this paper we studied the health care decisions and spending behavior for a large population of employees (and their dependents) who were forced into high-deductible insurance after years of having access to completely free health care.

A meaningful portion of all spending reductions came from well-off consumers who were predictably sick, implying that the true marginal prices they faced under high-deductible care were actually quite low.

We found that almost all spending reductions during the year occurred while consumers were still under the deductible, despite the fact that the majority of incremental spending occurs for consumers that have already passed the deductible. Moreover, about 30% of all spending reductions come from consumers in months when they (i) began that month under the deductible but (ii) were predictably sick, in the sense that they had very low shadow prices for health care.

http://www.nber.org/papers/w21632

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This study is forcing economists to rethink high-deductible health insurance

By Sarah Kliff
Vox, October 14, 2015

Economists Zarek Brot-Goldberg, Amitabh Chandra, Benjamin Handel, and Jonathan Kolstad studied a firm that, in 2013, shifted tens of thousands of workers into high-deductible insurance plans. This was a perfect moment to look at how their patterns of care changed — whether they did, in fact, use the new shopping tools their employer gave them to compare prices.

Turns out they didn’t. The new paper shows that when faced with a higher deductible, patients did not price shop for a better deal. Instead, both healthy and sick patients simply used way less health care.

This raises a scary possibility: Perhaps higher deductibles don’t lead to smarter shoppers but rather, in the long run, sicker patients.

Kolstad and his co-authors looked at the case of a large, unnamed company that shifted more than 75,000 workers and their dependents from a plan with no deductible to one with a $3,750 deductible.

Workers’ health spending dropped, and did so quickly.

In one sense, then, the high-deductible plan did accomplish a key goal: lower health spending. But when the researchers looked at why spending dropped, they found it had nothing to do with smarter shopping. The average price of a doctor visit wasn’t dropping.

Instead, under the high-deductible plan, workers just went to the doctor way less. The paper finds that “spending reductions are entirely due to outright reductions in quantity.” Workers did use less “potentially wasteful care,” like imaging services, but they also cut back on “potentially valuable care,” like preventive visits.

Even more striking: The sickest workers were those who were most likely to reduce their use of care while still under the deductible — even though this is the group that needs lots of care and is most likely to blow through the deductible by the end of the year. Once these sick workers actually exceeded their deductible, though, use of medical services rebounded.

“This is a difficult task for consumers to take on, and we now have very detailed data to show that’s the case,” (Kolstad) says. “When we’ve thought about the economics, we’ve generally thought this type of price change wouldn’t be problematic, that sicker people would just spend their deductible and get the care they need. This research suggests that’s not the case.”

For Kolstad, this makes him skeptical of “demand-side” interventions in health care — those that rely on consumer demands for lower health prices to ultimately lead to less medical spending.

http://www.vox.com/2015/10/14/9528441/high-deductible-insurance-kolstad

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Comment:

By Don McCanne, MD

This is an important study. It shows that sick patients will not shop prices but rather they will forgo beneficial health care services while they are still under the deductible for their plan.

This confirms that deductibles are an inappropriate tool for reducing health care spending, since health policies should be designed to improve care rather than impair it. This puts the entire concept of consumer-directed health care under question as a means of slowing health care spending. In contrast, single payer policies control spending while benefiting patients.

This study may seem familiar to regular readers. That is because it was covered in our June 15, 2015 Quote of the Day. It was based on an article in “The Conversation” by Ben Handel, one of the co-authors of this study.

What is new is that NBER has now released the full study, and reports of it are appearing in the media. It is a concept well worth repeating. Excerpts of the Vox article by Sarah Kliff are included above in that her description is quite clear, avoiding the technical language of economists and policy wonks.

Quote of the Day, June 15, 2015: https://www.pnhp.org/news/2015/june/deductibles-do-not-foster-price-shopping

Backgrounder: Health Care Plan

Jeb!, October 13, 2015

ObamaCare must be repealed and replaced.  To position American health care to make the most of the potential of transformational innovation, policy solutions should go even further to stop the damage Washington central planners have caused for decades.  Solutions should ensure that health care is centered on individuals, the consumers, and that the health care system benefits from the innovation that will make it more accessible, convenient, personal and affordable.

