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OECD compares U.S. with other high-spending countries

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OECD compares U.S. with other high-spending countries

Health-care expenditure and health policy in the USA versus other high-spending OECD countries

By Luca Lorenzoni MSc, Annalisa Belloni MSc, Franco Sassi PhD
The Lancet, July 1, 2014

Summary

The USA has exceptional levels of health-care expenditure, but growth has slowed dramatically in recent years, amidst major efforts to close the coverage gap with other countries of the Organisation for Economic Co-operation and Development (OECD). We reviewed expenditure trends and key policies since 2000 in the USA and five other high-spending OECD countries (Canada, France, Germany, the Netherlands, and Switzerland). Higher health-sector prices explain much of the difference between the USA and other high-spending countries, and price dynamics are largely responsible for the slowdown in expenditure growth. Other high-spending countries did not face the same coverage challenges, and could draw from a broader set of policies to keep expenditure under control, but expenditure growth was similar to the USA. Tightening Medicare and Medicaid price controls on plans and providers, and leveraging the scale of the public programmes to increase efficiency in financing and care delivery, might prevent a future economic recovery from offsetting the slowdown in health sector prices and expenditure growth.

Health expenditure levels

The higher health spending reported in the USA is not simply a result of the country’s greater wealth or of the age structure of its population. Even the larger prevalence of risk factors — including obesity — explains only a small part of the reported differences. OECD Health Care Quality Indicators show that the US health-care system is doing well in several areas (eg, cancer care), but less well in others (particularly the primary care sector). Overall, the quality of the care provided does not seem to explain the higher health expenditure in the USA.

OECD work on comparative price levels in health suggests that the prices, rather than volumes, of health services contribute the most to explaining the higher US spending, in line with the conclusions of scholarly work.

Probable explanations for health price levels exceeding general price levels in the USA include a more intense use of health-related technologies, low productivity, decentralised price negotiations, fragmentation in the insurance market, and a high level of provider concentration. In a private insurance or provider model — as in the Netherlands and Switzerland (with compulsory insurance coverage), and the USA (with voluntary insurance coverage) — a high amount of choice is combined with weaker cost control. In particular, the USA — excluding Medicare — does not use a centralised authority to set health spending budgets or negotiate prices with providers. A public-contract model — as in Canada, France, and Germany — gives a central authority (national government or social insurance administration) more leverage over health-care providers, generally with lower administrative costs than multiple-payer systems.

From the Discussion

The USA is an outlier in the scenery of OECD health-care systems, for its staggering levels of expenditure, the extent of fragmentation of its system and the sheer complexity of its administration, the power of vested interests, and the large number of people left without adequate health insurance coverage. However, during the period examined in this paper, characterised by a long and severe recession with a fluctuating economy and employment rates, differences in growth rates between the USA and other high-spending countries were substantially reduced. Great efforts have been made to sustain coverage and lift the USA from the bottom of the OECD coverage league table. Efforts have also been made to contain further growth in health-care expenditure, with rates falling in line with those of other high-spending OECD countries. This progress is no reason for complacency, and more and bigger efforts are needed in the years to come, particularly in controlling the main driver of higher health-care expenditure in the USA — ie, health sector prices. The risk that a future sustained economic recovery, and the probable general price increases that would come with it, might offset the gains made in recent years is real and should be anticipated. Medicare and Medicaid price controls on plans and providers, such as adjustments in payments to Medicare Advantage managed care plans, or DRG base rate adjustments to account for expected productivity growth in the general economy, could be tightened further and extended, particularly for pharmaceutical products and physician fees, without resorting to measures affecting service use, which would restrict choice or coverage. More daring measures could be used in the hospital sector, such as all-payer fees negotiated at state level (eg, Maryland’s Health Service Cost Review Commission), global budgets, and reference prices, although these would involve major changes in the US health-care market approach. Examples of effective measures are available from other countries, which might bring the USA further in line, in terms of both health-care expenditure and coverage, notwithstanding the relatively smaller effect of policy changes in the USA, in view of the different relation between insurance or financing and delivery systems. Changes gradually introduced towards the end of the study period, which will probably affect expenditure growth in the future, include bundled payments, reference prices for hospital care, and the introduction of Accountable Care Organisations to realign provider incentives, with a potential for quality improvement, in addition to cost containment. However, more evidence is needed about the complex causal pathways that link health-care expenditure and use with health outcomes, to avoid possible detrimental effects on population health from tightened controls on health-care expenditure.

[The authors are from the Health Division, Organisation for Economic Co-operation and Development (OECD), Paris, France.]

http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)60571-7/fulltext

Press release – The Lancet: “Dramatic slowdown in growth of US health expenditure over last decade closes gap between USA and other high-spending countries”: http://www.eurekalert.org/pub_releases/2014-06/tl-tld062714.php

Press release – OECD: “After Decline in U.S. Health Expenditure Growth, OECD Sees Risk of Spending Uptick in Recovery”: http://www.oecd.org/washington/lancet-health-unitedstates.htm

Comment:

By Don McCanne, MD

This OECD study comparing health care spending and health policy in the United States with five other high-spending OECD nations confirms that health care financing systems undergo continual revision. Yet the United States is unique in that our policy changes have not moved us from first position on per capita spending nor from last position on the proportion of the population that is covered.

As the authors state, “the USA is an outlier in the scenery of OECD health-care systems, for its staggering levels of expenditure, the extent of fragmentation of its system and the sheer complexity of its administration, the power of vested interests, and the large number of people left without adequate health insurance coverage.” Although some slowing in health care spending has occurred, future spending trends are uncertain.

The authors suggest some possibilities for reform, but they are based on maintaining the basic financing structure that was expanded but not fundamentally altered by the Affordable Care Act (ACA). In fact, some of their suggestions were derived from ACA.

This paper is helpful since it describes the dynamics of health financing policy in several wealthy nations. We can always learn from others, even if the lessons are on what not to do. On the latter point, other nations have had much to learn from us even if they have not applied the lessons well (e.g., unwise attempts at privatization schemes).

