PNHP

Churning for Dollars — There Ought to Be a Law

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Churning for Dollars — There Ought to Be a Law

By Donna Smith
Common Dreams, July 27, 2014

Remember Liz Fowler? She was the WellPoint executive who took a brief sabbatical from her direct paychecks from the private health insurance industry to write the Affordable Care Act while working for Senator Max Baucus. Once that project was wrapped up, Liz went to work briefly for the U.S. Department of Health and Human Services as she transitioned her way back to work as a lobbyist for health industry giant Johnson & Johnson.

I met with Fowler once in Washington, D.C. I was part of a delegation of people hoping to be heard on single-payer, improved and expanded Medicare for all for life health care reform, and she had the most sincere, concern-filled gaze I had ever seen in D.C. as she did her best to show support for those who wanted something other than the profit-based, market driven reform we got. She was a marvelous actress. Once her work was done in achieving victory for the health insurance industry through the Affordable Care Act/Obamacare, Fowler set off for greener again (and received plenty of cash).

Now, in Colorado, we’re seeing Patty Fontneau, the CEO of the health insurance exchange, making her departure to return to private industry. Fontneau will take a position as president of health insurance giant CIGNA’s private exchange business. Prior to heading up the exchange, she worked for a law firm and in finance. No doubt her new role at CIGNA will provide her an income that supports the lifestyle to which she became accustomed while earning nearly $200,000 annually (plus bonuses) as the head of the Colorado exchange. It’s a safe bet she never had to apply for or worry about any tax credits or subsidies to cover her own health insurance premiums.

The only time I ever met Fontneau was after I complained to the exchange board in a public meeting about the delay in receiving a Medicaid denial so I could get on with shopping for and signing up for a policy on the exchange. Her staff and Medicaid managers wanted to make sure I knew it was my error that caused the delay. (It wasn’t.) And I never really got the gaze of concern and sincerity that Fowler had mastered at the national level.

So, what’s wrong with all this cross-pollination of private and public interests and executives in our health care industry? It is an affront to the basic common sense of most Americans and Coloradans to ask us to think that executives like Fowler and Fontneau have not been rewarded for their loyalty and success in protecting the big business interests that drive our health system. These are not people who devote themselves to public service of any kind for very long — being a public servant doesn’t generally pay enough to keep them anchored to the public good over private profits and interests.

I wish there were some kind of law that prevented this sort of churning of industry executives in and out of positions funded with public dollars — or at least some sort of tax penalty or fine that had to be paid when the connections are just too obvious to be anything but rewards for being a friend to big business. Our health care system will continue to see this sort of executive churning and reward system until we transform the system into one that is about health care and not about massive profits for the health care industry.

Health care needs to be treated as a public good and a human right. CIGNA certainly is not in the business of providing that. Health insurance is not health care. Health insurance is a financial product sold to us to protect health and wealth which may do neither thing very well at all. So we weren’t duped by Fowler or Fontneau as they worked to help the health industry from the inside or as they left to do similar work more directly from outside the public administration of Obamacare. We patients and private citizens were always the means to an end — higher profits for the health industry and bigger salaries for those who help make it so. As an old adage goes and has ever stayed true, “Follow the money.”

On Wednesday, July 30, Medicare will celebrate its 49th anniversary. This nation and our state have benefited madly from the success of the Medicare program over the years as more seniors and the disabled were spared from poverty and suffering by having access to affordable health care. Improved and expanded Medicare for all for life would help end the same sort of trauma for all of us, and it would stop the process by which private industry profits are the top priority in our health care system.

Health Care for All Colorado will celebrate Medicare’s anniversary with an action on July 30th, and it’s a safe bet that very few health care executives or even those working on health care and currently earning a salary funded with public dollars will join in our action. They have other masters to serve, after all, and we the patients and more common folk of Colorado are not among them. And so long as we have private, for-profit health insurance companies calling the shots in our health system, we can expect they will run the show inside our state houses as they influence and own our elected officials and inside our doctors’ offices as they dictate what care we can and cannot have.

Donna Smith is the executive director of Health Care for All Colorado and the Health Care for All Colorado Foundation.

http://www.commondreams.org/views/2014/07/27/churning-dollars-there-ought-be-law

Kshama Sawant on single payer

Glimmers of healthcare politics at meeting of Western Washington docs

Tough talk from Kshama Sawant and others at annual gathering of Western Washington Physicians for a National Health Program.

By Ted Van Dyk
Crosscut.com (Seattle), July 23, 2014

Seattle City Council member Kshama Sawant also was critical of Obamacare, arguing that the administration colluded with drug and insurance companies in framing it. Sawant spoke longest and most avidly at the meeting. She called on committed single-payer supporters to follow the example of those who sought a $15 minimum wage in Seattle, and bring tireless pressure to bear on Democratic officeholders in particular. Sawant is a committed socialist who often referred to “working class interests” and “corrupt corporations, banks, and hedge fund operators.”

Kshama Sawant (video at 4:45):

“Our discussion should be formulated not on the basis of whether or not the ACA delivered something good. Maybe it did, but that’s not the point. The point is, what are we not getting from it, and why didn’t we win single payer health care? That’s what I would like to focus on.”

http://crosscut.com/2014/07/23/health-medicine/121125/western-wa-physicians-national-health-program/?page=single

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Comment:

By Don McCanne, MD

Socialist Kshama Sawant, a member of the Seattle City Council, came to national attention by leading her fellow council members in passing a $15/hour minimum wage for their city. Having shown that political activism can still be effective, she has important advice for us in our efforts to enact single payer reform.

Currently attention has been diverted from single payer, as most progressives are celebrating the supposedly great successes in implementation of the Affordable Care Act (ACA). Even the Republicans in Congress who have voted several times to repeal ACA, are now suing President Obama for not implementing it fast enough.

Those of us who continue to adamantly support single payer are facing criticism for not joining the ACA bandwagon. This is where Sawant’s message is so important. Whether “ACA delivered something good” is not the point. The point is, we have to inform the public on “what are we not getting from it.” And what we are not getting is most of the goals of reform! The accomplishments are extremely modest compared to the reform that we need.

What are we not getting from ACA that we would be getting from single payer?

  • Truly universal coverage
  • Dramatic reduction in administrative waste
  • Removal of financial barriers to care
  • Coverage of all essential health care services
  • Free choice of hospitals and health care professionals
  • Removal of the interventions and excesses of the private insurers
  • Taxpayer financing based on ability to pay
  • Infrastructure reform that would slow spending to sustainable levels

And what successes are the ACA supporters touting (though using different rhetoric)?

  • Coverage of only about half of the uninsured
  • Shift to underinsurance products
  • Guaranteed issue of these underinsurance products
  • Deductibles that keep patients away from care by erecting financial barriers
  • Insurance subsidies that are inadequate
  • Ultra-narrow networks that take away choice
  • Insurance marketplaces that increase administrative complexity and waste
  • Inadequate cost containment policies (except for perverse higher deductibles)

Sawant delivers a very strong leftist message on social justice issues, and includes in her comments the failures of the Democratic Party to act. But this point on what we are not getting from ACA and why we need single payer is not a leftist message. It is a call for all of us from across the political spectrum who support single payer to take control of the message. We can no longer allow ourselves to be a meek voice silenced by those who, for noble and ignoble reasons, celebrate the paltry successes of ACA.

Again, the something good that ACA did is not the point. The point is what we are not getting from ACA and would be getting under a single payer system. Let’s drown out the message of the ACA supporters who wimped out on real reform.

Arkansas – Poor people need to be taught how insurance works

Arkansas Weighs Plan To Make Some Medicaid Enrollees Fund Savings Accounts

By Michelle Andrews
Kaiser Health News, July 22, 2014

If all goes according to plan, next year many Arkansas Medicaid beneficiaries will be required to make monthly contributions to so-called Health Independence Accounts. Those that don’t may have to pay more of the cost of their medical services, and in some cases may be refused services.

Supporters say it will help nudge beneficiaries toward becoming more cost-conscious health care consumers. Patient advocates are skeptical, pointing to studies showing that such financial “skin-in-the-game” requirements discourage low-income people from getting care that they need.

Michigan and Indiana have already implemented health savings accounts for their Medicaid programs, modeled after the accounts that are increasingly popular in the private market. The funds, which may be supplemented by the state, can be used to pay for services subject to the plan deductible, for example, or to cover the cost of other medical services.

The program particulars in each state differ. But both states – and the Arkansas proposal — require beneficiaries to make monthly contributions into the accounts in order to reap certain benefits, such as avoiding typical cost sharing for medical services. Funds in the accounts may roll over from one year to the next, and participants may be able to use them to cover their medical costs if they leave the Medicaid program.