Governor Bush’s reforms will get Washington out of the way and empower patients with more choices, security and control over their health care decisions.  These reforms will not only lower the costs of care, they will substantially lower federal spending.  They will enable a modern system that is convenient, affordable, accessible and results-oriented.

https://jeb2016.com/backgrounder-health-care-plan/

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Jeb’s Obamacare Repeal-And-Replace Plan Is More Repeal Than Replace

By Jonathan Cohn
The Huffington Post, October 13, 2015

The Bush plan calls for a familiar mix of conservative ideas on health care, according to campaign documents obtained by The Huffington Post. It would eliminate the coverage scheme of “Obamacare” — the tax credits, regulations on insurance, and individual mandate that have led to a historic reduction in the number of uninsured Americans.

In its place, Bush would introduce a new kind of financial assistance for people buying insurance on their own — specifically, tax credits pegged to age but not to income, and not designed to guarantee access to the same level of coverage as Obama’s health care program does.

The Bush plan also would give control of Medicaid, the insurance program for low-income Americans, over to the states.

What would this all mean in practice? It’s impossible to say with any precision, at least without more details about the dollar amounts involved.

Still, the outlines of Bush plan look a lot like like some other plans now in circulation on the right, like the so-called 2017 Project Plan and a proposal from Rep. Tom Price (R-Ga.). These plans envision less government spending and regulation, but would likely result in some combination of fewer people with insurance and less financial protection for people who have coverage. Experts contacted by The Huffington Post said they expected Bush’s plan, if enacted, would play out in a similar way.

The Bush plan would weaken (the Affordable Care Act) standards on insurance: People buying coverage would have more freedom to buy less-generous policies that cover only catastrophic costs. And the tax credits that Bush would provide, by design, guarantee access only to these catastrophic policies.

That’s cheaper than subsidizing the “silver” plans that the Affordable Care Act treats as its standard — a result conservatives would certainly cheer. But without ACA levels of assistance, poorer people who want more comprehensive coverage probably wouldn’t have the money to buy it.  Once they got sick, they’d be stuck with more punishing out-of-pocket expenses.  And because these are people with lower incomes, they’d have less money to cover those costs.

While the campaign has not specified how much money the states would get under Bush’s scheme (for Medicaid), conservative plans to hand control over to the states generally call for less spending on the program. Medicaid is already under-funded. If states had even less money with which to manage it, they’d almost surely have to restrict eligibility or cover fewer services — either of which would mean less financial protection, in this case for the very poor.

One more key footnote to the Bush plan is its protection for people with pre-existing conditions, which is different from the guarantee in the Affordable Care Act. The Bush plan calls for guaranteeing access, but only for people with “continuous” coverage. That means people whose insurance has lapsed — say, because they lost a job and couldn’t afford premiums for a few months — could be subject to denial because of their current medical problems.

“There seems to be an emerging consensus among Republican candidates for how to approach health care, beyond repealing Obamacare,” Larry Levitt, senior vice president at the Henry J. Kaiser Family Foundation, said on Monday night. “It centers around more limited protections for people with pre-existing conditions, health insurance tax subsidies that don’t vary with income, scaling back the tax subsidy for employer-based health benefits, and capping Medicaid. It means less regulation, and also less direct help for lower income people with their health needs.”

http://www.huffingtonpost.com/entry/jeb-bush-obamacare_561c712ae4b0c5a1ce60569b

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Comment:

By Don McCanne, MD

Although Jeb Bush’s health reform proposal released today is lacking in detail, there is enough to know that he would reduce government spending and government regulations, leaving patients even more exposed to impaired access and financial hardship. Those with a basic understanding of health policy can wade through the deceptive political rhetoric of Bush’s proposal to see how harmful it would be.

Financial health shaky at many Obamacare insurance co-ops

By Amy Goldstein
The Washington Post, October 10, 2015

A new breed of health insurers created under the Affordable Care Act — representing one of the government’s most innovative attempts in decades to foster better coverage — is on shaky financial ground in many of the 23 states where the plans began.

The nonprofit health plans were envisioned as a consumer-friendly counterweight to for-profit insurers, a way to provide more competition, greater consumer choice and better coverage in markets typically dominated by big commercial carriers. The government allocated billions of dollars in loans for them.

But in recent months, nearly half of the un­or­tho­dox start-ups have been told by federal regulators that their finances, enrollment or business model need to shape up.

The Centers for Medicare and Medicaid Services (CMS), which oversees the health-care law, recently sent warning letters to 11 of the “co-ops,” as they’re known. The agency placed them on “enhanced oversight” or required them to produce a plan of “corrective action,” or both, according to federal figures not previously made public. Several have been notified in the past two weeks.

Amid this increased monitoring, one co-op has folded, stranding its members, and four others are preparing to close in late December. They include the Nevada Health Co-Op, which was initially among a top tier that federal officials had regarded as best poised to succeed.