The obvious flaw in this paper is that the authors did not discuss more comprehensive reform proposals such as a single payer national health program. They do, however, note that the United States “does not use a centralised authority to set health spending budgets or negotiate prices with providers,” whereas a public-contract model used in other nations “gives a central authority (national government or social insurance administration) more leverage over health-care providers, generally with lower administrative costs than multiple-payer systems.”

Doesn’t it seem that this is the lesson we should be receiving from other nations? Doesn’t this cry out for single payer in the United States? Of course, we already knew that. Our policy failure is a political failure. We will not get the policy right until we change our politics.

‘Private option’ won’t help poor

By Adam Gaffney, MD
 USA Today, July 7, 2014

Traditional Medicaid will remain a crucial safety net

Living in poverty is hard enough; having to face sickness without insurance while doing so is a fate no one should bear.

By expanding Medicaid to all earning less than 138% of the poverty level, the Affordable Care Act will help many avoid this outcome. Unfortunately, the Supreme Court ruled that states can opt out of the expansion, and 24 states have done that. Arkansas and Iowa, on the other hand, have won federal waivers to pursue a “private option” as a compromise, and other states may follow.

Private option Medicaid would give low-income families vouchers to purchase private insurance, instead of enrolling them in traditional Medicaid.

Why is that a problem?

  • First, private option plans impose new co-pays for doctor visits and medications on the dubious premise that patients need more “skin in the game.” But co-pays often deter vital care: Heart attack victims delay coming to the ER, or children forgo asthma medicines. And co-pays are especially hard on low-income families.
  • Second, the private option is inefficient. Insurers have much higher overhead than public programs such as Medicaid or Medicare. Privatized “Medicare Advantage” plans take more than 13% for overhead (traditional Medicare is closer to 2%), gaining large profits at taxpayer expense.

The private option has also been used to make stealth benefit cuts: Iowa’s plan eliminates the transportation benefit that helps patients get to treatments such as dialysis.

Medicaid is far from perfect, but the private option won’t be an improvement. Medicaid patients, for instance, often have trouble finding doctors. But private option Medicaid plans, like many plans on the health exchanges, have very narrow doctor and hospital networks.

“Churning” is another problem: Families must often change providers as they move in and out of Medicaid eligibility. But churning will persist under the private option as people change jobs or plans change provider networks.

To truly address Medicaid’s problems, we need a universal single-payer system. But until that is achieved, traditional Medicaid will remain a crucial safety net. We must fight to expand it, but also to protect it.

Adam Gaffney is a physician and writer in Massachusetts who blogs at theprogressivephysician.org.

http://www.usatoday.com/story/opinion/2014/07/07/medicaid-private-option-adam-gaffney-theprogressivephysician-editorials-debates/12318763/

Is Gingrich’s prediction of Medicare withering on the vine about to come true?

Gingrich’s Correct Prediction About Medicare’s Future

By Austin Frakt
The New York Times, July 7, 2014

On Oct. 24, 1995, Newt Gingrich made an assertion about what would happen to Medicare if its beneficiaries could choose between it and private plans. Medicare is “going to wither on the vine because we think people are voluntarily going to leave it — voluntarily.” Though he later walked this statement back, many observers viewed it as an attack on the program.

In fact, over the nearly two decades since, Mr. Gingrich’s claim has undergone something of a test — and it has largely passed it.

In that time, Medicare beneficiaries have enjoyed various levels of access to private alternatives to traditional Medicare through the Medicare Advantage program and its predecessors.

Today, 30 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan, more than at any time in history.

The surge in Medicare Advantage enrollment seems surprising. With payments to plans cut by the Obama administration, history suggests enrollment should go down, not up. What, then, could explain the growing popularity of private Medicare plans?

One answer is that baby boomers, who are just entering Medicare-eligibility age, are more accustomed to the types of insurance Medicare Advantage offers, such as H.M.O.s, than their predecessors were.

Another answer is that prior generations of retirees may have been more likely to have had coverage from former employers that wrap around traditional Medicare, filling in its gaps. This coverage has become less common as employer-sponsored retirement benefits have eroded generally. Since Medicare Advantage plans generally offer extra benefits, financed by the generous government subsidies they receive relative to traditional Medicare, perhaps new retirees are turning to them in greater numbers for more complete coverage.

As Medicare Advantage grows, traditional Medicare necessarily shrinks and its influence on the American health care system weakens. If the trend continues, policies, including those in the Affordable Care Act, designed to use traditional Medicare as a tool to reshape health care delivery for all Americans may become less potent. Is there a tipping point at which traditional Medicare ceases to matter?

If so, we’re probably not there yet, but we may be moving toward it. Unless things change, the data suggest Mr. Gingrich may have been right in a way: Given a choice between traditional Medicare or more benefits from more highly subsidized private plans, Medicare beneficiaries may well be willing to let the former wither on the vine.

Reader comments:

Don McCanne 
San Juan Capistrano, CA

Although the higher payments to the Medicare Advantage plans are being reduced, the Obama administration, with encouragement from Congress (responding to AHIP’s intense lobbying campaign), has offset some of the reductions with innovative measures to increase payments to the private insurers.

That is perpetuating the blatant unfairness wherein taxpayers are paying more for those enrolled in the private plans than they are for those enrolled in the traditional Medicare program.

If it is right that we pay the private insurers more, then in all fairness we should be paying more for those in the traditional program so that everyone receives comparable benefits.

Fairness should be of the highest priority when our elected politicians are spending our tax dollars. Once we get that right, it will be no contest when it comes to comparing the traditional Medicare program with the private Medicare Advantage plans that divert a large portion of funds to profound administrative excesses, wasteful marketing, excessive executive compensation packages, and profits for superfluous passive investors, as they take away our choice of health care providers.

If we voters insist on fairness, it will be the private Medicare Advantage plans that will wither on the vine.