“We believe in consumerism,” says John Selig, director of the Arkansas Department of Human Services. By requiring Medicaid beneficiaries to make a monthly contribution to a Health Independence Account, “we think they’ll use care more appropriately and get a sense of how insurance works.”

Under the health law, states can expand Medicaid coverage to adults with incomes up to 138 percent of the federal poverty level (currently $16,105 for an individual). So far, about half have done so. But some conservatives have objected to the expansion of a government entitlement program, preferring a private market approach that they say encourages personal responsibility.

Arkansas and Iowa proposed and received approval from the federal Department of Health and Human Services for premium assistance programs that use federal funds to enroll the new Medicaid-eligible beneficiaries in marketplace plans.

For 2015, Arkansas is proposing to expand its experiment by introducing the Health Independence Accounts. Nearly all beneficiaries earning between 50 and 138 percent of the poverty level ($5,835 to $16105 for an individual) would have to participate through monthly contributions of between $5 and $25, depending on their income, or face cost-sharing requirements capped at 5 percent of income by Medicaid rules. In addition, Medicaid enrollees with incomes over the poverty level could be refused services if they don’t make their monthly contribution and don’t make a copayment. (This year, those with incomes between 100 and 138 percent of poverty already have co-pays.)

Under the new program, any of the private option enrollees would be able to avoid all cost sharing charges next year by making monthly contributions to their HIA.

Each month that a beneficiary makes a payment to his or her account, the state will contribute $15. Unused amounts will roll over from one year to the next up to a maximum of $200, which can be used by the beneficiary for health care costs if he or she leaves Medicaid for private coverage.

Advocates say they’re pleased that 175,000 Arkansans have gained coverage under the Medicaid expansion. But the proposal for next year gives them pause.

“There are concerns with adding cost sharing to those below the poverty level,” says Anna Strong, health care policy director at Arkansas Advocates for Children and Families.

Those concerns are well founded, say experts. “This is something that researchers have looked at a lot,” says MaryBeth Musumeci, associate director at the Kaiser Commission on Medicaid and the Uninsured. “Overarchingly, premiums and cost sharing have been shown to discourage or impede folks from getting needed care.”

Some experts note that at least 40 states already charge premiums or cost sharing for at least some beneficiaries. Beneficiaries have skin in the game already, they say, and they question the value of these special accounts that add a whole new layer of complexity for people who may not ever have had insurance before.

“We’re creating these incredibly complicated administrative structures, and I don’t think people will understand them,” says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities.

http://www.kaiserhealthnews.org/Stories/2014/July/22/Michelle-Andrews-on-Arkansas-plan-for-Medicaid-savings-accounts.aspx

Comment:

By Don McCanne, MD

Arkansas is demonstrating to us the irrationality of basing reform on ideological concepts divorced from health policy science. Let’s look closer at this proposal for “Health Independence Accounts,” their version of consumer directed health care for very low income individuals, using the concept of health savings accounts.

  • “Nearly all beneficiaries earning between 50 and 138 percent of the poverty level ($5,835 to $16,105 for an individual) would have to participate through monthly contributions of between $5 and $25.”
  • It seems to matter little that these individuals have no discretionary income since they do not have enough revenues to meet their basic needs, much less contribute to a savings account.
  • If they are able to make their payments, then, according to this article, cost sharing is eliminated. Wasn’t a purpose of the savings accounts to help pay for cost sharing?
  • So what do they suggest is the purpose of the health savings accounts? They “can be used by the beneficiary for health care costs if he or she leaves Medicaid for private coverage.” So this is a financing plan for Medicaid that won’t be used, but saved until after the person leaves Medicaid? How does that help?
  • For those with incomes between 100 and 138 percent of the federal poverty level, failure to make a payment into the Health Independence Account could result in being refused health care services. Is this really a rational policy for trying to improve health care access for these low income individuals?

No, it’s not about improving health care access. According to John Selig, director of the Arkansas Department of Human Services, “We believe in consumerism. We think they’ll use care more appropriately and get a sense of how insurance works.”

This is ideology that is totally divorced from health policy science. Contrast that with ideology that is based on sound health policy science that results in everyone receiving the health care that they need within a system that is affordable for all. Of course, that would be a single payer national health program.

This is sometimes presented as an ideological divide between the “individual responsibility” and the “we’re all in this together” mindsets, but ideology cannot be divorced from policy science. Health care should not simply be teaching poor people about how insurance works. It should be about getting them the care that they need, when they need it.

Paradox of health care spending slowdown but higher financial burden for patients

Health Care Spending Slowdown: The Consumer Paradox

By Al Dobson, Ph.D., Gregory Berger, M.P.P., Kevin Reuter, Phap-Hoa Luu, M.B.A. and Joan E. DaVanzo, Ph.D., M.S.W.
Dobson/DaVanzo, Report prepared for the Federation of American Hospitals, July 23, 2014

In recent reports we have outlined the continuing historic slowdown in the growth rate of health care spending driven in large part by emerging structural changes in the health care system. Recent evidence suggests that the cost curve has continued to bend, with health care spending declining in the first quarter of 2014. Despite this continuing trend in health care spending growth, consumers are increasingly concerned that they are ever-more financially burdened by spending on their own health care.

This consumer perception is largely a factor of the “new normal” being established through health insurance, which includes:

  • Benefit plan designs, used by employers and insurers to shift greater financial risk to consumers through higher out-of- pocket spending (i.e., deductibles, co-payments, and co- insurance); and
  • Health insurance premiums, which continue to rise faster than the average person’s income.

This trend of growth in out-of-pocket spending combined with increases in health insurance premiums that outpace increases in wages is not sustainable over the long term, and harms both patients and providers.

Key Findings

  • In the first quarter of 2014, consumer spending on health care declined by 1.4%, representing the largest decline in over 30 years
  • Almost 60% of Americans think that health care costs have been growing faster than usual in recent years, and more than 70% of consumers attribute responsibility for their perceived high and rising costs to health insurance companies
  • Total premiums have increased substantially over the past decade, from 14.9% to 21.6% of median household income between 2003 and 20126
  • Employee contributions to premiums and out-of-pocket spending have risen 23% faster than employee costs since 2009 (32% in cumulative growth vs. 26%)
  • Cumulative growth in workers’ contributions to premiums between 2002 and 2013 was 114%, approximately four times higher than growth in workers’ average income (31%)
  • Deductibles for family coverage increased more than 75% from 2006 and 2013 (from $1,034 to $1,854), while enrollment in plans with a deductible increased to 81% in 2013
  • The percentage of workers enrolled in high-deductible plans ($1,000 or more) has increased more than five times over the past decade, from 4% in 2006 to 26% in 2014
  • Overall, employees’ premium contributions and out-of-pocket expenses per capita have grown by 42% over the past five years, from $6,824 in 2009 to $9,695 in 2014

Payers and providers are both adjusting to a “new normal” in the marketplace through a variety of multi-year strategies aimed at improving quality, reducing costs, and minimizing financial risk within the evolving regulatory framework. Additional interventions or blunt policymaking, rather than allowing the market to respond to current reform efforts, could interfere with the system.

Both payers (including employers) and providers have prepared multi-year transition plans to adjust their business models, and require some level of predictability and capital reserves. Major disruptions to the operating environment for providers, payers and/or employers may generate uncertainty, which ultimately could flow down to consumers in the form of higher premium contributions and out-of-pocket spending.

http://fahpolicy.org/wp-content/uploads/2014/07/Dobson-DaVanzo-Federation-Cost-Sharing-Executive-Summary.pdf

Report: http://fahpolicy.org/wp-content/uploads/2014/07/Dobson-DaVanzo-Federation-Cost-Sharing-Report.pdf

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Comment:

By Don McCanne, MD

This report describes the paradox of the “new normal” in which increases in health care costs have been slowing as payer/employers and providers adjust their business models to the marketplace, while the financial burden for health care on patient/consumers continues to increase. As this report states, “this trend of growth in out-of-pocket spending combined with increases in health insurance premiums that outpace increases in wages is not sustainable.”

This study was sponsored by the Federation of American Hospitals – the lobby organization for America’s private, investor-owned hospitals. To no surprise, they recommend that the marketplace be allowed to work its magic, avoiding disruptions or policy changes that could interfere with the system. They caution that such interference “could flow down to consumers in the form of higher premium contributions and out-of-pocket spending.”

What? They have just shown us how the market they want to protect is taking care of payer/employers and providers (including for-profit hospitals) while creating financial burdens for patient/consumers through “higher premium contributions and out-of-pocket spending.”

