What we know so far about health insurance losses and what it means for policy

By Josh Bivens and Ben Zipperer
Economic Policy Institute, August 26, 2020

Although the gold-standard data sources tracking changes in health insurance coverage will not be available until next year, imperfect but available data on job churn and net employment allow us to produce estimates of losses of health insurance coverage since the COVID-19 shock began. These estimates are more accurate than early-crisis estimates, and they account for job gains.

Following are key highlights from the report:

• In any given month, churn in the labor market—some people losing jobs while other people gain them—means millions of workers newly gain or lose access to employer-sponsored health insurance (ESI) each month. For example, between 2015 and 2019, roughly 2.8 million workers gained access to ESI in each month while 2.7 million workers lost access, leading to a net increase in ESI coverage of just over 100,000 workers each month.
• Extreme churn after February 2020 has led to very large losses in ESI coverage. In March and April, for example, new hiring led to 2.4 million workers gaining ESI coverage each month, but historically large layoffs led to 5.6 million workers losing coverage each month. This rate of lost coverage—over 3 million workers—dwarfs a similar calculation for the number of workers losing coverage each month during the biggest job-losing period of the Great Recession (September 2008–March 2009).
• While the data documenting labor market churn data are useful, they do not provide the best estimates of ESI losses because they are not the most timely data, nor do they provide the best net measure of employment changes.
• Since the onset of the COVID-19 shock to the economy, roughly 6.2 million workers have lost access to health insurance that they previously got through their employer, according to the best measure of net employment change. Our analysis using the monthly, high-quality measure of the total number of jobs in the economy from the Current Employment Statistics (CES) program of the Bureau of Labor Statistics (BLS) is consistent with 9 million workers having lost access to ESI in March and April 2020 but 2.9 million workers having gained coverage between April and July 2020.
• Not every worker who loses ESI loses health insurance coverage. Public health insurance rolls are expanding to absorb the enormous ESI coverage losses of recent months. However, they have not expanded enough to absorb everybody who lost job-based coverage. A new government survey measuring the economic consequences of the COVID-19 shock in real time indicates that for every 100 workers who were covered by ESI before losing their job, about 85 retained access to some form of health insurance in the week after they lost their job.
• It is likely the case that Medicaid is the dominant alternative source of coverage when people have lost ESI in the COVID-19 shock, as Medicaid rolls have likely expanded by more than 4 million since the COVID-19 shock began.

From the Conclusion:

The inefficiencies and problems caused by the U.S. system of tying access to health insurance to specific jobs is well known. The downsides of employer-based health insurance access have been made spectacularly visible by the COVID-19 shock—a shock that has cost millions of Americans their jobs and their access to health care in the midst of a public health catastrophe.

Delinking access to health insurance from specific jobs should be a top policy priority for the long term. The most ambitious and transformational way to sever this link is to make the federal government the payer of first resort for all health care expenses—a “single-payer” plan. The federal government already is the primary insurer for all Americans over the age of 65 and for households with incomes low enough to qualify for Medicaid. The advantages of a single-payer system are large, both in ensuring consistent access to medical providers that households prefer and in restraining the often-rapid growth of health care costs.

https://www.epi.org…

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Comment:

By Don McCanne, M.D.

Although the data on changes in employment status and employer-sponsored health insurance due to the COVID-19 pandemic are still preliminary, we do have enough information to know that the impact has been catastrophic. We have long known that tying health insurance to employment has serious unintended consequences, and the experience during this pandemic adds indubitably to the conclusion that it is a bad idea.

The authors conclude, “Delinking access to health insurance from specific jobs should be a top policy priority.” Further, “The most ambitious and transformational way to sever this link is to make the federal government the payer of first resort for all health care expenses — a ‘single-payer’ plan.” They are absolutely right on target.

They further conclude, “Absent a once-and-for-all switch to a single-payer system, policymakers can take smaller steps…” Uh-oh, incrementalism, in this case suggesting perhaps lowering the age of Medicare eligibility, or raising income thresholds for Medicaid eligibility, or adding a public option to the ACA exchanges, perhaps with employer play or pay, etc. These incremental measures increase costs, perpetuate inequities, perpetuate profound administrative waste, and still leave millions uninsured or underinsured.

So ignore their optional incremental steps and go for the real thing: the single payer model of an improved Medicare for All. Anything less simply perpetuates far too many of the dysfunctions of our current health care financing system. We’ve had enough of that.

