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Higher costs and lower quality in for-profit Medicare home health agencies

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Higher costs and lower quality in for-profit Medicare home health agencies

For-Profit Medicare Home Health Agencies’ Costs Appear Higher And Quality Appears Lower Compared To Nonprofit Agencies

By William Cabin, David U. Himmelstein, Michael L. Siman and Steffie Woolhandler
Health Affairs, August 2014

Abstract

For-profit, or proprietary, home health agencies were banned from Medicare until 1980 but now account for a majority of the agencies that provide such services. Medicare home health costs have grown rapidly since the implementation of a risk-based prospective payment system in 2000. We analyzed recent national cost and case-mix-adjusted quality outcomes to assess the performance of for-profit and nonprofit home health agencies. For-profit agencies scored slightly but significantly worse on overall quality indicators compared to nonprofits (77.18 percent and 78.71 percent, respectively). Notably, for-profit agencies scored lower than nonprofits on the clinically important outcome “avoidance of hospitalization” (71.64 percent versus 73.53 percent). Scores on quality measures were lowest in the South, where for-profits predominate. Compared to nonprofits, proprietary agencies also had higher costs per patient ($4,827 versus $4,075), were more profitable, and had higher administrative costs. Our findings raise concerns about whether for-profit agencies should continue to be eligible for Medicare payments and about the efficiency of Medicare’s market-oriented, risk-based home care payment system.

Conclusion

Medicare’s home health payment system aims to harness market-oriented incentives for efficiency. CMS seeks to upgrade care through a quality monitoring program that imposes substantial documentation burdens on clinicians. Our findings suggest that this program may not fully insulate patients from profit-incentivized quality compromises.

Meanwhile, the payment incentives have nourished the growth of proprietary agencies whose costs (and profits) are far higher than those of their nonprofit counterparts. Overall, it appears that proprietary home care agencies deliver slightly lower-quality care at a substantially higher cost, belying claims that for-profit incentives increase efficiency.

Further analysis of the impact of proprietary ownership (and other factors associated with poor home health agency performance) is sorely needed. If our findings are confirmed, Medicare should consider returning to the pre-1980 prohibition on investor ownership of home health agencies and simplifying the current complex payment system, which has neither contained costs nor maximized quality.

http://content.healthaffairs.org/content/33/8/1460.abstract

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H.R. 676, Expanded & Improved Medicare For All Act

Sponsored by Rep. John Conyers, Jr and 60 cosponsors

Sec. 103.

(a) Requirement To Be Public or Non-Profit.–

  1. In general.–No institution may be a participating provider unless it is a public or not-for-profit institution. Private physicians, private clinics, and private health care providers shall continue to operate as private entities, but are prohibited from being investor owned.
  2. Conversion of investor-owned providers.–For-profit providers of care opting to participate shall be required to convert to not-for-profit status.

https://beta.congress.gov/bill/113th-congress/house-bill/676

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Comment:

By Don McCanne, MD

Markets, competition, investor ownership, and profits are touted incessantly as being key to higher quality and lower costs in health care, even though Noble laureate Kenneth Arrow showed us decades ago why markets do not work in health care. Previously studies of hospitals, HMOs, nursing homes, hospices, and dialysis centers have show us that investor ownership is associated with lower quality and higher costs. We can now add Medicare home health agencies to that list wherein proprietary, for-profit investor ownership is detrimental.

H.R. 676, the Expanded & Improved Medicare For All Act, sponsored by Rep. John Conyers, Jr, is a single payer bill that includes provisions that would eliminate investor-owned, for-profit providers. Today’s article adds to the evidence as to why the leadership of Physicians for a National Health Program supports the elimination of passive investors and profit diversion from our health care system. Health systems must be designed to benefit patients, not market exploiters that sacrifice quality while draining resources from health care. The primary missions are different. One is to take care of patients and the other is to make money.

For-profit home health agencies blasted in new analysis

By Steven Ross Johnson
Modern Healthcare, Aug. 4, 2014

For-profit home health agencies had higher Medicare costs per patient while scoring lower in quality performance when compared with not-for-profit firms, a new analysis finds.

For-profit home healthcare agencies had an average cost-per patient of $4,827 compared with not-for-profit firms that had an average cost per patient of $4,075, according to the report, published Monday in the journal Health Affairs.

The report analyzed cost reports filed by more than 7,000 home health agencies to Medicare in 2010-2011 and data for 22 quality measures from Medicare’s Home Health Compare database.

Operating costs at for-profits were found to be 18% higher than at not-for-profit agencies. Administrative costs accounted for $476 more toward the overall cost per patient, while profits represented $463 in cost difference.

At the same time, the article concludes that for-profit home health agencies scored slightly lower than not-for-profits in meeting various care-quality measures, reaching each standard around 77% of the time compared with 78% for not-for-profit firms.

For-profit home health firms also were found to have a higher frequency of hospital readmissions among their patients at 28% compared with not-for-profits whose rate was 24%.

“Overall, it appears that proprietary (for-profit) home care agencies deliver slightly lower-quality care at a substantially higher cost, belying claims that for-profit incentives increase efficiency,” the analysis concluded.

The article goes further in its view of for-profit home health agencies by posing the question as to whether such firms should be allowed to continue receiving payments under Medicare, from which they were prohibited before 1980.

Medicare spent more than $18 billion on home healthcare services in 2011, serving around 3.4 million beneficiaries. according to a 2103 report by the Medicare Payment Advisory Commission (PDF).

There were more than 12,000 home health agencies in 2011, according to MedPAC, a number that rose by 62% compared with 7,528 agencies in 2000. Before that year, the industry was actually in the midst of a steady decline, with the number of home health companies falling by 31% between 1997 and 2000. The total number of agencies participating in Medicare has increased by an average of more than 500 a year since 2002, according to MedPAC.

Experts believe the growth of the for-profit industry, which makes up about 62% of all home-health care, came about after the implementation in 2000 of the currently used, risk-based prospective payment reimbursement model.