They haven’t gotten reform right, and they won’t as long as we allow the medical/industrial complex to remain in charge. Reform needs to be centered around the patient, yet it is the patient who is being dumped on. Single payer would fix that.

Two falsehoods on single payer

By David Lotto, Ph.D., and Michael Kaplan, M.D.
The Berkshire Eagle (Mass.), July 22, 2014

On July 10, Mr. Jim Balfanz wrote a letter to the editor titled: “Dangers of single-payer on display” in which he makes two claims. The first is that what he calls the “Veterans Administration health care corruption scandal” happened because the VA is a government-run single-payer program. The second claim he makes is that the Affordable Care Act (Obamacare or the ACA) is on the road to creating a single-payer system for everyone in the country.

As Daniel Moynihan said “we are all entitled to our own opinions but not to our own facts.” The main cause of the extended wait times at some VA facilities is because there are too many patients in need of care and not enough staff to provide the care in a timely manner. The corruption part comes because of the VA’s enthusiastic pursuit of the latest craze in business circles — pay for performance. This system creates financial incentives to report short waiting times. The temptation to lie to get their bonus money was evidently too much for some supervisory staff at the VA.

The basic problem is that the VA has not been given the funds to hire the staff necessary to do the job. The main reason for this is that the Republican-controlled House of Representatives didn’t authorize the necessary funds.

The second claim is truly absurd. Obamacare is a thoroughly privatized system first proposed and supported by Republican legislators. It is not a government-run program. None of the recipients of money, insurance companies and health care providers work for the government. Supporters of a single-payer system regard the passage of Obamacare as furthering the privatization of the health care system and a major handout of our tax dollars to pay for profit-driven health care which was chosen to provide subsidized insurance for income-eligible people.

Obamacare is really a national version of Romneycare, the state health care expansion. However the ACA has given free reign to the private insurance industry to restrict benefits through patient cost-sharing and narrow networks limiting access to care for those who need it most. Even though not a Republican voted for the plan, it is the plan the Republicans originally proposed. It is possible that the severe restrictions placed on people getting insurance through the exchanges may make voters realize a single-payer health care system is the only way everyone can get fair coverage when they need it and not have the U.S. spend any more than we do now on health care.

It is the wacko birds (John McCain’s term) of the Republican Party, like the ones in the House of Representatives who wasted valuable time to vote for the repeal of Obamacare no less than 54 separate times, and claim that the ACA is leading us toward socialism when it is the opposite, who trumpet these kinds of false claims in total disregard of actual realty.

Voters in all parties should demand a single-payer health care system, an improved, expanded Medicare for all, that will provide generous benefits for all Americans.

David Lotto, Ph.D., resides in Pittsfield. Michael Kaplan, M.D., resides in Lenox. Both are members of Physicians for a National Health Program, pnhp.org.

http://www.berkshireeagle.com/news/ci_26193973/two-falsehoods-single-payer

Glimmers of healthcare politics at meeting of Western Washington docs

Tough talk from Kshama Sawant and others at annual gathering of Western Washington Physicians for a National Health Program

By Ted Van Dyk
Crosscut.com (Seattle), July 23, 2014

The Western Washington Chapter of Physicians for a National Health Program, which advocates for a universal, comprehensive single-payer national health program, held its annual public meeting last Saturday evening at Kane Hall on the University of Washington campus. The event provided a useful snapshot of things to come in healthcare politics nationally, but also here in Washington State. 

The meeting, held before a nearly full house that included numerous practicing doctors and nurses, also provided its share of surprises. Here are some highlights:

There was consensus that a single-payer plan is at least several years away and that state- rather than national-level organizing efforts to institute one would bear the most fruit over the next two years. 

The Affordable Care Act (a.k.a. Obamacare) allows states, beginning in 2017, to seek exemptions from its provisions provided they present a credible alternative plan to the U.S. Secretary of Health and Human Services. The meeting’s speakers agreed that between now and 2017 lobbying efforts to enact single-payer alternatives should focus on governors and state legislators to enact single-payer alternatives. (Such HHS approvals, Rep. Jim McDermott pointed out, would likely occur only during the administration of a President sympathetic to the idea).

There was surprising dissatisfaction expressed toward Obamacare per se.  McDermott, the ranking Democrat on the House Ways and Means health subcommittee, said he was “annoyed and disappointed” that President Obama, at the outset of his administration, had refused even to consider a single-payer approach for which many organizations had worked tirelessly in prior years. Dr. Phil Caper, a former senior staff member of Sen. Ted Kennedy’s health subcommittee and co-founder of a Maine group which supports a single-payer approach, commended President Obama, Michele Obama and Rep. Nancy Pelosi for their intense efforts to pass the Affordable Care Act. (See video of his talk at URL below.) But he characterized the legislation itself as “bad public policy” because it leaves many without coverage and shifts costs inequitably among various patient groups.

Seattle City Council member Kshama Sawant also was critical of Obamacare, arguing that the administration colluded with drug and insurance companies in framing it. Sawant spoke longest and most avidly at the meeting. (See video of her talk at URL below.) She called on committed single-payer supporters to follow the example of those who sought a $15 minimum wage in Seattle, and bring tireless pressure to bear on Democratic officeholders in particular. She derided fellow City Council members, with the exception of Nick Licata, for bending almost automatically toward special-interest and corporate agendas. She solicited support for the defeat of sitting Washington State House Speaker Frank Chopp in upcoming primary elections.

Sawant is a committed socialist who often referred to “working class interests” and “corrupt corporations, banks, and hedge fund operators.” Phil Caper, by contrast, noted that, unsurprisingly, drug companies, insurance companies and health-care providers had historically taken positions they considered to be in the best interests of their shareholders and/or bottom lines. Many of their interests, he said, could in fact be better satisfied under a comprehensive single-payer plan than through Obamacare or previous programs. No one’s interest is served if health-care remains unaffordable to many, if a catastrophic illness can hurt individuals, families and their insurers and providers, and if the public and private costs of healthcare keep rising.

All conference speakers agreed that a single-payer plan that covers everyone should be financed by general tax funds. Caper reported that, in Maine, doctors required to deal with multiple health-insurance plans spent about three times as much money on administration as Canadian doctors who operate under a simpler single-payer plan. 

Hospitals, he said, spent even more, because of the need for large billing departments with hundreds of employees. The same was true of insurance companies, which maintain large underwriting departments to create hundreds of “risk pools.” Estimates in Maine of unnecessary administration came to $1,500 per year for every resident of the state. Affordable Care Act provisions, said Caper, will cause these administrative costs to grow. 

My life partner and I attended the Saturday meeting mainly to see and hear Caper, an old Washington, D.C. comrade. But, at its end, it was impossible not to be impressed by the commitment and energy of the single-payer advocates on the podium and in the audience. 

I was reminded of similar meetings in the 1960s in which healthcare reform advocates pledged to pass Medicare and Medicaid. That finally took place in 1965 after nearly two decades of ceaseless effort by a broad coalition of political, labor, business and health-sector leaders.

The difference between 1965 and now is that partisan and ideological lines were less harshly drawn back then and working across those lines was not so difficult. That said, time and reality are on the side of the single-payer advocates. 

In 2008, I thought President Obama would begin a health-reform effort by introducing a universal, single-payer plan to cover major medical (catastrophic) expenses as one step towards a broader healthcare plan. He did not. Still, even with its imperfections, Obamacare may have served the eventual enactment of a single-payer model. Not because the latter conforms to Sawant’s socialist vision. But because it best serves the needs of American citizens and taxpayers; insuring coverage for all and financed equitably, while removing present administrative redundancies and cost and eligibility disparities.

The next task for local Physicians for a National Health Program is its active political support for Health Care for All-Washington, which advocates at state level for s single-payer scheme.

Ted Van Dyk has been involved in, and written about, national policy and politics since 1961. His memoir of public life, “Heroes, Hacks and Fools,” was published by University of Washington Press. You can reach him in care of editor@crosscut.com.

http://crosscut.com/2014/07/23/health-medicine/121125/western-wa-physicians-national-health-program/

KFF update on Medicare out-of-pocket spending

How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook

By Julliette Cubanski, Christina Swoope, Anthony Damico and Tricia Neuman
Kaiser Family Foundation, July 21, 2014

As part of efforts to rein in the federal budget and constrain the growth in Medicare spending, some policy leaders and experts have proposed to increase Medicare premiums and cost-sharing obligations.  Today, 54 million people ages 65 and over and younger adults with permanent disabilities rely on Medicare to help cover their health care costs.  With half of all people on Medicare having incomes of less than $23,500 in 2013, and because the need for health care increases with age, the cost of health care for the Medicare population is an important issue.