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Further comment by Don McCanne

Maintaining the integrity of the traditional Medicare program is important because it serves as an example of the capabilities of the government in managing a public insurance program. If the reputation of Medicare is trashed it would provide powerful rhetoric for the opponents of single payer.

The Medicare plus Choice program was established to provide private health plan competition to the traditional Medicare program, supposedly bringing us higher quality at lower cost. The experiment proved to be a failure since it was clear that the private insurers were unable to deliver on that promise. The privatizers did not give up. The program was revitalized as Medicare Advantage, but with a new twist. To supposedly prove that the plans could provide higher quality at lower cost, Congress cheated. They gave the plans an extra 14 percent over the costs of traditional Medicare, thinking that we wouldn’t notice.

The plans became popular mainly because they could entice Medicare beneficiaries with extra benefits, though those benefits were only a small part of their extra payments. That was enough to lure more enrollees. Recognizing that the plans were being paid too much, and struggling to find ways to pay for the Affordable Care Act, Congress included in the Act a gradual reduction in these Medicare Advantage overpayments.

It did not take long for the insurance industry to organize protests against Obama’s “cuts to Medicare.” The Obama administration, under pressure from members of Congress, responded with three years of accounting gimmicks that would offset some of the reductions.

Not only is our tax money being unfairly diverted to the private insurers, while neglecting those in the traditional program, a portion of the Part D premiums paid by traditional Medicare beneficiaries is also being diverted to the provision of more benefits for the Medicare Advantage patients – benefits that those in the traditional program do not receive.

It is important that we publicize this injustice so that the blatant cheating will end. Once that happens, the Medicare Advantage plans will have proven to be a failed model of health care financing. Hopefully then people will listen when we show them that a publicly administered and financed program – a single payer system – provides much greater value in health care.

Single payer affirmed by court decision

By Daniel J. Schaffer, M.D.
The Spokesman-Review (Spokane, Wash.), Letters, July 7, 2014

The recent U.S. Supreme Court decision in the Hobby Lobby case points out yet another flaw in the employer-based health insurance model of paying for health care. The delivery of health care should be based on the needs of the patient, not the religious convictions of their employer. A publicly funded, single-payer system would relieve employers of the necessity of making difficult decisions like this because they would be out of the health care business entirely.

It remains a mystery to me why any employer would want to be burdened with the administrative hassle and expense of providing health care, when this should be the responsibility of society as a whole. Their competitors in other countries do not have this burden. Employers should be marching in the streets demanding a publicly funded system. It is in their financial best interest.

Dr. Daniel J. Schaffer resides in Spokane.

http://www.spokesman.com/stories/2014/jul/07/single-payer-affirmed/?print-friendly

Medicare for all simplifies health care

By William D. Clark, M.D.
Portland (Maine) Press Herald, Letters, July 3, 2014

In his June 22 articles (“When college athletes get hurt, whose wallets should feel the pain?” and “USM ‘doing responsible things’ for athletes”), Mark Emmert explores the questions “Who pays?” and “Is it fair?” for injured University of Maine athletes. He interviews UMaine officials, caregivers, injured athletes and outside experts.

Any uninsured student entering UMaine must pay $3,000 for health care coverage, in addition to tuition. For serious injuries, like those Emmert describes, the athlete pays $10,000 for deductibles that generate seemingly endless mountains of bills.

UMaine buys insurance that kicks in after the deductible, paying $124,000 for it. UMaine pays $340,000 to provide injured athletes “free rehabilitation services.” Is UMaine doing enough for its athletes? Is it fair to other UMaine students to add a share of the $464,000 to their tuition?

We could establish a less complex, fairer and cheaper option than the one Emmert describes at UMaine. Health policy experts, economists, physicians and Congress people urge us to provide everyone with “improved Medicare for all.” Medicare for All is simple – from your first breath to your last one, you have access to private care, with choice of physician, hospital and rehabilitation facility.

Everyone pays when working (not when sick!), and everyone has the same comprehensive benefit package. It’s cheaper, and experts say more than $350 billion would be saved by changing from a profit-oriented system to a patient care-oriented one. The savings more than offset the $110 billion experts estimate would be required for health care for the currently uninsured.

Do you know that more than $30 million went to Aetna’s CEO in 2013? Why not offer what every other developed country does, and provide taxpaying citizens, UMaine athletes and other students a simpler, equitable and less costly health care option?

Explore “simpler, fairer, cheaper” options at http://maineallcare.org.

William D. Clark, M.D., is managing editor at DocCom.

Letter to the editor: Medicare for all simplifies health care

Does America have the political maturity for single-payer healthcare?

By Michael Hiltzik
Los Angeles Times, July 3, 2014

Responding to my post about how the Supreme Court’s Hobby Lobby ruling demonstrates the necessity of a single-payer healthcare system, Ezra Klein raises the specter of unrestrained political interference in healthcare decisions. 

“A Republican-led government could decide that taxpayer dollars shouldn’t be going to cover contraception at all, and then a single-payer system means no one’s insurance covers contraception,” he wrote. This is “one of single-payer’s real problems.”

This is an important issue. Americans gain nothing if they evict insurance bureaucrats from the operating room only to make room for preening politicians.

But experience — in the U.S. and abroad — suggests that Klein’s concern is overwrought. It’s based implicitly on three assumptions, none of which is especially telling: (1) that every debate about medical treatments will be politically explosive; (2) that the U.S. political system will be unable to resolve such debates, or will tend to resolve them by favoring the most retrograde choice; and (3) that it’s impossible to inoculate from political interference decisions about what a government-funded healthcare system covers. 

But it’s really based on one overarching question: What about abortions? 

When people talk about political interference in health and medical affairs, they’re really talking about abortion. That’s the medical procedure that draws the most political fire — in fact, among mainstream medical procedures, it’s the only one that draws major political fire. Contraception in general is politically noncontroversial — the court’s Hobby Lobby decision didn’t question its legality, or even its morality, in the least.