“Home health margins for freestanding HHAs (home health agencies) have been very high since the PPS (prospective payment) system) was implemented, as Medicare margins averaged 17.7% between 2001 and 2010,” according to the MedPac study.

“For-profit home care agencies are bleeding Medicare; they raise costs by $3.3 billion each year and lower the quality of care for frail seniors,” said Dr. Steffie Woolhandler, professor of public health at City University of New York’s Hunter College and senior author of the Health Affairs analysis. “Letting for-profit companies into Medicare was a huge mistake that Congress needs to correct.”

William Dombi, vice president for Law with the National Association for Home Care and Hospice, and industry group that represents 6,000 not-for-profit, for-profit, hospital-based, and government-controlled home health agencies across the U.S., disputed the validity of the analysis, stating the cost report data used to justify its findings was not reliable, adding that neither MedPAC nor CMS used that information in the manner it was used in the analysis.

“Its (the article’s) suggestion that Medicare should consider a return to a ban on proprietary home health agencies would deprive millions of Medicare beneficiaries access to home care as most cities, towns, and rural areas have few, if any, nonprofit agencies,” Dombi wrote in an email response. “We have found that the tax status of a home health agency is not the determinant of its quality of care or cost of operation.”

http://www.modernhealthcare.com/article/20140804/BLOG/308049994/&template=emailart&template=emailart

Safety Concerns About New Drugs Revealed

Study Compared Warning and Withdrawal Rates for Drugs Released Before and After the Drug Industry Increased Funding to the FDA to Expedite Drug Approvals

Press release
Public Citizen, Aug. 4, 2014

What’s safer: a newly approved drug or one that has been on the market much longer? Newer drugs have a one in three chance of acquiring a black box warning or being withdrawn for safety reasons within 25 years of their approval, according to a new study by researchers from Cambridge Health Alliance/Harvard Medical School, Boston Medical Center (BMC)/Boston University School of Medicine (BUSM), City University of New York School of Public Health, and Public Citizen. The study, published today in the August issue of Health Affairs, is the largest on this topic, encompassing all of the drugs approved by the U.S. Food and Drug Administration (FDA) over a 35-year period.

Black box warnings are part of the prescription medication label intended to alert consumers and health care professionals about important safety concerns, such as serious side effects or life-threatening risks. They are the most serious medication warnings required by the FDA.

The study compared warning and withdrawal rates for drugs released before and after 1992. The approval process for medications changed in 1992 with the Prescription Drug User Fee Act (PDUFA), which allowed the FDA to collect fees to expedite drug approvals. Congress passed PDUFA after heavy lobbying by the pharmaceutical industry, and PDUFA has been reauthorized by Congress several times. Since the law’s enactment, the average drug approval time for all drugs has fallen from 34 months to 16 months.

Very few of the 32 drugs withdrawn for safety reasons had clearly unique benefits at the time of approval, but all had unique risks that eventually led to their withdrawal.

The researchers discovered that drugs released after the PDUFA passed were more likely to be withdrawn or have a black box warning, with 26.7 percent of these drugs receiving such a warning compared to 21.2 percent in the pre-PDUFA drugs that underwent the longer approval process. Half of all black box warnings appeared after a drug had been on the market for 12 years, and safety withdrawals have occurred as late as 30 years after a drug’s initial release.

The authors suggest that the expedited process may have led to the release of drugs before they could be adequately evaluated for safety issues.

“The FDA is under constant pressure to rush new drugs through the pipeline to approval. In its hurry, the FDA is apparently failing to distinguish useful drugs from toxic ones, and more dangerous drugs are slipping through,” said study lead author Cassie Frank, MD, a physician at Cambridge Health Alliance and an instructor in medicine at Harvard Medical School. “By the time many drugs receive serious safety warnings, millions of Americans have already been exposed to their side effects, which can sometimes be fatal. As a doctor, I try to keep my patients safe by avoiding new drugs, when there are similar, older ones available.”

 “Our findings raise concern that the FDA is rushing its review of new drugs and allowing potentiallyunsafe medicines onto the market. As a primary care doctor, I’m wary of prescribing brand new drugs unless they’re really a breakthrough, since their full risks are often unknown. And patients should be wary too,” said senior author Karen Lasser, MD, MPH, associate professor of medicine at BUSM who practices  internal medicine at BMC.

“The FDA’s resources for reviewing drugs have increased dramatically since the passage of PDUFA, amounting to $760 million this fiscal year from pharmaceutical companies, about two-thirds of the agency’s drug review budget,” said study co-author Sidney Wolfe, MD, founder of Public Citizen’s Health Research Group and author of “Worst Pills, Best Pills.” “Since PDUFA, the review times for the drugs that are eventually banned have decreased enormously. From an average, prior to PDUFA, of about three years from receipt of the drug application to FDA approval, the interval has dropped sharply to about one year, following PDUFA. These shorter review times, combined with increased FDA authority to require further studies after approval – rather than settling safety issues before approval – possibly contributes to the increased rate of withdrawals and black box warnings.”

View the study.

“Era Of Faster FDA Drug Approval Has Also Seen Increased Black-Box Warnings And Market Withdrawals,” By Cassie Frank, David U. Himmelstein, Steffie Woolhandler, David H. Bor, Sidney M. Wolfe, Orlaith Heymann, Leah Zallman and Karen E. Lasser. Health Affairs, August 2014.

Adventures in ‘Prior Authorization’

By Danielle Ofri, M.D.
The New York Times, Aug. 3, 2014

“Dear Doctor,” the letter from the insurance company began. “We are writing to inform you that a prior authorization is required for the medication you prescribed.”

That’s usually where I stop reading. Thousands of these letters arrive daily in doctors’ offices across the country. They are attempts by insurance companies to prod doctors away from more expensive treatments and toward less expensive alternatives. To use the pricier option, you need to provide a compelling clinical reason.