Although Medicare helps to pay for many important health care services, including hospitalizations, physician services, and prescription drugs, people on Medicare generally pay monthly premiums for physician services (Part B) and prescription drug coverage (Part D).  Medicare has relatively high cost-sharing requirements for covered benefits and, unlike typical large employer plans, traditional Medicare does not limit beneficiaries’ annual out-of-pocket spending.  Moreover, Medicare does not cover some services and supplies that are often needed by the elderly and younger beneficiaries with disabilities—most notably, custodial long-term care services and supports, either at home or in an institution; routine dental care and dentures; routine vision care or eyeglasses; or hearing exams and hearing aids.

Many people who are covered under traditional Medicare obtain some type of private supplemental insurance (such as Medigap or employer-sponsored retiree coverage) to help cover their cost-sharing requirements.  Premiums for these policies can be costly, however, and even with supplemental insurance, beneficiaries can face out-of-pocket expenses in the form of copayments for services including physician visits and prescription drugs as well as costs for services not covered by Medicare.  Although Medicaid supplements Medicare for many low-income beneficiaries, not all beneficiaries with low incomes qualify for this additional support because they do not meet the asset test.

Because people on Medicare can face out-of-pocket costs on three fronts—cost sharing for Medicare-covered benefits, costs for non-covered services, and premiums for Medicare and supplemental coverage—it is important to take into account all of these amounts in assessing the total out-of-pocket spending burden among Medicare beneficiaries.  Our prior research documented that many beneficiaries bear a considerable burden for health care spending, even with Medicare and supplemental insurance, and that health care spending is higher among older households compared to younger households.

Key Findings

  • Premiums for Medicare and supplemental insurance accounted for 42 percent of average total out-of-pocket spending among beneficiaries in traditional Medicare in 2010
  • Out-of-pocket spending rises with age among beneficiaries ages 65 and older and is higher for women than men, especially among those ages 85 and older.
  • As might be expected, beneficiaries in poorer health, who typically need and use more medical and long-term care services, have higher out-of-pocket costs, on average.
  • Just as Medicare spends more on beneficiaries who use more Medicare-covered services, more extensive use of services leads to higher out-of-pocket spending.
  • Among beneficiaries in traditional Medicare, those with a Medigap supplemental insurance policy pay more in premiums for this additional coverage, on average, than beneficiaries with employer-sponsored retiree health benefits ($2,166 vs $1,335, on average, in 2010).
  • Analysis of ‘high out-of-pocket spenders’ finds a disproportionate share of certain groups, including older women, beneficiaries living in long-term care facilities, those with Alzheimer’s disease and ESRD, and beneficiaries who were hospitalized, in the top quartile and top decile of total out-of-pocket spending (including both services and premiums).
  • Between 2000 and 2010, average total out-of-pocket spending among beneficiaries in traditional Medicare increased from $3,293 to $4,734, a 44 percent increase.

Implications

The typical person on Medicare in 2010 paid about $4,700 out of pocket in premiums, cost sharing for Medicare-covered benefits, and costs for services not covered by Medicare.  Even with financial protections provided by Medicare and supplemental insurance, some groups of Medicare beneficiaries incurred significantly higher out-of-pocket spending than others, which could pose challenges for those living on fixed or modest incomes.  Out-of-pocket spending tends to rise with age and number of chronic conditions and functional impairments, and is greater for beneficiaries with one or more hospitalizations, particularly those who receive post-acute care.

http://kff.org/medicare/report/how-much-is-enough-out-of-pocket-spending-among-medicare-beneficiaries-a-chartbook/

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Comment:

By Don McCanne, MD

This KFF update on the financial burden placed on Medicare beneficiaries shows that average out-of-pocket costs are $4,734 when half of all people on Medicare have incomes of less than $23,500. Although Medicaid supplements Medicare for some low income beneficiaries, destitution is a prerequisite for qualifying for Medicaid. The wealthy should have no problems, but should affordable access to health care be granted only to those with modest or low incomes who must give up what little fungible assets they have been able to accumulate through life?

Another concern in this report is that those with a Medigap supplemental insurance plan pay considerably more in premiums than do those with an employer-sponsored retiree health benefit program. Although Medigap benefits are quite modest, the premiums charged make them one of the worst values in the health insurance market.

Medicare benefits need to be expanded to a level at which Medicare becomes a prepaid health care program. When you need health care, you get it.

Beyond Obamacare: Universalism and Health Care in the Twenty-first Century

By A.W. Gaffney, M.D.
New Politics, Summer 2014

The Affordable Care Act commentariat—including those confidently awaiting the day when all its promises are vindicated, those rooting for its ignominious demise, and those of us in a separate camp—have been kept occupied in recent months. Between autumn’s website drama and winter’s enrollment saga, the news cycle has been full of stories of IT dysfunctions tackled, right-wing challenges thwarted, enrollment goals met, electoral prospects threatened, and individuals newly insured (or variously dissatisfied). 

Yet however important such details, stories, and analyses may sometimes be, we lose sight of the larger meaning of the ACA if we narrow our vision to its technological travails or to the latest enumeration of the insured. For those of us who are seeking a more fundamental and egalitarian change within the U.S. health care system, it seems particularly important at the current juncture to instead take a step back and appreciate the larger political, historical, and health policy significance of the ACA, to appreciate how we’ve come to have it, what it achieves, and what it leaves entirely undone. Understanding where we are and where we came from is, however, only the beginning of the story.

Moving forward, a focus on alternatives to the ACA, and of ways to achieve them, must increasingly be at the forefront of our discussions. A crucial question in this regard relates to how the struggle for true universal health care could fit within—and potentially propel—a larger popular mobilization against inequality. But to ask these questions, we should begin by looking back, to understand the road already travelled, as we seek to break off on a new, and bolder, path. 

The Politics of Passage

The ACA fell well short of what many of us had hoped for at the end of the hundred-year war for health care reform, which had begun with the Progressive-era campaign of the 1910s. It eliminates neither uninsurance nor underinsurance, as we shall soon examine in greater depth. It also leaves intact a grossly inefficient (if profitable) system of funding and organization. 

But why did the ACA fail to achieve what most construe as “universal health care”? I would argue that there are two ways to interpret the outcome. The first is to emphasize the particular proximate political conditions at the time it was passed, namely the role of corporate interests, the machinations of partisan politics, and so forth. The second interpretation—and one that has received less attention—would be to understand the ACA in the context of the dynamics of a much larger and lengthier neoliberal turn within the United States—and, arguably, global—political economy of health care. 

Now with respect to the first approach, it seems fair to conclude that disappointment could have been predicted before the health care reform brawl even broke out. The boundaries of health care reform had been largely drawn by the time that the 2008 election delivered the presidency and both houses of Congress to the Democratic Party (including, by July 2009, 60 votes in the Senate). As sociologist Paul Starr put it, Democrats had committed to only “minimally disruptive” reforms going into the election.1 Obama’s health care proposal during the primaries, for instance, was less expansive than that of Hillary Clinton, and in some respects narrower than the ACA itself.

But why? The role of the so-called “stake-holders” is one crucial factor here. In the years leading up to the election, a “rapprochement on health reform,” as Starr calls it, had formed between mainstream liberal groups and key industries. The corporate interests within this rapprochement seem to have perceived that the status quo of rising costs and uninsurance was politically—and economically—unsustainable. In 2008 the Board of Directors of America’s Health Insurance Plans (AHIP)—the national lobbying group for the health insurance industry—released a statement that actually endorsed “universal coverage,” which it defined as a combination of “guarantee-issue coverage with no pre-existing condition exclusions with an enforceable individual mandate.”2 In other words, if the government required everyone to buy private insurance, the industry would be happy to provide it, and would even stop discriminating against the sick. The document additionally endorsed government subsidies for those making less than 400 percent of the federal poverty level to enable them to buy private health insurance. These proposals, (“guaranteed issue,” an individual mandate, and subsidies for the purchase of private insurance) were core elements of the ACA, together with a limited employer mandate and a large expansion of Medicaid.

Other ideas that were not contained in the AHIP statement—for instance the proposal for a “robust” public option—had a less successful career. AHIP was, not surprisingly, rather lukewarm about the prospect of a competing public insurance plan, however “robust” or puny it might be. Though AHIP’s president Karen Ignagni had earlier pledged support for Obama’s health care reform, AHIP actually surreptitiously funneled some $86.2 million to the U.S. Chamber of Commerce for lobbying against the law in 2009 alone—just as debates about the “public option” got underway.3 AHIP thereby succeeded in keeping its place at the bargaining table, while simultaneously working against the bill, which had the effect of making the final product more amenable to its interests. 