Klein acknowledged this through his example of how politics can influence a government healthcare program: He cites Medicaid, which doesn’t cover abortions — but does cover contraception. 

That said, Klein is right when he observed that a system in which the government pays for all medical care “heightens the stakes” in the politics of healthcare.

The first question that needs to be answered about that is whether it’s necessarily bad. Judgments by a government-funded system about what treatments are paid for, and for how much, are at least partially political issues, and politics should play a role in deciding them. There are drawbacks to this, of course, but that just points to the next question: Compared to what?

Before the Affordable Care Act — and to a great extent still — those issues were decided by commercial entities, the insurers. Inevitably these decisions have been infected by self-interest. Political discussions, however, will reflect (at least ideally) the preferences of the broad public.

How would that work in the case of contraception? Opinion polls show that contraception has wide public support; what are the chances that Congress would willingly refuse treatment that has solid support and directly affects half the voting population? 

The nature of most medical procedures is, in fact, not politically controversial. The only issues are their cost and efficacy. But single-payer systems around the world have developed systems for resolving those issues. As I reported in 2009, Britain’s National Health Service relies in part on the National Institute for Health and Care Excellence, or NICE, which uses a measure known as the quality-adjusted life year, or QALY, to judge the cost-effectiveness of drugs and treatment.

The idea is to gauge the cost of extending a patient’s life by a year, adjusted by the quality of life for that year. NICE assesses drugs and treatments by their cost per QALY; the institute traditionally has endorsed those that cost less than 20,000 pounds sterling per QALY (about $34,000), and has tended to frown on those exceeding 30,000 pounds (about $51,000).

NICE’s role is advisory, and Parliament certainly has the ability to respond to public uproars in favor of a treatment the institute has rejected. But that’s as it should be.

And isn’t it preferable for judgments about the nature and efficacy of medical treatments to be reached publicly, say after congressional hearings, rather than being reached in corporate boardrooms or, even worse, to be based on ignorance and misinformation? 

Consider the birth control methods at the heart of the Hobby Lobby case. The ACA mandates 20 contraceptive methods for coverage; Hobby Lobby’s owners objected to four of these because they were what the business owners called “abortifacients” — drugs or devices that promote abortion.

But medical science says that’s erroneous: The four methods aren’t abortifacients. But the business owners were able to sell their scientifically ignorant assertion to a science-challenged Supreme Court majority. Under a single-payer system, however, that assertion would be judged by the weight of scientific evidence, with experts making their case in public. Which method do you think is more likely to result in a scientifically valid assessment?

This picture of how politics would work in a single-payer regime is, admittedly, idealistic. Emotion and politics will always play a role in a public-funded healthcare system’s judgments. So some safeguard would be needed to moderate the influence of political fashion or public delusion. (Anti-vaccination movement, I’m talking about you.)

Here the ACA shows the way. The act left the decision about what medical services to designate as mandated preventive care to the Department of Health and Human Services. HHS consulted the Institute of Medicine, an arm of the nonprofit National Academies, which proposed the roster of contraceptives and other services. Something like the Institute of Medicine certainly could be put in place to function as an independent, objective arbiter of medical services to be paid for under a single-payer system.

The ultimate question about single-payer in the U.S. really is whether our political system is mature enough to handle it. Can the influence of demagogic politicians be limited? Can Congress keep from meddling in every coverage decision brought before the healthcare program’s administrators? 

Those who project their doubts about these questions into the limitless future do so through the prism of today’s partisan disaster in Washington. But that’s not a permanent condition — sooner or later, the gridlock will have to give, because the public won’t stand for total inaction forever. And single-payer by any reckoning will take years, maybe decades, to enact and implement. That’s more than enough time for the political system to grow out of its current childishness.

More to the point, only a mature system will be able to enact single-payer, so it’s pointless to worry about it being hampered by childishness once it’s in place.

Let’s think again about abortion. There’s no point in worrying that a single-payer program would bar abortion — the thing to worry about is that the abortion debate will be an obstacle to enacting a single-payer plan at all. So clearly, the abortion issue will have to be resolved first.

Ezra Klein is right. Single-payer does have many virtues, and it does have some problems.

But under our current system post-Hobby Lobby, scientifically uninformed employers can interfere in the medical decisions of thousands of their workers. Obviously, that’s the worst of all possible worlds.

Single-payer’s problems, however, are either resolvable or conjectural, while its virtues are manifest. We should keep our eye on those, and worry about the problems when the time comes.

http://touch.latimes.com/#section/-1/article/p2p-80710386/

Private Medicare Part D insurers pay 69% more for brand drugs than does Medicaid

Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices

United States Government Accountability Office (GAO), June 2014

GAO found that Medicaid paid the lowest average net prices across a sample of 78 high-utilization and high-expenditure brand-name and generic drugs when compared to prices paid by the Department of Defense (DOD) and Medicare Part D. Specifically, Medicaid’s average net price for the entire sample was $0.62 per unit, while Medicare Part D paid an estimated 32 percent more ($0.82 per unit) and DOD paid 60 percent more ($0.99 per unit). Similarly, Medicaid paid the lowest net price for the subset of brand-name drugs in the sample, while DOD paid 34 percent more and Medicare Part D paid an estimated 69 percent more. Medicaid also paid the lowest net price for the subset of generic drugs, while Medicare Part D paid 4 percent more and DOD paid 50 percent more.

GAO found that multiple factors affected the net prices paid by each program. Specifically, a key factor for the entire sample and the brand-name subset was the amount of any post-purchase price adjustments, which are the refunds, rebates, or price concessions received by each program from drug manufacturers after drugs have been dispensed to program beneficiaries. These price adjustments ranged from about 15 percent of the gross price for Medicare Part D to about 31 percent for DOD, and nearly 53 percent for Medicaid across the entire sample. The gross prices each program negotiated with pharmacies and the magnitude of beneficiary-paid amounts also contributed to differences in net prices paid by the three programs, but to a lesser degree.