In theory, this is a reasonable way to control costs by making it harder to prescribe costlier medications. In practice, it is a wasteful administrative nightmare, a cavalcade of recurring paperwork, lengthy phone calls and bureaucratic battles.

One study estimated that on average, prior authorization requests consumed about 20 hours a week per medical practice: one hour of the doctor’s time, nearly six hours of clerical time, plus 13 hours of nurses’ time. Other studies have suggested that prior authorizations could cost individual practices tens of thousands of dollars a year.

The letter in my hand concerned one of my patients, Mr. V., who suffers from stubborn hypertension. His chart is a veritable tome, documenting the years of effort it took to find the combination of four different blood-pressure medications that controls his hypertension without upsetting his diabetes, kidney disease and valvular heart disease or making his life miserable from side effects. We’ve been on stable ground for a few years now, a state neither of us takes for granted.

But Mr. V. had changed insurance companies, and now one of his medications required a prior authorization. The last thing I wanted was for him to be turned away at his pharmacy and have his blood pressure spiral out of control, so I called right away to sort things out.

Twenty minutes of phone tree later, I discovered that the problem was that I had exceeded a pill limit for one of his medications. Mr. V. needed to take 90 of those pills each month for the high dosage that his blood pressure required. I patiently explained this to the customer-care representative.

Equally patiently, she told me that 45 pills a month was the maximum allowed for this particular medication.

Three more phone trees and three more customer-care representatives later, my patience was flagging. Apparently a request for 90 pills was flummoxing the system. Representative No. 4 asked me to list all the blood-pressure medications that Mr. V. had been on in the past, including dates of initiation and relevant lab values, a request of epic proportions in his case.

The representative went down her checklist. “Would taking 45 pills per month instead of 90 pills adversely affect Mr. V.’s health?” she asked.

At first I thought she was joking. “Well,” I replied, “it would probably make his blood pressure shoot up in the second half of the month.”

She paused, then asked her next question with the encouraging uplift of suggestion. “Has Mr. V. ever tried 45 pills per month instead of 90 pills?”

Then I realized that she was not joking. “Are you out of your mind?” I hollered into the phone. “It’s taken years — years! — to find the right combination of meds to control his blood pressure without killing his kidneys or making him dizzy or nauseated or depressed or ruining his libido or running his potassium off the charts or breaking his bank account. Do you really think I’m going to randomly jiggle the dosages just for the hell of it?”

“A simple yes or no will suffice, doctor.”

Prior authorization clearly saves money for the insurance companies, at least up front. Many physicians simply give in, because the process is just too arduous.

But prior authorization ultimately ends up costing the health care system. The time and money that medical practices devote to prior authorizations could surely be put to better use for patient care. And it’s not even clear that insurance companies save money in the long run. One study examined the records of more than 4,000 patients with Type 2 diabetes who were prescribed medications requiring prior authorizations. Those who were denied the medications had higher overall medical costs during the following year; not getting the medications probably worsened their conditions.

I bit my tongue for the remainder of my conversation with the insurance company, holding back long enough to obtain the prior authorization that would allow Mr. V. the 90 pills he needed each month. I tried not to break the phone when I finally slammed down the receiver.

I’m all for controlling medical costs and trying to apply rational rules to our use of expensive medications and procedures. But in the current system, everything seems to be in service of the corporate side of medicine, not the patient. The clinical rationale and the actual patient — not to mention the doctors and nurses involved in the care — are at best secondary concerns.

In the end, we were able to keep Mr. V.’s blood pressure under control. My blood pressure, however, was a different story.

Danielle Ofri, an associate professor at New York University School of Medicine, is the author of “What Doctors Feel: How Emotions Affect the Practice of Medicine.”

http://www.nytimes.com/2014/08/04/opinion/adventures-in-prior-authorization.html

America needs improved Medicare for all

By Anne Scheetz, M.D.
State Journal-Register (Springfield, Ill.), Aug. 2, 2014

Forty-nine years ago, on July 30, 1965, President Lyndon Johnson signed Medicare and Medicaid into law.

Together, the two programs have made health care accessible to millions of people who otherwise couldn’t afford it. The legislation ended racial segregation in hospitals and decreased poverty among the elderly, thereby improving the financial security of generations of their families. And it strengthened local economies by creating health-care jobs that can’t be outsourced abroad.

Transformative though it was, this legislation left a great deal undone. Millions of Americans still do not have access to the care they need, millions more suffer financial devastation in paying for care, and our system is the most inefficient and bureaucratic in the industrialized world.

The contrast between the ways in which people become eligible for Medicare and Medicaid is instructive for the next transformation that American health care needs so urgently: expanded and improved Medicare for all.

For the majority of Medicare enrollees, eligibility is simple. You become eligible on your 65th birthday, and once enrolled you are in for life.

This simplicity allowed the Medicare rollout in the pre-computer era to be more than 90 percent complete within one year. It is also part of the reason for Medicare’s low overhead – less than 3 percent compared to more than 15 percent for private insurance.

Medicaid is another matter. It’s a program for the poor – or rather for certain classes of the poor – but it’s not even as simple as that.

“Poor” is not a single number such as 65. A person’s eligibility for Medicaid rests on a complex, document-based assessment of their income and other changeable factors; hence, the requirement that a Medicaid “redetermination” takes place yearly.

The 2012 Illinois Medicaid reform called the SMART Act resulted in a costly and time-consuming controversy over whether redeterminations should be done by state workers or be outsourced to a private company. The state workers’ union AFSCME ultimately prevailed over those who wanted to privatize this function. Meanwhile, an unknown number of enrollees erroneously lost their Medicaid cards – and therefore lost access to health care – until the mistakes were corrected.

Rarely did reports on the controversy note that every person needs health care throughout their lives, regardless of changes in their income. From that standpoint, every dollar spent on determining eligibility for any coverage (eligibility for subsidies on the Affordable Care Act’s insurance exchanges is also subject to yearly redetermination) is a dollar wasted on a useless function.

What we need then to get maximum value out of every health-care dollar is simplicity. That brings us back to Medicare.