The birth and quick death of these co-ops illustrate the program’s fragility. When the ACA was enacted in 2010, the Consumer Operated and Oriented Plans were a compromise to appease congressional liberals who had wanted a new public insurance program for Americans unable to get health benefits at work.

Yet the co-ops’ struggle of late also reflects regulators’ shifting posture. In moves that could affect coverage for hundreds of thousands of people, CMS has gone from nurturing to getting tough.

The first plan to collapse served people in Iowa and Nebraska; it folded in February after being taken over by state insurance regulators. In July, Louisiana’s co-op revealed it was shutting down. Then late last month in New York state, the nation’s largest co-op toppled, startling insurance industry and health policy analysts who thought it was too big for the government to let fail.

The latest announcement came Friday, when the Kentucky Health Cooperative, serving about 51,000 customers, said that it, too, will close Dec. 31 because of poor finances.

The co-op disappearances are disrupting coverage for nearly 400,000 customers across five states, according to the most recent publicly available enrollment figures.

The program has been under siege from the start, including from the insurance industry. Before the law’s passage, government grants to help them get going were switched to loans. None of that money could go for advertising — a wounding rule for new insurers that needed to attract customers. Moreover, the amount available was cut from $10 billion to $6 billion and then later, as part of the administration’s budget deals with congressional Republicans, to $2.4 billion. Federal health officials abandoned plans for a co-op in every state.

At the time, some health policy experts warned that the constraints would make it difficult for some co-ops to thrive.

In August, federal officials delayed another type of assistance intended to help cushion the risk of covering the previously uninsured. This temporary “risk corridor” money was cut last week to a small fraction of what many co-ops had been banking on. The Kentucky co-op blamed its demise on its cut — from an expected $77 million to less than $10 million.

https://www.washingtonpost.com/national/health-science/financial-health-shaky-at-many-obamacare-insurance-co-ops/2015/10/08/2ab8f3ec-6c66-11e5-9bfe-e59f5e244f92_story.html

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Comment:

By Don McCanne, MD

During the crafting of the Affordable Care Act (ACA), there was strong support for including the option of selecting a government-run insurance program in the insurance exchanges. This “public option” was first emasculated so that it would not be an effective competitor to the private insurance firms, and then it was totally eliminated from ACA by political chicanery. That led to support for including “Consumer Operated and Oriented Plans” (co-ops) – nonprofit insurers controlled by directors elected by the enrollees – as a substitute for the public option.

The private insurers were not through. Obviously they did not want competition from a nonprofit consumer-operated system that should have significantly lower expenses than do the private insurers. Insurers require capital – both for start-up expenses and for establishing reserves from which to pay claims. Although the original intent was to provide government grants to the co-ops, these were changed to government loans which the co-ops would have to pay back (not to mention that borrowing to fund reserves is a shell game – the net reserves are zero). Adding the burden of debt service onto the backs of these co-ops basically destroyed their competitive advantage, especially at a time that they were facing high start-up costs. Further, as an extra measure, the insurers had included in ACA a rule that prohibited the co-ops from advertising. Thus the insurers saw to it that the co-ops were placed at a competitive disadvantage.

And what help did the co-ops receive from the government? First the government cut way back on the funds that were made available as loans to satisfy capital requirements. When co-ops were successful in their enrollment efforts, the government did not make further loans available to satisfy increased reserve requirements (larger member rolls require greater reserves). Then the feds reneged on their requirement to pay the co-ops losses above the risk corridor (a form of reinsurance for excessive losses by the co-ops). Finally, the feds have become hard-nosed and have begun shutting down the co-ops because of failure to maintain adequate reserves. Surprise! How were they supposed to build reserves in a year with high start-up costs, high debt service, and increased reserve requirements because of greater than expected enrollment?

It is clear that HHS, from the beginning, has been in bed with the private insurers. This experience with the co-ops is not the only example of their effort to relieve the insurers of competition from government programs. They have been supporting the private Medicare Advantage (MA) plans through administrative manipulations that offset the required reductions in overpayments to these plans. Also, they are now greatly increasing Part B premiums for about one-third of Medicare beneficiaries, especially for those with high incomes – a measure bound to diminish support for the traditional Medicare program, chasing irked beneficiaries into the private MA plans.

This unfortunate outcome for the co-ops was not exactly unanticipated. It was inevitable based on the design features dictated by the private insurers (see our Quote of the Day of July 18, 2011). What is particularly sad is that our own government has not been a reliable partner with our citizens and their organizations. They have gotten into bed with the private insurers instead.

Single payer would fix this, but we would need new public administrators.