The pharmaceutical industry similarly perceived it could both win and lose through health care reform. Most importantly, the industry needed to protect the great and treasured prize it had won in 2003, namely the clause in George W. Bush’s Medicare Modernization Act (MMA) that explicitly prohibited Medicare from bargaining with insurance companies over drug prices. By some estimates, the elimination of that clause could have saved the public purse—and cost the industry—upwards of $500 billion over a decade.4 The other option would have been to re-import drugs—allowing them to be purchased much more cheaply abroad where such negotiations do take place—which would be a more roundabout way to achieve a portion of these savings. However, after some tense negotiations between the drug industry lobby group (the Pharmaceutical Research and Manufacturers of America, known as PhRMA) and the administration, neither Medicare-drug negotiation nor re-importation was included in the ACA.5 This was, one supposes, the “politics of the possible,” though this merely speaks to the sadly impoverished range of possibilities in a political system permeated by corporate dollars.

Neoliberalism and the Political Economy of American Health Care

While these machinations (and many others) are important to appreciate, it’s also worth evaluating the Affordable Care Act in the context of the much longer neoliberal turn in American health care policy and thought. Though this is a separate and much larger story than can be told here, we can capture a glimpse of this multi-decade transformation simply by looking at the shift of the health care political center. In 1969, Edward Kennedy proposed legislation that would have created a program of national health insurance, with no copays, means testing, or cost sharing of any type. Nixon’s counterproposal in 1971, on the contrary, looked very much like the ACA, with an employer mandate and an expanded Medicaid-like program for the poor. Like the ACA, it also involved copayments and cost sharing, not just to save money, but as a “matter of principle.” To paraphrase the historian Beatrix Hoffman, health care couldn’t be made a right; it had to remain something you paid for.6

But as corporate and business interests began their powerful push for renewed preeminence in the late 1970s, the Democratic health care proposal—which in 1969 was basically a social-democratic universal system in line with those enacted by left and labor governments in Europe—quickly transmogrified into Nixon’s plan. Jimmy Carter, though he argued in an interview in late March 2014 that “Medicare-for-all” would have been preferable to the ACA, during his presidency actually made no substantial effort to pursue health care reform. Health care reform didn’t return to the national agenda until the administration of Bill Clinton, who again didn’t seriously consider a national health insurance system. Even his less ambitious plan for universal coverage via way of “managed competition” sunk. Mitt Romney’s health care reform in Massachusetts, which drew heavily from Nixon’s “mandate model” plan, was, conversely, successful. 

However, evaluating the rise and fall of the health care reform agenda only tells part of the story. These same decades, as the work of Thomas Piketty has so clearly laid out, were also characterized by soaring inequalities in income and wealth; this was the result, in part, of amplified corporate dominance of the political system and the interrelated decline of the power of labor. It would almost be surprising if alongside these dynamics there had not been a corresponding shift within health care thought, policy, and organization that favored these ascendant interests. Such a shift is indeed visible, and the manifestations of it are multifold: the corporate takeover of the Health Management Organization (HMO) during the 1980s and 1990s; a move by health policy experts and economists away from support for universal national health insurance to an obsession with the “moral hazard” of free health care; the growth of for-profit health care companies (hospices, hospitals, dialysis-centers, nursing homes); and soaring profits for pharmaceutical companies, which was mediated by key legislative victories (for instance, the Bayh-Dole Act of 1980 and the MMA of 2003).7

As the result of these changes, by the twenty-first century, the corporate health care sector had both unprecedented capital to spend and imperative interests to defend: there shouldn’t be any surprise that lobbying money would flood—and not merely season—the health care reform debate of 2009. According to the Center for Responsive Politics, lobbying from the health industry reached an all-time high of $554 million in 2009 alone. Physicians’ organizations—which once were the central lobby that could single-handedly make or break a health care reform initiative—were relegated to a bit part. Yet though it placated powerful interests, the ACA still contained some redistributionist elements, particularly with respect to the Medicaid expansion. In yet another sign of the shift of the political center, it thereby managed to deeply offend the Republican Party, even though (as Obama pointed out) its roots were to be found on their side of the aisle. To summarize, after all was said and done, a social-democratic alternative was barely considered, a Nixonian health care plan was barely passed, and more stayed the same than changed. 

The ACA: Accomplishments and Shortfalls

Among those working towards more fundamental health care change (for instance, as I’ll discuss below, a single-payer system), an assessment of the overall impact of the ACA is a frequent cause for disagreement. Is the law a (possibly wobbly) step in the right direction to be embraced and expanded, a harmful compromise to be denounced and discarded, or something in between? My own sense here is that global assessments are problematic and not that helpful: the massive law does many different things for many different people, and so is better dissected (and criticized) with respect to its specific effects and shortcomings rather than rejected or championed en toto. 

For instance, whatever the failures of the law may be and whatever injustices will persist, moving individuals out of the vulnerable ranks of the uninsured is clearly a good thing, and no amount of political analysis should belittle the benefit to—and relief felt by—these individuals. The ACA reduces uninsurance mainly via two mechanisms. First, as mentioned, it expands Medicaid to everyone below 138 percent of the federal poverty level. Unfortunately, as a result of the June 2012 Supreme Court ruling that made state participation optional, only 26 states (and the District of Columbia) are participating in the expansion, excluding millions from the benefits of Medicaid. Second, the ACA requires the establishment of an insurance “exchange” where private insurance can be sold to those without Medicare, Medicaid, or employer-based insurance; those with incomes below 400 percent of the federal poverty level will receive government subsidies to purchase insurance on these exchanges. However, between these programs and the employer and individual mandate, the ACA will still leave an estimated 31 million uninsured (compared with an estimated 57 million without it).8 In other words, triumphant proclamations notwithstanding, the ACA does not create universal health care in the United States. 

Now if eliminating the problem of uninsurance was our only goal, it seems that the ACA would be at least be a clear step in the right direction. Unfortunately, however, there is another phenomenon that has been evolving for some time, that the ACA neither created nor fixed but to some extent codifies, and which confers a highly inegalitarian element to our health care system: underinsurance. Underinsurance is often defined as having insurance but still having substantial out-of-pocket costs for medical care (i.e. greater than 10 percent of family income after premiums); it’s clearly a growing problem, and it is by no means eliminated by the ACA.9 The plans on the exchanges, for instance, incorporate high levels of cost sharing, or copays, deductibles, and coinsurance. They are graded into four metallic tiers based on their actuarial value (i.e. the percent of your health care expenses that insurance covers), beginning at a paltry 60 percent for the “bronze plans.” Putting aside the deeply inegalitarian concept of dividing a population into different grades of metal (the allusion to Plato’s Republic has somehow not yet been made), such plans fulfill the long-held concern of health policy “experts” that patients need more “skin in the game” (i.e. cost exposure), such that they don’t whimsically procure medically unnecessarily procedures and diagnostic studies. Families will be subject to as much as $12,700 annually in additional out-of-pocket costs for health care (after premiums are paid) to keep the dreaded “moral hazard” of “free care” at bay.10

Putting aside what happens to the level of strictly defined “underinsurance,” I would argue that there is a larger problem on the rise, which one might call “malinsurance,” namely insurance that compromises the physical and economic health of the bearer. Malinsurance encompasses an even broader scope of problematic insurance plans: insurance where the price of the premiums impinges on a reasonable standard of living; insurance with unequal and inferior coverage of services, drugs, or procedures; insurance with “cost sharing” that forces individuals to decide between health care and other necessities; insurance with inadequate and inequitable access to providers or facilities; and insurance that insufficiently protects against financial strain in the case of illness. 

Today, many (if not most) of us could in some ways be considered underinsured, while most (or maybe all) of us might be considered malinsured. This will, unfortunately, remain the case in coming years, even with the full and unimpeded enforcement of the ACA. 

But what are the alternatives, and are they viable? 

Moving Forward: A Single-Payer Solution?

A “single-payer system” is probably the best-studied alternative for the United States. Conceptually, it is quite simple: national health insurance, with a single entity (the government) providing health insurance for the country. Its core principles (as generally agreed upon within the single-payer movement) can be briefly summarized. First, everyone in the country would be covered by national health insurance. Second, the system wouldn’t impose “cost sharing,” so health care would be free at the point of care, with underinsurance thereby eliminated (assuming an adequate level of funding). Third, it would drastically reduce spending on health care administration and bureaucracy through elimination of the fragmented multi-payer system, and also through the global budgeting of hospitals. It would also contain costs through health care capital planning, and through other measures like direct negotiations with pharmaceutical companies over drug prices. Putting this together, a single-payer system would constitute a markedly egalitarian turn in American health care. Access to health care would be made not only universal but also equal, with free choice of provider and hospital to everyone in the country, provided as a right.