Why shouldn’t everyone in the country, regardless of age, have an improved version of Medicare? It would pay for 100 percent of all necessary care and would be financed entirely by taxes based on ability to pay. (Almost all of us will pay less in taxes than we now pay in premiums plus out-of-pocket costs.) You’d choose your own doctor, dentist, hospital, pharmacy – every provider – and no longer be locked into a restrictive network.

By eliminating useless bureaucracy, we would take better care of everybody and still save money. That’s a description of Medicare for all, and it really is that simple – if we have the will to do it.

Dr. Anne Scheetz is a founding member of the Illinois Single-Payer Coalition and a leader of the Illinois chapter of Physicians for a National Health Program. She lives in Chicago.

http://www.sj-r.com/article/20140802/Opinion/140809884#ixzz39KzJWDLc

Now just try to make the plans work

Newly Insured, Many Now Face Learning Curve

By Abby Goodnough
The New York Times, August 2, 2014

Advocates of the Affordable Care Act, focused until now on persuading people to buy health insurance, have moved to a crucial new phase: making sure the eight million Americans who did so understand their often complicated policies and use them properly.

The political stakes are high, as support for the health care law will hinge at least partly on whether people have good experiences with their new coverage.

Many people who signed up for private coverage through the new marketplaces had never had health insurance, and even the basics — like what a premium is and why getting a primary care doctor is better than relying on the emergency room — are beyond their experience. Others have a sense of how insurance works but find the details of the marketplace plans confusing, especially if they signed up without the help of someone who understood them.

Insurers, too, are trying to help ease their new members’ confusion. Independence Blue Cross, which enrolled 165,000 people in its marketplace plans, has representatives traveling the Philadelphia region this summer in a tractor-trailer, the Independence Express, and offering educational seminars. Independence also has tried to reach all of the new members by phone to welcome them and “make sure they understand what they bought,” said Paula Sunshine, the company’s vice president of consumer sales and marketing.

The company knew going in that the learning curve would be steep. It held focus groups last year with nearly 2,000 people and found, for example, that virtually none knew what coinsurance was.

In one sign of widespread confusion, a recent Kaiser Family Foundation survey of programs that helped people apply for marketplace coverage found that 90 percent had already been re-contacted by consumers with post-enrollment questions.

http://www.nytimes.com/2014/08/03/us/newly-insured-by-health-law-millions-face-a-learning-curve.html

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Comment:

By Don McCanne, M.D.

If health care reform had worked the way it should have, today anyone could get the health care that he or she needed without having to worry about how to pay for it. What are we seeing instead? Just trying to enroll in health care coverage has been a very difficult process for many, and tens of millions will still remain uninsured. And today’s article shows how problematic the next step is – trying to put your coverage to use.

Some of the problems have already been widely publicized. Newer plans, especially those in the exchanges, have low actuarial values (i.e., very high deductibles and other excessive cost sharing). Cost sharing can make care unaffordable for those with modest incomes. Plans are now using narrow- and ultra-narrow networks of hospitals and health care professionals which limit patients’ choices in their health care, often preventing access to the most appropriate physicians and hospitals. We are now seeing tiered levels of specialized services and pharmaceuticals in which patients are financially penalized if they use specialists or drugs in the higher, more expensive tiers even if they are clearly preferred for medical reasons. The penalty is assessed by the insurers strictly to dissuade patients from using more expensive care even though it may be better care. Patients are also having difficulties determining not only whether specific providers are in or out of their networks, but also which tier they are in and what that means. Furthermore, the provider enrollment in these networks is quite unstable, not to mention the instability that arises when the patient must change plans and therefore change networks. This says nothing about the problems patients face when they try to get an appointment and find that there are no openings, or find that the distances are too far – directly due to the insurance innovation that promises a higher volume of patients to fewer physicians so that insurers can get greater discounts, even though overloading their practices. The list goes on and on with administrative excesses that are designed to enhance the business performance of the insurance products at a cost to the patients that they should be serving.

It should not have been this way. A single payer national health program would have automatically enrolled everyone; it would have included all providers, and it would have been financed through equitable taxes, making it affordable for everyone.

Although this New York Times article presents the problem as a need to teach individuals the complexities of using these newer insurance products, the problem is actually the complexities themselves and the tremendous injustices that ensue.

The remainder of this comment is composed of more excerpts from the NYT article. The experience of Salwa Shabazz should enrage us and drive us to demand health care justice for all. Her case shows us the compelling need for comprehensive structural reform of our health care financing system.

The following are excerpts from the NYT article (link above):

Last week, Salwa Shabazz arrived at the office of a public health network here with a bag full of paperwork about her new health insurance — and an unhappy look on her face. She had chosen her plan by phone in March, speaking to a customer service representative at the federal insurance marketplace. Now she had problems and questions, so many questions.

“I’ve had one doctor appointment since I got this insurance, and I had to pay $60,” Ms. Shabazz told Daniel Flynn, a counselor with the health network, the Health Federation of Philadelphia. “I don’t have $60.”

Mr. Flynn spent almost two hours going over her Independence Blue Cross plan, which he explained had a “very complicated” network that grouped doctors and hospitals into three tiers. Ms. Shabazz, who has epilepsy, had not understood when she chose the plan that her doctors were in the most expensive tier.

“None of that was explained when I signed up,” she said. “This is the first I’m hearing it.”

Independence Blue Cross has focused on making sure people understand the tiered-network plan that Ms. Shabazz chose, which was popular because of its relatively low price but also particularly hard to understand. Ms. Shabazz, 38, paid only about $32 a month in premiums, with federal subsidies of $218 covering the rest. But she could not afford the $60 co-payments to see her specialists on her annual income of $19,000.

Her financial situation worsened when she had to quit her job at the Pennsylvania Liquor Control Board in June because of the epilepsy, she said. She had called the federal marketplace to report her change in income, and had received a letter that she handed to Mr. Flynn, hoping he could explain it. The news, he said, was not good: With no more paychecks, she had fallen into the so-called coverage gap, earning too little to keep qualifying for the subsidies that made her premiums affordable, but likely still not qualifying for Medicaid because Pennsylvania has not expanded that program, as 26 states have under the Affordable Care Act.