In some cases, VA beneficiaries can obtain drugs on a fee-for-service basis through non-VA facilities. These make up a very small proportion of VA drug expenditures (less than 1 percent in fiscal year 2010). Therefore we did not include VA in this report comparing prices paid to retail pharmacies.

The statutory framework allowing each program to obtain post-purchase price adjustments contributes to the wide range of percentages observed. Medicaid’s federally mandated rebates apply to virtually all drugs, while DOD’s refunds only apply to certain drugs (i.e., primarily brand-name drugs). Furthermore, we found that even when DOD received a refund for a given drug, DOD’s per-unit refund amount was less than Medicaid’s per-unit rebate for most of the drugs in our sample even though we applied only the federally mandated (i.e., URA-based) rebates for the calculation of Medicaid net prices. If we had been able to accurately apply the Medicaid state supplemental rebates, the per-unit Medicaid rebate amounts would be even larger (i.e., a greater percentage of the gross unit price) than we report. Finally, we found that Medicare Part D obtained the lowest per-unit price adjustments among the three programs. In contrast to the statutory authority allowing DOD and Medicaid to collect specific refunds and rebates, Medicare Part D plan sponsors rely on independent negotiations to obtain price concessions from drug manufacturers. As we have previously reported, plan sponsors have noted limitations on their ability to negotiate price concessions for some drugs due to formulary requirements set by CMS, lack of competitors for some drugs, or low utilization for some drugs that limit incentives for manufacturers to provide price concessions.

http://www.gao.gov/assets/670/664521.pdf

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Comparison of DOD and VA Direct Purchase Prices

United States Government Accountability Office (GAO), Apr 19, 2013

When GAO compared prices paid by the Department of Defense (DOD) and the Department of Veterans Affairs (VA) for a sample of 83 drugs purchased in the first calendar quarter of 2012, DOD’s average unit price for the entire sample was 31.8 percent ($0.11 per unit) higher than VA’s average price, and DOD’s average unit price for the subset of 40 generic drugs was 66.6 percent ($0.04 per unit) higher than VA’s average price. However, VA’s average unit price for the subset of 43 brand-name drugs was 136.9 percent ($1.01 per unit) higher than DOD’s average price. These results were consistent with each agency obtaining better prices on the type of drugs that made up the majority of its utilization: generic drugs accounted for 83 percent of VA’s utilization of the sample drugs and brand-name drugs accounted for 54 percent of DOD’s utilization of the sample drugs. DOD officials told GAO that in certain circumstances they are able to obtain competitive prices for brand-name drugs – even below the prices for generic equivalents – and therefore will often preferentially purchase brand-name drugs.

http://www.gao.gov/assets/660/654019.pdf

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Comment:

By Don McCanne, MD

These two GAO reports explain prices that the federal government pays for drugs and the mechanisms for pricing of those drugs within the Department of Veterans Affairs, Medicaid, Department of Defense, and Medicare Part D programs. The mechanisms are complex, and you have to read the full reports to fully understand them.

The bottom line is that government agencies are far more effective in negotiating optimal pricing than are the private insurers that administer the Medicare Part D program. As an example, the Medicare Part D insurers paid 69 percent more for brand-name drugs than did Medicaid.

The private Part D plan sponsors tout their effectiveness in using market principles to obtain best prices – supposedly the reason for their existence –  yet they complain that they have not been as effective as the government because of “formulary requirements set by CMS, lack of competitors for some drugs, or low utilization for some drugs that limit incentives for manufacturers to provide price concessions.”

Formulary requirements? The government agencies include in their formularies the drugs that patients need. The private insurers attempt to exclude from their formularies drugs that do not provide optimal profit opportunities. Complaining about “formulary requirements set by CMS” does not explain their inability to to obtain best prices for the government since the government has its own de facto formulary requirements for the VA, DOD and Medicaid programs.

Lack of competitors for some drugs? The government agencies also negotiate within the same pharmaceutical environment wherein there is a lack of competitors for some drugs.

Low utilization for some drugs that limit incentives for manufacturers to provide price concessions?  The government agencies also include low utilization drugs in their formularies.

Medicare Part D was designed based on the fraudulent contention that private marketplace dynamics are more effective then government negotiation in obtaining maximum value – a position that wastes government/taxpayer funds by paying excessive prices in the private sector compared to the price concessions that the government can obtain. We would not be tolerating this fraud if we had a properly designed single payer national health program.

Godzilla has risen: The insurance industry under the ACA

By Emily Dalton, M.D.

When inquired if Godzilla was “good or bad,” producer Shogo Tomiyama likened it to a Shinto “God of Destruction” which lacks moral agency and cannot be held to human standards of good and evil. “He totally destroys everything and then there is a rebirth; something new and fresh can begin,” he said.

Despite all the hopes many of us had for the Affordable Care Act (ACA), the current system of medical insurance is a dysfunctional nightmare. I should know, because I am in the unique position of experiencing it from three perspectives simultaneously: that of a patient who uses an insurance plan, that of a small business owner who purchases insurance for a group of employees, and that of a physician who contracts with and gets paid by insurance companies.

As a patient, I am tricked by the expensive insurance plan I bought. Even though the card says “HSA 2000,” the deductible for my family is actually $4,000. After that the insurance only pays for 70 percent of covered charges when initially we were told 80 percent.

When I call my insurance company to address problems, I must make sure that I have several hours of free time, so that I can stay on hold long enough to get through to the low level representative who has little power to do anything. The disclaimer “Description of covered benefits is not a guarantee of payment” makes me fearful and insecure. I am at the mercy of large, for-profit corporation that is beholden to shareholders and run by greedy CEOs who do not care about me.

Having insurance means little anymore. Deductibles are high, share of costs are high, and many benefits are simply not covered. Deny, deny, deny! The company has so many devious ways of denying payment that even a sophisticated health care “consumer” can be taken by surprise. The reason for denial could be the type of treatment (no counseling for you!), or lack of a contract with a specific provider, or that your medication is non generic, or not on formulary.