Now, in light of the formidable resistance that could be expected from a wide-spectrum of powerful and well-funded “stake-holders” (for instance, AHIP and PhRMA), the actual realization of such a system is, to put it mildly, daunting. We can predict that the impressive resources that have been deployed in opposition to the ACA might be multiplied many times to counter even the specter of true universal health care. However, while our political prospects must always be judged soberly, there are also reasons for guarded optimism. The confluence of several of the following dynamics (and many others) may, for instance, create a political opening for such a project in the coming years. 

First, dissatisfaction with our health care system will almost certainly rise, which I think will occur as we become more and more a “copay country,” with high-deductible, high-premium, and narrow-network health plans becoming the new normal. One could imagine considerable public outrage and mobilization against this new commodified status quo, just as there was against corporatized HMOs in the 1990s. 

Second, though politics at the federal level may remain inhospitable to the cause for some time, single-payer campaigns at the state government level may provide an opening for the construction of more limited single-payer state systems, while also providing an opportunity for grassroots organizing and movement building that would, in turn, strengthen the larger national campaign.11

Third, support for a single-payer system among physicians (which already has majority support in some polls) might be translated into more vocal outrage in coming years. In particular, as patients pay more and more out-of-pocket at the time of care, physicians will increasingly be forced into the role of “merchants of health,” basing medical decisions not only on clinical evidence, but on their patients’ income and wealth. I believe—and deeply hope—that such class-based medicine will be rejected by the profession.

Fourth, and perhaps most important, a broader mobilization against the politics of inequality now seems to be in the making. As it is perceived that the excessive costs of American health care are actually contributing to the problem of inequality—for instance, insofar as high premiums indirectly reduce income or as cost sharing directly consumes a greater portion of already stagnant wages—one can imagine that the drive for a single-payer system might become closely linked with a much larger, and more powerful, political mobilization. 

Of course, the precise road by which fundamental change in the health care system could be achieved remains obscure. Currently, the ACA remains at center stage, drowning out discussions of alternatives. With time, however, the changes instituted by the ACA will become subsumed within the fabric of the health care system: we’ll no longer be debating the benefits or shortcomings of Obama’s signature legislation; we’ll be declaiming the persistent injustices of our overall health care system. However powerful the opposition, if allied with a larger popular movement against ever-rising inequality, true universal health care may yet have its day in the sun.

At the same time, I believe that the struggle for health care justice—the fight for universal and equal health care for all—could, in turn, powerfully inform, and bolster, this larger movement. In polls, universal health care (and single-payer) garners support from a surprisingly large proportion of the country, generally a majority. In addition, Medicare has long remained a highly popular program, even (to some extent) across class and political lines. Perhaps, one might conjecture, this is because the need for health care speaks to our intuitive commonalities as human beings. 

We may have soaring inequality and a political system more and more indebted to corporate sponsors. But I believe that we’ll ultimately reject the notion of class-based health care. The ideal of universalism still has great potential power; in time, we’ll learn to harness it.

A.W. Gaffney is a physician and writer whose work has appeared in Salon, Dissent, Jacobin, and In These Times. He blogs at www.theprogressivephysician.org.

Footnotes

  1. Paul Starr, Remedy and Reaction: The Peculiar American Struggle over Health Care Reform (New Haven: Yale University Press, 2011), 195.
  2. “Board of Directors’ Statement: Now Is the Time for Health Care Reform: A Proposal to Achieve Universal Coverage, Affordability, Quality Improvement and Market Reform.,” (America’s Health Insurance Plans, 2008).
  3. Drew Armstrong, “Insurers Gave U.S. Chamber $86 Million Used to Oppose Obama’s Health Law,” Bloomberg.
  4. Dean Baker, “Reducing Waste with an Efficient Medicare Prescription Drug Benefit” (Center for Economic and Policy Researcb, 2013).
  5. Peter Baker, “Obama Was Pushed by Drug Industry, E-Mails Suggest,” New York Times, June 9, 2012.
  6. Beatrix Rebecca Hoffman, Health Care for Some: Rights and Rationing in the United States since 1930 (University of Chicago Press, 2012).
  7. On the Bayh-Dole Act, see H. Markel, “Patents, Profits, and the American People—the Bayh-Dole Act of 1980,” New England Journal of Medicine 369, no. 9 (2013). On moral hazard, a good review can be found in J. A. Nyman, “American Health Policy: Cracks in the Foundation,” Journal of Health Politics, Policy and Law, vol. 32, no. 5 (2007). 
  8. “Effects of the Affordable Care Act on Health Insurance Coverage—Baseline Projections,” ed. Congressional Budget Office (2014).
  9. The devil is very much in the definition here (i.e. what arbitrary cutoff defines sufficient versus insufficient coverage); using a conservative threshold, a recent study found that 12 percent of the U.S. population was insured but underinsured (in addition to the 18 percent uninsured). C. Schoen et al., “America’s Underinsured: A State-by-State Look at Health Insurance Affordability Prior to the New Coverage Expansions,” (The Commonwealth Fund, 2014).
  10. In all fairness, however, we were already becoming a “copay country” even before the ACA. Those of us with employer-provided health insurance have, for instance, seen growing copay and deductibles in recent years. G. Claxton et al., “Health Benefits in 2013: Moderate Premium Increases in Employer-Sponsored Plans,” Health Affairs, vol. 32, no. 9 (2013). I discuss the issue of “copay country” in greater depth in “Your doctor copays are too high!” Salon, August 5, 2013.
  11. That being said, state single-payer requires federal waiver to allow for the incorporation of Medicare into the system, and so requires federal cooperation.

http://newpol.org/content/beyond-obamacare

A. W. Gaffney: “Malinsurance” may drive reform

Beyond Obamacare: Universalism and Health Care in the Twenty-first Century

By A. W. Gaffney
New Politics, Summer 2014

Among those working towards more fundamental health care change (for instance, as I’ll discuss below, a single-payer system), an assessment of the overall impact of the ACA is a frequent cause for disagreement. Is the law a (possibly wobbly) step in the right direction to be embraced and expanded, a harmful compromise to be denounced and discarded, or something in between? My own sense here is that global assessments are problematic and not that helpful: the massive law does many different things for many different people, and so is better dissected (and criticized) with respect to its specific effects and shortcomings rather than rejected or championed en toto.

Now if eliminating the problem of uninsurance was our only goal, it seems that the ACA would be at least be a clear step in the right direction. Unfortunately, however, there is another phenomenon that has been evolving for some time, that the ACA neither created nor fixed but to some extent codifies, and which confers a highly inegalitarian element to our health care system: underinsurance. Underinsurance is often defined as having insurance but still having substantial out-of-pocket costs for medical care (i.e. greater than 10 percent of family income after premiums); it’s clearly a growing problem, and it is by no means eliminated by the ACA. The plans on the exchanges, for instance, incorporate high levels of cost sharing, or copays, deductibles, and coinsurance. They are graded into four metallic tiers based on their actuarial value (i.e. the percent of your health care expenses that insurance covers), beginning at a paltry 60 percent for the “bronze plans.” Putting aside the deeply inegalitarian concept of dividing a population into different grades of metal (the allusion to Plato’s Republic has somehow not yet been made), such plans fulfill the long-held concern of health policy “experts” that patients need more “skin in the game” (i.e. cost exposure), such that they don’t whimsically procure medically unnecessarily procedures and diagnostic studies. Families will be subject to as much as $12,700 annually in additional out-of-pocket costs for health care (after premiums are paid) to keep the dreaded “moral hazard” of “free care” at bay.

Putting aside what happens to the level of strictly defined “underinsurance,” I would argue that there is a larger problem on the rise, which one might call “malinsurance,” namely insurance that compromises the physical and economic health of the bearer. Malinsurance encompasses an even broader scope of problematic insurance plans: insurance where the price of the premiums impinges on a reasonable standard of living; insurance with unequal and inferior coverage of services, drugs, or procedures; insurance with “cost sharing” that forces individuals to decide between health care and other necessities; insurance with inadequate and inequitable access to providers or facilities; and insurance that insufficiently protects against financial strain in the case of illness. 

Today, many (if not most) of us could in some ways be considered underinsured, while most (or maybe all) of us might be considered malinsured. This will, unfortunately, remain the case in coming years, even with the full and unimpeded enforcement of the ACA. 