“You’ll probably have to cancel your plan,” he said.

Ms. Shabazz’s mother, Waheedah Shabazz-El, who had accompanied her to the appointment, shook her head as her daughter wiped away tears. “There are so many layers to this,” Ms. Shabazz-El said.

Closing comment by Don McCanne:  We are not powerless. Let’s demand single payer, and not let up until we get it.

What does California’s 4.2% premium increase mean?

Obamacare premiums to rise a modest 4.2% in 2015

By Stuart Pfeifer, Chad Terhune, Soumya Karlamangla
Los Angeles Times, July 31, 2014

Defying an industry trend of double-digit rate hikes, California officials said the more than 1.2 million consumers in the state-run Obamacare insurance exchange can expect modest price increases of 4.2% on average next year.

“We have changed the trend in healthcare costs,” said Peter Lee, Covered California’s executive director. “This is good news for Californians.”

State officials and insurers credited the strong turnout during the first six-month enrollment window that ended in April for helping to keep 2015 rates in check. But others cautioned it’s still too early to gauge the health law’s impact, suggesting several factors may be temporarily holding rates down in the individual market.

“We don’t really know what the real cost of Obamacare is yet because insurance companies are heavily subsidized for the first three years” of the law’s implementation, said Robert Laszewski, a healthcare consultant in Virginia who has closely tracked the overhaul. “The insurance companies essentially can’t lose money.”

California Insurance Commissioner Dave Jones said the modest uptick in premiums was a positive sign, but he said insurers were likely motivated by a November ballot initiative, Proposition 45, that would give his office new authority to regulate health insurance rates.

“This is merely a pause in the double-digit rate increases we’ve seen historically,” Jones said.

Consumer Watchdog, the Santa Monica advocacy group pushing Proposition 45, said insurers held back this year to avoid that kind of voter backlash.

WellPoint Inc., Anthem Blue Cross’ parent company, Kaiser and other insurers have contributed more than $25 million to defeat the ballot measure.

http://www.latimes.com/business/la-fi-obamacare-2015-rates-20140801-story.html

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Comment:

By Don McCanne, M.D.

Before we discuss some of the possible reasons that the 2015 increase in premiums for California’s ACA exchange were held down to 4.2 percent, we should mention the bad news that is not being covered by the media. We are celebrating an artificially low increase that is still twice the rate of inflation – 2.1 percent (Consumer Price Index, June 2014 – Bureau of Labor Statistics), as workers continue to fall behind over the last three decades of increasing income inequality.

Although ACA enthusiasts are touting success in controlling health insurance premiums, there are many reasons why their celebration is premature, but two stand out.

Proposition 45, which will be on the November ballot, would provide authority to California’s insurance commissioner to regulate health insurance premiums. The last thing the insurers want to do is to anger voters with high rate increases just before this election. The insurers have already contributed over $25 million to defeat this measure.

The other important reason is that the insurers are still protected by reinsurance and insurance rate corridors. In fact, the Obama administration adjusted this coverage to be sure that the insurers were fully protected again next year should they not receive enough premium revenue to meet their expenses. They can’t lose! Of course they are going to come in with low bids when they are under the threat of voter revolt.

And what about the next year when they no longer have protection against losses? We already know the routine. “The patients enrolled in our plans were older and sicker while the younger, healthier individuals were covered by plans at work, or bought the cheap catastrophic plans, and the new drugs that cost tens of thousands of dollars or more placed a strain on our budgets, and our contingency reserves were depleted with the market crash of 2015, and we’ve lost our rate flexibility with the termination of government reinsurance, and…” Well, you know.

Although there are many other uncertainties as the implementation of ACA plays out, one certainty that we can rely on is that insurers will be requesting much larger premium increases for 2017, possibly double digits. That would not be happening under a single payer national health program.

Victor Fuchs on the solution for high health care costs in U.S

Why Do Other Rich Nations Spend So Much Less on Healthcare?

By Victor R. Fuchs
The Atlantic, July 23, 2014

Despite the news last week that America’s healthcare spending will not be rising at the sky-high rate that was once predicted, the fact remains that the U.S. far outspends its peer nations when it comes to healthcare costs per capita. This year the United States will spend almost 18 percent of the gross domestic product (GDP) on healthcare.

Why does the United States spend so much more?

The biggest reason is that U.S. healthcare delivers a more expensive mix of services. For example, a much larger proportion of physician visits in the U.S. are to specialists who get higher fees and usually order more high-tech diagnostic and therapeutic procedures than primary care physicians.

A second important reason for higher healthcare spending in the U.S. is higher prices for inputs such as drugs and the services of specialist physicians. The prices of branded prescription drugs in the U.S. are, on average, about double those in other countries. The fees of specialist physicians are typically two to three times as high as in other countries. The lower prices and fees abroad are achieved by negotiation and controls by governments who typically pay for about 75 percent of all medical care. Government in the U.S. pays about 50 percent, which would still confer considerable bargaining power, but the government is kept from exerting it by legislation and a Congress sensitive to interest-group lobbying.

The third and last important reason for higher spending in the U.S. is high administrative costs of insurance. Many of our peer countries have lower administrative costs through more coordination, standardization, and in some countries a single national system or several regional healthcare-insurance systems, even when the provision of care is primarily a private-sector responsibility.

The complexity of private-sector insurance is not in the public interest. Each company offers many plans that differ in coverage, deductibles, co-pays, premiums, and other features that make it difficult for buyers to compare the prices of different policies.

If we turn the question around and ask why healthcare costs so much less in other high-income countries, the answer nearly always points to a larger, stronger role for government. Governments usually eliminate much of the high administrative costs of insurance, obtain lower prices for inputs, and influence the mix of healthcare outputs by arranging for large supplies of primary-care physicians and hospital beds while keeping tight control on the number of specialist physicians and expensive technology. In the United States, the political system creates many “choke points” for diverse interest groups to block or modify government’s role in these areas.