Deductibles can vary depending on the type of service: medical, pharmacy, durable medical, or mental health (don’t even mention dental or vision). After my insurance denied the fourth claim submitted, I realize what is going on. In the past insurances could kick you off for getting sick or refuse to accept you for having a pre-existing condition, but now they are legally obliged to accept all comers. However, they have found a new way to shed their undesirable patients: balk, deny, hassle and ignore you until you willingly transfer your diseases to another company. Ah, insurance is wonderful – just don’t get sick!

As a small business owner, I have over 25 employees, most of whom rely on me to provide insurance. Over the past decade, we dread the arrival of each new year, because the insurance plans offered previously are cancelled and replaced by more expensive plans with fewer benefits. Typically we see the price of premiums increase by 25-40 percent. The plans are so complicated we can’t even understand them, and we have three full time medical billing specialists on staff. The alphabet soup of HMOs, EPOs, PPOs, HSAs is overwhelming, the rules that regulate the deductibles, copays, share of cost, prior authorizations and formularies can be mind-boggling, and even if you understand them, remember: Descriptions of benefits are not a guarantee of payment.

As a physician, I have had no end of problems dealing with the nine different insurance companies with which we have contracts. Our office has three full-time employees whose job it is to make sure the claims we send in get paid correctly, each according to its own set of terms. It seems that any reason is good enough for an insurer to underpay or deny payment. If we don’t catch the mistakes, we lose out.

I pay my staff their hourly wage as they beg, bicker and bargain so we can get reimbursed. Sometimes we call the California Medical Association to get help, and sometimes we yell at our insurance broker, but we don’t often reach out to the understaffed, overburdened Department of Insurance or the Department of Managed Health Care. I also pay my staff to overcome other hurdles and barriers the insurance industry has created like “prior authorizations” that are required before patients can get their medications, consults or procedures.

When the ACA was rolled out, our office was also offered a very low reimbursement rate to see a certain insurer’s Covered California patients, so we declined the contract. However, that insurer gave patients deceptive insurance cards that looked identical to those of our contracted patients, and we were also falsely promoted as contracted providers on their website.

Our office and our patients did not find out who had Covered California status and who had regular status until bills were denied, and it fell upon my staff to inform parents that their insurance had not covered their costs and that they owed us money. Dumbfounded and dismayed, families wept and raged at our medical billers.

My newest employee quit because she felt she could not continue in a job that was so hurtful to young families. After sending out patient after patient in tears, she decided the bad karma invoked by performing her duties could not be justified, and she decided to move on to a happier job. When things reach a point where your employees feel like they will face eternal damnation just for doing their job then the system is broken.

Every time the company refuses to pay for a procedure, consult or a medication, the company gets to keep the money! Every time the company suckers some poor clinic into accepting low rates, the company gets to keep the money! Every time the company “forgets” to pay a claim, the company gets to keep the money! Each time the company raises premiums, the company gets to keep the money! The worse they behave, the more money they get. Are we crazy to tolerate such a system?

The Affordable Care Act, despite the best of intentions, has fortified a monster. By mandating that everyone purchase insurance, the industry is stronger and feels emboldened to take even more advantage of patients and health care providers. Exponentially larger and more powerful than the agencies assigned to oversee it, the industry finds ways to circumvent and resist restrictions.

This leech has gotten firmly latched on to the lifeblood of American medicine, and is sucking money and energy out of medical care from all angles. Like a cancer, is has created harmful malfunctioning growths that waste our precious health care dollars. How long are we going to stand for this?

I wish “Obamacare” was what the conservatives imagine it to be and hate — a comprehensive, Medicare-like, government-run system — and I wish I could sign up for it.

Emily Dalton is a pediatrician at Eureka Pediatrics in Eureka, Calif. A shorter version of this article appeared  the North Coast Journal in Humboldt County, Calif., under the title “The Insurance Leech” (June 19).

Anthem Blue Cross punishing patients and providers for their own error

Error on Anthem ID cards results in claim denials

California Medical Association
CMA Alert, June 30,2014

In late March, the California Medical Association (CMA) began receiving complaints from physicians in San Diego, Orange and Bay Area counties about denials from Anthem Blue Cross. Practices reported that patients presented to their offices with Anthem ID cards that indicated they had a Covered California/mirror PPO product and subsequent eligibility verification also indicated the patient had a PPO product.

However, Anthem later denied the claims stating the services were not covered under the patients’ benefit plans because they received services from out-of-network providers.

CMA escalated the issue to Anthem and learned that while the Anthem ID card and eligibility verification indicated these patients had purchased PPO products, it was a mistake. These patients had actually purchased EPO products, with no out-of-network benefits.

While Anthem is offering a PPO product for their Covered California/mirror patients in most counties, they are only offering an EPO product in San Francisco, Los Angeles, Orange and San Diego counties. The Anthem EPO product does not provide any benefits if patients receive services from out-of-network physicians/facilities.

At CMA’s urging, Anthem corrected the affected patient ID cards and reissued new cards to EPO patients in May. Anthem also confirmed they have updated the information that displays when physicians verify eligibility to accurately reflect the correct product type.

CMA requested that Anthem automatically reprocess affected claims at the PPO rates, the product the ID card and eligibility information reflected, but Anthem was unwilling to do so. Instead they are requiring patients to appeal each individual claim to Anthem.

http://www.cmanet.org/cma-alert/archives/2014/june-30-2014

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Comment:

By Don McCanne, MD

Anthem Blue Cross made a mistake in that they provided ID cards and eligibility verification for their EPO (exclusive provider) patients that indicated they were PPO (preferred provider) patients. PPO patients can obtain some care out-of-network but with reduced benefits. EPO patients are not eligible for any benefits out-of-network.