Moving Forward: A Single-Payer Solution?

A “single-payer system” is probably the best-studied alternative for the United States. Conceptually, it is quite simple: national health insurance, with a single entity (the government) providing health insurance for the country. Its core principles (as generally agreed upon within the single-payer movement) can be briefly summarized. First, everyone in the country would be covered by national health insurance. Second, the system wouldn’t impose “cost sharing,” so health care would be free at the point of care, with underinsurance thereby eliminated (assuming an adequate level of funding). Third, it would drastically reduce spending on health care administration and bureaucracy through elimination of the fragmented multi-payer system, and also through the global budgeting of hospitals. It would also contain costs through health care capital planning, and through other measures like direct negotiations with pharmaceutical companies over drug prices. Putting this together, a single-payer system would constitute a markedly egalitarian turn in American health care. Access to health care would be made not only universal but also equal, with free choice of provider and hospital to everyone in the country, provided as a right.

The confluence of several of the following dynamics (and many others) may, for instance, create a political opening for such a project in the coming years. 

First, dissatisfaction with our health care system will almost certainly rise, which I think will occur as we become more and more a “copay country,” with high-deductible, high-premium, and narrow-network health plans becoming the new normal. One could imagine considerable public outrage and mobilization against this new commodified status quo, just as there was against corporatized HMOs in the 1990s. 

Second, though politics at the federal level may remain inhospitable to the cause for some time, single-payer campaigns at the state government level may provide an opening for the construction of more limited single-payer state systems, while also providing an opportunity for grassroots organizing and movement building that would, in turn, strengthen the larger national campaign.

Third, support for a single-payer system among physicians (which already has majority support in some polls) might be translated into more vocal outrage in coming years. In particular, as patients pay more and more out-of-pocket at the time of care, physicians will increasingly be forced into the role of “merchants of health,” basing medical decisions not only on clinical evidence, but on their patients’ income and wealth. I believe—and deeply hope—that such class-based medicine will be rejected by the profession.

Fourth, and perhaps most important, a broader mobilization against the politics of inequality now seems to be in the making. As it is perceived that the excessive costs of American health care are actually contributing to the problem of inequality—for instance, insofar as high premiums indirectly reduce income or as cost sharing directly consumes a greater portion of already stagnant wages—one can imagine that the drive for a single-payer system might become closely linked with a much larger, and more powerful, political mobilization. 

http://newpol.org/content/beyond-obamacare

****

Comment:

By Don McCanne, MD

As A. W. Gaffney points out in this article, underinsurance or “malinsurance” may drive us to demand single payer as we mobilize against the politics of inequality. The entire article is well worth downloading and reading when you have a free moment.

Note on word usage:  Gaffney’s neologism, “malinsurance,” is sometimes used to refer to medical malpractice insurance. To avoid confusion, we should continue to use the already established term, “underinsurance,” as the label for the rapidly expanding menace of inadequate health care coverage.

Is Insurance Bureaucracy Lengthening Physician Workdays?

By Steve Jacob
Dallas/Fort Worth Healthcare Daily, July 21, 2014

The U.S. spends about three times as much on healthcare administration and insurance per capita as Canada. Brookings Institution economist Henry Aaron estimated in 2003 that the U.S. would save more than $213 billion annually in administration and insurance costs if it had a single-payer system similar to that nation’s.

In fact, the entire healthcare system is inflated with costly administrative tasks. According to the Institute of Medicine (IOM), the United States spends $361 billion annually on healthcare administration — double the treatment costs of heart disease and triple the cost of cancer. The IOM estimates half of these expenditures are unnecessary.

Aaron described the U.S. healthcare system as “an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.”

Donald Berwick, former director of the Centers for Medicare and Medicaid Services, estimated that needless administrative complexity created $107 billion to $389 billion in wasteful health-system spending in 2011. He cited “government, accreditation agencies, payers and others (who) create inefficient and misguided rules. For example, payers may fail to standardize forms, thereby consuming limited physician time in needlessly complex billing procedures.”

For example, Johns Hopkins Health System in Baltimore deals with about 700 different health plans, employers and other payers. Each payer has an annually negotiated rate for each service. Each also has different payment cycles and eligibility rules that must be tracked. The sheer complexity creates its own redundancies in several Johns Hopkins departments, which the organization calculated to be more than $40 million annually.

According to a study by a University of Massachusetts professor, a single-payer system would save the U.S. $1.8 trillion over a decade—including $592 billion in 2014 alone. Those savings would stem from eliminating the administrative burden of the current system and using the government’s bargaining power to drive down the cost of pharmaceuticals.

According to a 2008 study, 59 percent of U.S. physicians support a single-payer system. That is no doubt a measure of the enormous frustration physicians feel toward the nation’s insurance bureaucracy. In a 2011 survey of physicians who said they were “moderately to severely stressed or burned out on an average day,” the leading cause cited was the administrative demands of the job.

The AMA has been leading an effort to cut in half the number of medical claims paid incorrectly by large insurers.

The percentage of claims incorrectly processed by health plans fell for the third straight year, to about 7 percent, in 2013, according to the AMA’s sixth National Health Insurer Report Card. That compares with a 2011 rate of more than 19 percent. The AMA estimated that more than $43 billion could have been saved if commercial insurers had paid all claims correctly since 2010.

The AMA created an Administrative Burden Index to rank insurers based on unnecessary costs. The index rates commercial plans using a “star rating” based on delayed remittance, prior authorization requirements, claim edits and claim denials.

According to its fifth annual National Health Insurer Report Card, error rates for private health insurers on paid medical claims dropped from 19.3 percent in 2011 to 9.5 percent in 2012. This improvement resulted in $8 billion in health system savings, because of the reduction in unnecessary administrative work to reconcile errors. While dramatic improvements were made in 2013, the commercial health-insurance industry still paid the wrong amount for nearly 1 out of 14 medical claims.

Doctors’ workdays

According to a 2010 American Medical Association (AMA) survey, a typical physician office spends 20 hours a week on insurance administrative tasks. It found that more than 2 out of 3 physicians typically wait several days for pre-authorization for medications and 1 out of 10 wait more than a week. A 2009 Health Affairs study found that interactions with insurance companies cost U.S. physicians $23.2 billion to $31 billion a year.

The average physician spends nearly three weeks per year dealing with health plans. In addition, 23 weeks of nursing staff time and 44 weeks of clerical staff time are spent on insurance claims.

Physicians spend 45 percent of their workday outside the exam room, much of it devoted to documentation and follow-up. Every minute a physician spends outside direct patient care costs the average practice $4 to $6 in lost revenue.

With the widespread use of electronic health records (EHR), Health Affairs researchers estimated that at least half of a physician’s time during a patient visit is spent on low-value clerical work.

Insurance companies have been employing tactics reminiscent of managed care in the 1990s, according to The Wall Street Journal. They subtly are erecting more barriers to care through tighter networks and by requiring more referrals and authorizations prior to care.

In 2012, the AMA found a 23 percent increase over 2011 in claims that reflected an insurer pre-authorization review—increasing the total to 4.7 percent of claims. The AMA estimated that prior authorization policies added $728 million in administrative costs in 2012.

Doctors must follow strict health-plan guidelines or they will not be reimbursed. State and federal health-insurance programs continue to squeeze the rates they pay physicians. Many practices lose money when they treat Medicaid and Medicare patients.

Physicians have to hustle to cover their costs. Laurie Green, a San Francisco obstetrician and gynecologist, told the Journal, “I live my life in seven-minute intervals.” She estimated that she needed to earn $70 every 15 minutes to cover her office overhead.

Physicians’ workdays generally are brutal. A Philadelphia practice kept track of what its physicians did in a day’s time. The average doctor saw 18 patients, wrote 12 prescriptions, reviewed 14 consultation reports from specialists, studied 11 X-rays or other imaging reports, and wrote or answered 17 emails.

Of the time physicians spend outside of office visits, about one-third was spent on activities that saved an average of five visits a day, such as telephone calls and email communication with patients. The good news is that these activities reduce health-care costs, save time for patients and improve care coordination. The bad news for physicians is that these activities usually are not reimbursed.

Primary care, especially, is larded with unpaid work. An Archives of Internal Medicine study found that a typical general internist’s day included 70 laboratory tests, images and consultations; writing or signing 31 prescriptions; responding to seven messages related to patient care; and reviewing, editing and signing 17 electronic health records. This work is largely invisible and off the clock. Such administrative tasks add to an already crushing workload and can hasten physician burnout.