For those who would like to limit government control, there is an alternative route to more efficient healthcare through “managed competition,” proposed by Alain Enthoven, a Stanford University Business School Professor, more than 25 years ago. It is based on integrated group practice, which brings the insurance function, physicians, hospital, drugs, and other elements of care into a single organization that takes responsibility for the health of a defined population for an annual risk-adjusted per capita payment. Examples include the Group Health Cooperative of Puget Sound in Seattle and the Kaiser Permanente organizations in California.

With regard to healthcare, the United States is at a crossroads. Whether the Affordable Care Act will significantly control costs is uncertain; its main thrust is to reduce the number of uninsured. The alternatives seem to be a larger role for government or a larger role for managed competition in the private sector. Even if the latter route is pursued, government is the only logical choice if the country wants to have universal coverage. There are two necessary and sufficient conditions to cover everyone for health insurance: Subsidies for the poor and the sick and compulsory participation by everyone. Only government can create those conditions.

http://www.theatlantic.com/business/archive/2014/07/why-do-other-rich-nations-spend-so-much-less-on-healthcare/374576/

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Comment:

By Don McCanne, MD

Highly respected Stanford economist Victor Fuchs has long supported private solutions to universal coverage, such as Alain Enthoven’s managed competition. Although there is much to be said for establishing integrated health care delivery systems within the community, the logistics of providing all care through competing integrated delivery systems have proven to be insurmountable, as witness the managed care revolution that reduced this concept to competition between inefficient, expensive and intrusive third party insurer money managers.

Fuchs now notes that “the complexity of private-sector insurance is not in the public interest.” He acknowledges the crucial role of government in other nations. He states that we are now at a crossroads between “a larger role for government or a larger role for managed competition in the private sector.” Even if private managed competition is selected, “government is the only logical choice if the country wants to have universal coverage.”

But look at the government requirement he would impose if the private managed competition option were selected: “Subsidies for the poor and the sick and compulsory participation by everyone.” We already have that in the Affordable Care Act, and yet we will be left with 31 million uninsured.

At least Fuchs is right when he says, “Only government can create those conditions.” But the vehicle has to be functional. That’s why we need to do it through a single payer national health program. We can still have our integrated health care delivery systems that Arnold Relman also supported, but in addition we will need the other components that make the system work efficiently for all of us.

Happy Birthday, Medicare — the best form of health insurance

By Jackie Wolf
Daily Hampshire Gazette, July 31, 2014

AMHERST, Mass. — There is a joke that goes: What’s so good about turning 65? Answer: Insurance agents stop calling. I would like to suggest a variation on that joke: What’s so good about turning 65? For almost all people in the United States, the good news is they are eligible for Medicare.

The good news is they no longer, each year, have to read through charts and tables of private insurance company policies with different benefit levels, different deductibles, different co-pays and different premiums to find an affordable policy. When you are eligible for Medicare, you really have a great deal more peace of mind and health care security.

For almost 50 years, Medicare has provided millions of Americans with health insurance — in fact, approximately 37 million people in 2012 in all 50 states. It is a tested, proven United States model of good, government-run health insurance. Medicare operates efficiently and effectively paying 97 cents of every dollar on direct health care services. Medicare provides doctors and researchers with volumes of data on medical procedures and outcomes searching for the best approaches to treat and cure disease and illness. Medicare also covers an annual physical for all enrollees as well as fitness programs.

Compare those facts to the reality of the private insurance market. I challenge you to find any private insurance company that spends 97 cents of every dollar collected on direct health care services. With their high executive salaries, high budgets for marketing and advertising, and hundreds of denial-of-claims clerks, private insurers struggle to meet the mandated level of paying out 90 cents for every dollar collected on health care services.

Marilyn Tavernner, administrator for the Centers for Medicare and Medicaid Services is paid an annual salary of $143, 800. Compare that to the salary of Andrew Dreyfus, CEO of the Blue Cross Blue Shield of Massachusetts, who earned $1.1 million in 2011 (and that does not include benefits to which he is entitled). Remember: Blue Cross Blue Shield is a non-profit. In addition, the 17 directors of Blue Cross Blue Shield of Massachusetts are paid $47,000 to $54,500 each to show up for 10 meetings a year.

Private health insurers spend so much on marketing and advertising because they are looking for healthy people. They want to attract younger, active people and sell them policies – that’s called “cherry picking” — while avoiding, and, if possible, getting rid of older, sick people — that’s called “lemon dropping.” Many Massachusetts residents are speaking out for single payer for Massachusetts — or Improved Medicare for All Massachusetts.

They are tired of the fact that their health insurance is tied to their employment. They are tired of the fact that their employers have a say in what benefits are available. They are tired of filling out pages of paperwork to file claims for benefits they have paid for. And they are tired of all the bills for premiums, co-pays and co-insurance.

Physicians are, likewise, getting fed up dealing with the private health insurance market. Just this past week, I was talking with a graduate student whose mother is a psychiatrist. He told me his mother spends approximately 20 percent of her time filling out paperwork to get payment from the multitude of insurance companies. And that doesn’t cover the time she spends on the phone challenging the denials of treatments for her patients. It’s frustrating, discouraging and wrong.

We don’t need private insurance companies as middlemen. A state single payer health care plan — an improved Medicare for All Massachusetts plan (Senate bill S515) would insure all residents and guarantee quality, affordable care to all. Let’s look to the model of Medicare and enjoy health care security from cradle to grave. Happy Birthday Medicare!

Jackie Wolf is chair of the League of Women Voters of Amherst Health Care Committee.

http://www.gazettenet.com/home/12957847-95/jackie-wolf-happy-birthday-medicare-the-best-form-of-health-insurance

Improve health care by building on Medicare’s success

By Erica Heiman, M.D.
The Sacramento Bee, July 31, 2014

Lately, I have been diagnosing a lot of high blood pressure and diabetes. Patients who have never received medical care are now pouring into the county-funded Sacramento Primary Care Clinic, which provides care to low-income and other underserved patients.