The California Medical Association has requested that Anthem Blue Cross reprocess those claims based on the PPO status that they had verified. Anthem has refused to do so, insisting that each claim be appealed individually. For an industry noted for administrative excesses and placing an administrative burden on health care providers, they are carrying it to an extreme wherein they are requiring much more administrative excesses to rectify their own error – punishing patients and providers for their own mistake.

How can this industry be so crass? Yet this industry, which should be placing patient service above all else, places its own business interests first. Such an insensitive response would never take place if our health care financing system were to be managed by our own public administrators. EPOs wouldn’t even exist. It’s time to replace the private insurers with a publicly-administered single payer system.

Hobby Lobby case: Another reason to go beyond ACA

By Michelle Teheux
Pekin (Ill.) Daily Times, July 1, 2014     

The Supreme Court just presented us with the best-possible argument in favor of a single-payer health care system.

Rather than the Affordable Care Act, the single-payer option would offer some big advantages, such as nixing employers’ attempts to control what kind of birth control their employees use.

Switching to single-payer would mean these decisions could again be made by the individual in consultation with his (in the case of vasectomies) or her doctor, rather than having to take into consider what the employee’s corporate overlords considered the correct method of contraception.

I’m not unsympathetic to the religious views of those who don’t agree with one method of contraception or another. I think it’s important to note, however, that corporations don’t have any religious views. Only people have religious views. Also, the employer is providing insurance as part of a benefits package the employee has earned. Nobody is giving away health insurance to their employees as a gift, any more than they are giving away paychecks. The employees are earning their money and benefits, and if they decide to stop showing up for work, their employer will stop providing pay and insurance forthwith.

We need to remove employers from the health care debate altogether. It isn’t any of their concern whatsoever whether their employees choose one form of birth control or another. The appearance that they are paying for the contraception (even though they really are not) has served to give them a voice they shouldn’t have.

Imagine if we paid for national defense through payroll deduction. You’d have some people insisting they did not want any of their money to go toward purchasing weapons. Others would say they were OK with throwing their money toward guns, but no bombs. Or rocket launchers are OK, but absolutely no nukes. Etc.

We are all funding things that we don’t agree with, because there’s no way to always be fair. Sorry to break that to you.

Single-payer has always been my first choice of a health care system. It works well in many other countries, where the citizens are mystified by so many Americans’ all-out panic at the idea. We stubbornly insist we have the best health care system in the world, even though a tiny bit of research would show that other countries spend far less per capita on health care and have far better outcomes. It’s willful ignorance.

I never thought the ACA was the last word in health care. I always hoped we’d eventually get to single-payer, and maybe the ACA could be a step toward that eventual goal.

One thing we wouldn’t see, with single-payer, is any corporation trying to convince anybody that it couldn’t stand the idea of being involved in any way with a woman choosing to use contraceptives, because the money would be muddled up much the way money going toward munitions is muddled up. I can’t say my tax dollars explicitly went toward buying the bomb that drone dropped. I couldn’t say my tax dollars explicitly went toward helping pay for birth control pills for that woman who is in no way prepared for motherhood.

And one more thing. Let the 99 percent of us women who have used birth control stop being embarrassed to talk about it. Yes, sometimes some of us have used the pill to regulate our menstrual cycles or to clear up severe acne or to treat endometriosis, and some of us have chosen to have our tubes tied or our husbands have chosen vasectomies because we have a serious medical problem that would make pregnancy dangerous.

But for most of us, we use contraception simply because we don’t want to get pregnant at this particular time, or perhaps not ever, and we are having sex for reasons of pleasure and intimacy, not reproduction.

That’s the reason why almost everybody has sex, and it’s why we need effective contraception available to every single person who wants it.

The Affordable Care Act ought to have accomplished that. Since it can’t, all the more reason to move on to single-payer.

Michelle Teheux is editor at the Pekin Daily Times.

Read more: http://www.pekintimes.com/article/20140701/Opinion/140709850#ixzz36KJpmhOS

Evidence supports single payer

By Ellen Oxfeld
Rutland (Vt.) Herald, July 2, 2014

In his recent column on health care (June 29), John McClaughry criticizes Vermont’s road map to universal health care as laid out in Act 48. This road map hopes to create a publicly financed health care system, in which health care is a guaranteed public good for all Vermonters The target date for implementation is 2017.

According to Mr. McClaughry, the recent VA scandals, in addition to evidence from Canada and other countries where health care is universal and publicly funded, shows that such systems will result in “rationing, wait lines, maddening bureaucracies, inefficient work rules, demoralized doctors and nurses, shabby facilities, obsolete technology, and declining quality of care.”

So, what is the actual evidence? According to the Commonwealth Fund’s 2014 report on 11 industrialized nations (Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom and the United States), the United States ranked last on issues of access, efficiency, and equity. An interesting feature of this study is that it showed that even higher-income and insured Americans were often unable, as compared to those in other countries in similar positions, to get needed treatment. This may be due to the fact that even with insurance coverage, many Americans face high out-of-pocket costs.

Ironically, the United Kingdom ranked first in the recent Commonwealth Fund report. Their system is actually government owned and operated. However, we should be clear that Act 48 does not contemplate a government-owned health care system at all. Rather it proposes functioning much like our current Medicare system does, using publicly raised funds to pay providers, who remain in the private sector. (It is also important to point out that according to Act 48, the new publicly financed plan, Green Mountain Care, will function as a secondary payer or wraparound for those who are already on Medicare).

In any event, this recent data, and numerous other studies of comparative health care systems, leaves one wondering on what basis John McClaughry can assert that countries with publicly funded health care systems deliver worse care. He certainly cannot demonstrate that these systems are more expensive — as health care costs in the United States are the highest in the world. (According to the Fund’s report, we spend about twice as much per capita as the average for the comparison countries, and the same ratio holds true if one looks at health care spending as a percent of GDP). Over 60 percent of personal bankruptcies in the United States are due to health care expenses.