According to a 2013 physician survey by Medscape, nearly 40 percent reported at least one symptom of burnout, such as emotional exhaustion and a diminished sense of accomplishment. The top two reasons were “too many bureaucratic tasks” and “spending too many hours at work.”

Many health systems unwittingly are pushing more work onto the physician because they fear violating institutional or federal compliance issues. In some cases, only the physician can turn on the computer, reconcile a patient’s medications, record the history, enter orders for tests, compose the after-visit summary and complete the billing invoice—tasks that could be done by other staff members.

More than 3 out of 4 physicians believe insurers demand excessive pre-authorization for tests, procedures and medications, according to an AMA survey. More than 1 out of 3 have a rejection rate of 20 percent for first-time pre-authorization on tests and procedures, and more than half of physicians have a 20 percent rejection rate on prescriptions. About half of physicians have difficulty obtaining pre-authorization from insurance plans. About 2 out of 3 typically wait several days for permission. About the same proportion report difficulty in determining which tests, procedures and medications require pre-authorization.

This kind of workflow leads to low physician satisfaction. Nearly 1 out of 3 primary-care physicians say they intend to leave their practices within two years. The irony is that most physicians find interacting with patients outside of reimbursed office visits satisfying, and this kind of activity clearly enriches the primary-care environment. Unfortunately, no one is footing the bill for it.

Providers are attempting to push back against administrative burdens by becoming more efficient in other areas. Two process-improvement methodologies, such as Lean and Six Sigma, have migrated from other industries into health care.

Is Insurance Bureaucracy Lengthening Physician Workdays?

ACA and racial and ethnic disparities

Barriers to Care in an Ethnically Diverse Publicly Insured Population: Is Health Care Reform Enough?

By Call, Kathleen T. PhD; McAlpine, Donna D. PhD; Garcia, Carolyn M. PhD, MPH, RN; Shippee, Nathan PhD; Beebe, Timothy PhD; Adeniyi, Titilope Cole MS; Shippee, Tetyana PhD
Medical Care, August 2014

Abstract

Background:

The Affordable Care Act provides for the expansion of Medicaid, which may result in as many as 16 million people gaining health insurance coverage. Yet it is unclear to what extent this coverage expansion will meaningfully increase access to health care.

Objective:

The objective of the study was to identify barriers that may persist even after individuals are moved to insurance and to explore racial/ethnic variation in problems accessing health care services.

Research Design:

Data are from a 2008 cross-sectional mixed-mode survey (mail with telephone follow-up in 4 languages), which is unique in measuring a comprehensive set of barriers and in focusing on several select understudied ethnic groups. We examine racial/ethnic variation in cost and coverage, access, and provider-related barriers. The study adhered to a community-based participatory research process.

Subjects:

Surveys were obtained from a stratified random sample of adults enrolled in Minnesota Health Care Programs who self-report ethnicity as white, African American, American Indian, Hispanic, Hmong, or Somali (n=1731).

Results:

All enrollees reported barriers to getting needed care; enrollees from minority cultural groups (Hmong and American Indian in particular) were more likely to experience problems than whites. Barriers associated with cost and coverage were the most prevalent, with 72% of enrollees reporting 1 or more of these problems. Approximately 63% of enrollees reported 1 or more access barriers. Provider-related barriers were the least prevalent (about 29%) yet revealed the most pervasive disparities.

Conclusions:

Many challenges to care persist for publicly insured adults, particularly minority racial and ethnic groups. The ACA expansion of Medicaid, although necessary, is not sufficient for achieving improved and equitable access to care.

http://journals.lww.com/lww-medicalcare/Abstract/2014/08000/Barriers_to_Care_in_an_Ethnically_Diverse_Publicly.8.aspx

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Comment:

By Don McCanne, MD

This is yet one more study that shows that insurance alone will not achieve equitable access to care, particularly for minority racial and ethnic groups. Let’s provide a little bit more perspective.

When we say that health care should be equitable, what do we mean? Does that mean that we compromise the quality of care for those who are receiving the very best in order to free up resources for those who are experiencing barriers to access? No, it means that we should bring everyone up to the same high standard. One important step is to improve the performance of the financing system by eliminating much of the administrative waste. That would free up resources that could be used to reduce the barriers of cost, coverage and capacity – barriers that the populations in this and other studies face.

Does equitable health care mean that we should prohibit allowing individuals to buy their way to the front of the queue? No, it means that we should use regional planning, capacity adjustment, and queue management techniques so that we reduce excessive queues for everyone.

Often the claim is made that there are many other socioeconomic factors besides insurance coverage that result in impaired access to care. That is true. Merely providing optimal coverage will not in itself correct all of the other factors. But in that claim is the implicit suggestion that we should accept deficiencies in coverage and access because we can’t fix the access problems anyway. That view represents an unacceptable ethical compromise in our current dialogue on reform.

Insurance systems that include financial barriers to care due to both cost sharing and uncovered services, and that impair access due to limitations of networks and limitations in regional capacity are a major cause of inequitable access and coverage. Creating an equitable financing system is the first and perhaps most important step in improving access to high quality care for everyone. Society has an obligation to address the other socioeconomic issues, but not by tossing aside the assurance that health care will be there for those who need it.

Are we getting enough bang for our healthcare buck? Hardly.

By Philip Caper, M.D.
Bangor (Maine) Daily News, July 17, 2014

The U.S. healthcare system costs each of us about twice as much as those in other wealthy countries. Are we getting our money’s worth? Not by a long shot.

According to the fifth and most recent of a series of reports spanning the past decade by The Commonwealth Fund, one of the world’s most respected independent health care think tanks, “the U.S. is last or near last on dimensions of access, efficiency, and equity” and last on overall quality of our system. The nations studied include Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States.

Although the U.S. does have some advanced medical technology, as do most of the other countries studied, we do a lousy job of getting it to many of our people, leading to our poor scores on access.

We don’t compare particularly favorably when it comes to quality either. We score relatively poorly on safe and coordinated care, and while we score well on access to (lucrative) specialized care (but not primary care), that access does not translate into better outcomes. “The U.S. ranks last overall with poor scores on all three indicators of healthy lives — mortality amenable to medical care, infant mortality and healthy life expectancy at age 60.”

The Commonwealth report goes on to observe that, “The most notable way the U.S. differs from other industrialized countries is the absence of universal health insurance coverage. Other nations ensure the accessibility of care through universal health systems and through better ties between patients and the physician practices that serve as their medical homes.”

Even though the Affordable Care Act does result in a modest expansion of coverage for many people, even if it were to work exactly as designed (which it won’t) it would leave 25 million to 35 million people uninsured. Many more are underinsured due to high deductibles and co-pays, and restrictive physician and hospital networks. Both impede access to timely care. This will still leave us trailing most if not all other wealthy countries in the overall performance of our healthcare system.

Which causes me to think about Medicare, the closest thing we have to a universal health insurance system. Once you qualify for Medicare, it is good for life without any means test, and without regard to age, health status, employment status, gender or place of residence.

That kind of security cannot be achieved through private insurance.

Medicare was enacted by Congress and signed by President Johnson on July 1, 1965. Because of its simplicity, Medicare was smoothly rolled out to 19 million beneficiaries on July 1, 1966. No confusing websites or glitchy software needed. Since then, it has proven to be one of the most effective and efficient federal programs ever enacted, and has become politically untouchable. Even the most conservative politicians refuse to attack it, although some try to make the spurious (and ridiculous) claim that it is not really a federal program.

By following Medicare’s example, we could do a lot better. It would be very nice if we lived in a political culture where we could simply improve the ACA by replacing it with Medicare for everybody. But we don’t and won’t — at least not yet. We will have to wait a few more years, until the bewildering complexity, unfairness and arbitrariness of the ACA become more apparent to more people.

That shouldn’t stop us from preparing for the inevitable. The next landmark in the evolution of U.S. health care policy could come as soon as 2017, when the ACA provides the states an opportunity to replace many of its provisions with a simplified and improved system of their own.

Vermont has already enacted legislation that starts it on the path to do just that. Maine could be in the next wave of states to follow their example. If the Legislature is unwilling or unable to do that, the people could, through our initiative process.

We should celebrate the 49th (and soon 50th) anniversary of Medicare by starting the process of furthering the national movement toward universal health care as a human right.

We could create a simpler, more efficient, more equitable and less costly healthcare system that would turn us away from our current system of money-driven medicine and back toward the goal of healthcare with the sole mission of preventing and healing disease.

It would be the right thing to do.

Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be reached at pcpcaper21@gmail.com.

Are we getting enough bang for our healthcare buck? Hardly.