The Affordable Care Act has expanded access to 8 million more Americans. Although Sacramento County has always tried to ensure high-quality care to indigent patients, Obamacare has opened our doors even wider.

Often, these new patients are unaware they have a condition that requires treatment because it has never caused them any trouble. But these conditions, if untreated, lead to increased risk of heart attack, stroke and other serious complications.

In short, it’s important for everyone to have a doctor. If hypertension and high cholesterol are detected early and treated, the risks down the road are dramatically reduced. That’s why I love primary care; it may be difficult to see the benefits from day to day, but in the long run, they are vast.

Medicare entered its 50th year on Wednesday. Signed into law by Lyndon B. Johnson in 1965, its goal was to alleviate “the threat of financial doom” faced by aging Americans and their families. Since the 1960s, Medicare has steadily expanded, currently providing coverage to more than 50 million elderly and disabled Americans. Medicare is far from perfect – but it has succeeded in reducing poverty among its beneficiaries and in reducing health disparities.

Opponents often assert that Medicare is wasteful and should be cut. Aside from the political infeasibility of this, given how popular it is, it’s actually inaccurate: Medicare’s operational costs are estimated at about 2 percent, far below that of most private insurance companies. According to recent studies, Medicare’s growth rate is actually lower than projected and lower than cost increases in the private sector.

Proposed changes to Medicare have recently focused on granting vouchers for Medicare-like insurance plans run by the private sector. These plans receive lower approval ratings from their beneficiaries than traditional Medicare. Other proposals would increase the age of eligibility for Medicare, which may save the federal government money in the short term, but would result in higher costs to employers, individuals and Medicaid. In the longer term, this would be much more likely to look nice on a written budget projection than to provide meaningful benefit to the American people.

To rein in skyrocketing costs in health care, the answer isn’t cutting Medicare. It’s expanding and reforming it to create an improved “Medicare for All.”

Eliminating private insurance companies would eliminate their high overhead costs and the hefty salaries their CEOs earn. It would allow more bargaining on pharmaceutical prices so patients would have more affordable choices. Health care delivery would still be done by private-sector hospitals and clinics, and the number of options would likely expand for the average American, as current insurance plans restrict to “in-plan providers” who can be difficult to find and hard to schedule with.

I’m appreciative of the expansion in coverage that the ACA has allowed, but we still have a ways to go. There are still 13 percent of Americans without health insurance. Many of my patients who just enrolled in Medi-Cal are having trouble getting specialty care because their plans have not negotiated contracts with specialists in their areas. This is frustrating for the patients – who have to spend anxious days, weeks and months waiting for a call from the orthopedist’s office – and for primary care clinicians like me, who would like nothing more than to know that our patients will be well cared for without the efforts of an army of case managers.

The answer to health care costs that are 2.5 times higher than the industrial nation average (and yet fail to produce higher-quality care and more favorable morbidity and mortality indicators) is Medicare for All.

As I celebrate Medicare’s birthday and its successes, I look forward to the day when every American will access the same high-quality care that those over 65 now enjoy.

Erica Heiman is a resident physician at the University of California, Davis, Medical Center and a member of Physicians for a National Health Program.

http://www.sacbee.com/2014/07/31/6594125/viewpoints-improve-health-care.html#storylink=cpy

We All Need Health Care Now

National Health Insurance Saves Money in the Long Run

By Peter Conn
Santa Barbara (Calif.) Independent, July 30, 2014

Happy birthday, Medicare, which celebrates 49 years of service today. In a 1995 essay in the journal Health Affairs, Robert Ball wrote that those who helped develop Medicare saw it as a first step toward universal national health insurance. Covering only seniors was a fallback position because that is all that could be expected to pass Congress at the time. Sound familiar?

Medicare is not perfect, but political fights over ideology and special interest profits have blocked improvements that would increase efficiency and effectiveness. Otherwise by now we would have national health insurance, have better outcomes, have no uninsured nor financial barriers to care, and would be spending much less on administrative overhead, like the rest of the industrialized world.

The Medicare Advantage program — your Medicare dollars given to private insurers who of course need to make a profit — promised reduced cost and expanded coverage, but instead increased costs (15 percent more costly to the Medicare fund than traditional Medicare) and decreased choice of physicians.

Part D, subsidized drug prices but prohibited negotiating prices or importation, thus keeping prices artificially high.

And now, instead of folding Medicare, Medicaid, employer-provided insurance, and individual insurance into one Medicare-for-all plan, we have added Obamacare, which multiplies the administrative complexity and inefficiency of both public and private insurance plans. It still leaves over 30 million people without health insurance with an indefinite wait time for all but emergency room care.

Don’t misunderstand the above as a call for repealing Obamacare, which has provided affordable coverage to millions more people. My point is that if we could get beyond the ideological fighting, beyond corporate desire for ever-increasing profits and look only at efficiency and effectiveness, we could have national health insurance for everyone at no additional cost and save money now and in the long run.

Logically, fiscal conservatives should embrace a reform such as Medicare for all because, factually, it would save all of us money — government, individuals, and businesses. But it is hard to even get some progressive politicians who think Medicare for all is a good idea to champion it for fear of conservative backlash. The time is not right, some say.

Logic and facts may not be in fashion, but the time is right to organize, organize, organize. So if you think Medicare for all is a good idea, support one of the many groups backing the idea. When the parade of supporters gets big enough, the politicians will scramble to get to the front.

In the end, it is up to individuals, businesses, medical professionals, and organizations of all types to act. The movement exists. You need to join it to make it succeed.

Peter Conn is outreach coordinator of Health Care for All — Santa Barbara.

http://www.independent.com/news/2014/jul/30/we-all-need-health-care-now/

Who are those remaining uninsured?