Finally, what about the issue of the VA? Independent surveys actually show that those who get into this system give high marks on the quality of care they receive. But gaining admittance is not easy. One has to prove that one’s ailment was a result of one’s military service. Furthermore, as Sen. Bernard Sanders has pointed out, more than 2 million more veterans are in need of care now, due to the wars in Iraq and Afghanistan. Certainly, these numbers mean that more investment is needed to guarantee timely care for all these veterans. But how does this prove that publicly funded health care is inefficient? This recent scandal seems to say more about our propensity to engage in costly military adventures overseas, and then to forget that we have to care for veterans when they return home.

The fact is that 45,000 Americans in the private health care sector die each year because they were unable to receive the care they needed. Why is this not a scandal? It certainly should be, especially when we consider that every other country in the industrialized world has been able to provide health care to their citizens more effectively in terms of cost and quality through some kind of public financing and universal inclusion.

Act 48 was a breakthrough for Vermont, and we should support the road map to guaranteed publicly funded health care for all Vermonters that it laid out. The evidence has shown time and time again that public financing and guaranteed universal access are the most effective ways to create an efficient, cost-effective, high-quality health care system.

Ellen Oxfeld is a resident of Middlebury.

http://www.rutlandherald.com/article/20140702/OPINION04/707029932

The Hobby Lobby Lesson: We Need To Fight For Single-Payer Health Care

By Emily DiVito
Campaign for America’s Future, July 1, 2014

Here is the clearest, and scariest, implication of the Supreme Court’s Monday ruling in Burwell v. Hobby Lobby, Inc.: The Patient Protection and Affordable Care Act – “Obamacare” – is fatally flawed. It is clear we now need a public, single-payer health care system – because the Supreme Court can no longer protect us.

The fact that Hobby Lobby Inc. actually had a legal standing to bring this case to court in order to contest providing comprehensive health care to their 18,000 employees should prove that a key feature of the Affordable Care Act is unsound: It relies too heavily on private entities to deliver a public good – health care.

The Hobby Lobby case was decided not under the constitutional rights guaranteed by the First Amendment, but under those dictated in the Religious Freedom Restoration Act of 1993, drafted to prevent laws that substantially burden a person’s free exercise of religion. Under that act, the government must prove that a law that hinders religious expression serves a “compelling state interest” and does so in the “least restrictive” way possible.

Justice Samuel Alito’s majority opinion concedes that the government has a “compelling state interest” in providing contraception, but claims the Affordable Care Act does not do so with the “least restrictive means” to achieve this end. Unacknowledged, however, is that there is almost no way to provide comprehensive birth control coverage in a minimally restrictive way to businesses without widening government jurisdiction over health care. If businesses will not pay for health insurance that covers contraception, then the government must.

This exposes the primary and unavoidable weakness of the ACA. Because it still requires that private companies enforce what should be considered public policy – health care – the ACA will always face potential legal contention with the personally held religious beliefs of employers.

Moreover, Hobby Lobby Inc., Conestoga Wood and Mardel were able to preserve legal standing before the court while completely ignoring science and reality. The Religious Freedom Restoration Act protects their religious liberty so thoroughly that all the Greens and the Hahns had to do was believe that the forms of birth control in question, including emergency contraceptives, caused abortions. But, they very obviously do not. The American College of Obstetrics and Gynecologists has maintained for years that “emergency contraception is not effective after implantation; therefore, it is not an abortifacient.”

Public policy needs to be based on empirical fact, not disproved or unproven beliefs. But we cannot do this until the American health care policy eliminates the role of private companies in administering public goods.

Intentionally or not, Justice Alito makes the case for an expansion of government control of health care. He maintains throughout his 49-page decision that the best way to ensure comprehensive birth control access under insurance plans “would be for the Government to assume the cost of providing the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employers’ religious objections.”

Ironically, this represents a potential increase in the scope of the federal government that most conservatives would protest – and did protest when the ACA and the public option (in which the government would offer a publicly funded insurance plan as an alternative to private insurance) were up for debate four years ago.

Justice Alito’s offered solution to the newly formed coverage gap is the expansion of an ACA “accommodation” currently in place for religious nonprofits. Via an exemption to the ACA crafted by the Department of Health and Human Services, employees of these nonprofits are still eligible for contraceptive coverage through their existing insurance companies directly, and not through their religiously affiliated employer. Justice Alito maintains that “HHS has provided no reason why the same system cannot be made available when the owners of for-profit corporations have similar religious objections [to contraception coverage].”

Interestingly, interest groups on both side of this debate rejected Alito’s alternative, albeit for completely different reasons.

Lori Windham, Senior Counsel for the Becket Fund for Religious Liberty and counsel for Hobby Lobby, maintains that the accommodation “fails to solve the moral problem created by the mandate for many religious organizations.”

Judy Waxman, Vice President for Health and Reproductive Rights at the National Women’s Law Center, said that expanding the existing accommodation would separate birth control from other health care drugs and services. “Birth control is a basic health service that almost all women in this country use for health care. And it is important that it be covered like every other service,” Waxman said.

President Obama seems to have taken note. When White House Press Secretary Josh Earnest was asked Monday afternoon if the administration was looking to expand the current ACA accommodation in place for religious nonprofits, Earnest simply said “no.” Instead, he affirmed that the ruling made clear “that there is an opportunity for Congress to take the kinds of steps that would mitigate this problem.”

Unfortunately for American women, congressional action is very unlikely to happen, even though there is plenty of fervor over the issue among Democrats. Senate Majority Leader Harry Reid (D-Nev.) took to the Senate floor Monday morning to declare “If the Supreme Court will not protect women’s access to health care, then Democrats will.”

There are various legislative solutions to the contraceptive coverage gap left by the decision, including giving the federal government the power and the funds to cover contraception specifically and amending the Religious Freedom Restoration Act. But none of these are considered viable options amidst the current congressional dissonance.

But something must be done. A single-payer public health care option should be reexamined to detach employer whims from public needs. We must minimize the influence of bosses and businesses in the implementation of health care. No one elected them.

The Hobby Lobby Lesson: We Need To Fight For Single-Payer Health Care