Where are California’s Uninsured Now? Wave 2 of the Kaiser Family Foundation California Longitudinal Panel Survey

By Bianca DiLulio, Jamie Firth, Larry Levitt, Gary Claxton, Rachel Garfield and Mollyann Brodie
Kaiser Family Foundation, July 30, 2014

Of those Californians who were uninsured prior to open enrollment, 58 percent now report having health insurance, which translates to about 3.4 million previously uninsured adult Californians who have gained coverage, and 42 percent say they remain uninsured. The most common source of coverage was Medi-Cal with 25 percent of previously uninsured Californians reporting they are now covered by Medi-Cal. An additional 9 percent of California’s previously uninsured say they enrolled in a plan through Covered California, resulting in about a third reporting new coverage from the two sources most directly tied to the ACA. Twelve percent say they obtained coverage through an employer and 5 percent report enrolling in non-group plans outside of the Covered California Marketplace; some enrollment in these types of coverage may have been motivated by the ACA’s requirement to purchase insurance and some may be the result of normal movement within the marketplace.

Section 3: The Remaining Uninsured

Who Remained Uninsured?

As many previously uninsured Californians gained coverage, 42 percent remained uninsured. Many of the remaining uninsured have tenuous links to health insurance posing challenges for future enrollment efforts. Forty-five percent of the remaining uninsured reported in the baseline survey that they had been without health insurance for two or more years and an additional 37 percent said they have never had insurance. Hispanics make up 62 percent of the remaining uninsured and nearly half of them (29 percent) are undocumented Hispanics who are not eligible for Medi-Cal or assistance through Covered California. About 4 in 10 (39 percent) report family income that put them in the group likely eligible for Medi-Cal and another quarter (24 percent) are likely eligible for financial assistance through Covered California. These shares reflect the demographics of people who were uninsured prior to the first ACA open enrollment period and did not get coverage during the open enrollment period. Others may have been covered prior to open enrollment but now uninsured – a group not captured by this survey.

Why Did They Remain Uninsured?

Why did 42 percent of California’s uninsured prior to open enrollment remain without coverage? Most of the remaining uninsured seem to value insurance, with majorities saying it is something they need (71 percent) and that it is worth the costs (59 percent). Still roughly 3 in 10 of the remaining uninsured say they can get by without insurance (28 percent) or don’t feel coverage is worth the price (33 percent), including 4 in 10 (40 percent) of those who are likely eligible for coverage through Covered California or Medi-Cal due to their self-reported income level and immigration status.

The cost of insurance (whether perceived or actual) remains a barrier. When asked in their own words why they didn’t get coverage, one-third (34 percent) point to costs as the reason. Fifteen percent say they don’t qualify or don’t think they do, including 9 percent who say they can’t enroll or are worried about signing up because of their immigration status. Other reasons the remaining uninsured give for not signing up for coverage include not having yet tried or being too busy (9 percent), not having enough information about enrolling (9 percent), having tried but not being successful (8 percent), and not wanting or needing coverage (7 percent). A few (6 percent) say they didn’t get insurance because of issues associated with the application process, including three percent who say they are still awaiting contact or approval – a finding that is perhaps related to the large backlog of about 900,000 Medi-Cal applicants waiting for counties across the state to process their applications.

California’s Undocumented Uninsured

In California, undocumented immigrants make up about a fifth of those who were uninsured before the ACA expansions kicked in, and under the law, they are not eligible for Medi-Cal or subsidies through the exchange. As a group they are largely aware of these restrictions – 63 percent say they are not eligible for Medi-Cal and 70 percent say they don’t qualify for financial assistance through Covered California. Half say the mandate doesn’t apply to them and most (60 percent) correctly respond that they won’t have to pay a fine for not having coverage.

While the ACA restricts access to health benefits for undocumented immigrants under the law, there is still keen interest in coverage among this group. Since last summer about a third (35 percent) of California’s undocumented uninsured say they obtained coverage and of those who remain uninsured, half say they intend to get coverage later this year. In fact, the remaining undocumented uninsured are more apt to say they place a high value on insurance than other remaining uninsured Californians; nearly three quarters (73 percent) of the undocumented uninsured say health insurance is worth the cost and 85 percent say it is something they need, each 20 percentage points higher than the share for other remaining uninsured Californians.

http://kff.org/uninsured/report/where-are-californias-uninsured-now-wave-2-of-the-kaiser-family-foundation-california-longitudinal-panel-survey/

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Comment:

By Don McCanne, MD

California’s aggressive efforts to implement the provisions of the Affordable Care Act resulted in 58 percent of the previously uninsured now having coverage – about 3.4 million individuals. While this certainly gives cause for celebration, it must be tempered by the knowledge that 42 percent of the previously uninsured are still uninsured. Who are these people and why are they not insured?

The excerpts above provide a brief answer, though much more is available in the comprehensive report at the link above. In very general terms, as these authors note, many of the remaining uninsured “have tenuous links to health insurance posing challenges for future enrollment efforts.” The roughly 2.5 million previously uninsured who still remain uninsured will provide much greater challenges in trying to get them enrolled in some form of coverage, and a great many of them will still remain uninsured.

A comment should be made about California’s undocumented residents. They tend to be blamed by some for California’s high numbers of uninsured. Actually they constituted only about one-fifth of the uninsured before implementation of ACA. Although they are not eligible for Medi-Cal (Medicaid) nor for subsidies under Covered California (ACA insurance exchange), 35 percent obtained coverage on their own and another 50 percent intend to later this year. They have, in fact, been more responsible in this regard than have other uninsured Californians who were not enrolled in Medi-Cal or Covered California.

California’s efforts have been exemplary, and those involved in the ACA implementation are to be commended. Yet it is likely that one or two million people will remain uninsured. That’s not acceptable, and it is not California’s fault. California, and the entire nation for that matter, has an irreparably flawed health care financing infrastructure with which to work. It is obvious what we need to do. We need to replace this flawed system with a single payer national health program covering everyone, including the undocumented. The sooner the better.