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Changes to the guild’s cash-strapped health plan could force thousands of seniors off their coverage in the middle of a pandemic.

By Jeremy Fuster
Portside, LABOR, August 25, 2020

As a result of pandemic-fueled financial troubles, SAG-AFTRA on August 12 announced significant raises to premiums and minimum earnings requirements that it says are necessary to keep the entire plan afloat. Quarterly premiums will jump to $375 — or $747 for those with two or more dependents. Members under 65 will also now have to earn $25,950 or work at least 100 days during a 12-month base earnings period to qualify for coverage.

But the biggest change for seniors is that they will no longer be able to count residuals — which many Hollywood retirees rely on as a fixed income — towards that minimum earnings count.

“It’s infuriating. I’ve been in meetings telling us that this will knock 10% of health plan members off of coverage,” said one member who has been on a guild health plan since 1985. “Well, that 10% is going to be scrambling to get health care in the middle of a pandemic, and the great share of that burden will come on seniors. We are being left behind.”

The production shutdown due to the coronavirus pandemic has only worsened the financial predicament of both the health plan and the union itself. (The guild has laid off 108 people, roughly 20% of its workforce, since March.)

While the pandemic was the trigger, the changes are also connected to years-long trends both within the guild and nationwide. Inside SAG-AFTRA, the health fund has seen its surplus turn into a growing deficit since SAG and AFTRA merged in 2012. In both newsletters announcing the changes and virtual town halls with members, health plan trustees said that employer contributions to the plan have not kept up with the rising costs in health care despite negotiations with health care providers.

“The Trustees of the SAG-AFTRA Health Plan have taken a difficult but necessary action to address financial deficits facing the plan. The impact of healthcare costs that are continuing to skyrocket has been exacerbated by a global pandemic that has brought our industry to a standstill and dramatically diminished contributions to the Health Plan,” read a statement from plan representatives.

The guild’s new contract with the Alliance of Motion Picture and Television Producers — which members approved last month with 74% of the vote — includes a 1% increase in AMPTP contributions to the guild’s health plan, with the option of shifting an additional .5% of the wage increase in years 2 and 3 to the health plan or the SAG Pension Plan/AFTRA Retirement Fund.

But despite that increase in contributions from studios, the health plan trustees now say that it’s not enough to stave off this new premium surge.

Health plan trustees project another $83 million deficit next year, and warn that financial reserves would run out by 2024 without these changes.

The SAG-AFTRA premium hikes are also tied into a larger debate over the American health care system that has become a major factor in the 2020 presidential election. Andrew McGuire, head of single-payer organizing network California OneCare, argued that the lack of cost controls in the Affordable Care Act has allowed insurance companies to raise premiums well above the rate of inflation. Worse, many guild retirees will be turning to a private Medicare supplement marketplace that is similarly flawed.

“What we’re seeing now with these escalating costs and Medicare supplements is the result of decades of Republicans chipping away at the protections Medicare offers and the ability of the government to negotiate costs with insurers and pharmaceuticals,” he said.

During the Democratic presidential primary, one argument against single payer by eventual nominee Joe Biden was that such a system would take away the health care plans that unions have negotiated. It was an argument that he took to labor town halls and to forums hosted by the AFL-CIO. “I have a significant health care plan,” Biden said last September. “But guess what? Under mine, you can keep your health insurance you bargained for if you like it. If you don’t, you can move, and you can come into a public plan.”

Should Biden defeat Donald Trump and Democrats take control of Congress in November, many expect the party to make changes to the ACA and consider implementing a public option instead of the Medicare-for-All plan pushed by Sen. Bernie Sanders and the more progressive wing of the party. But McGuire believes that many union members like those in SAG-AFTRA who have lost their union-provided health care during the pandemic may be more receptive to a single-payer approach.

“The issue of single payer split a lot of unions during the primary, but there had been some unions that didn’t buy into the idea that their plans needed to be protected,” he said. “This pandemic is going to push some of the more recalcitrant unions towards single payer, and that’s going to make it more politically viable among the Democrats.”

https://portside.org…

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Increases in health care costs are coming out of workers’ pockets one way or another: The tradeoff between employer premium contributions and wages

By Laurel Lucia and Ken Jacobs
UC Berkeley Labor Center, January 29, 2020

While the research findings have been mixed on which levers employers rely on most to respond to rising health care costs as well as on what the net impact on wages has been, the bulk of the research literature indicates that, one way or another, most of the burden of ever-increasing health care costs falls on the shoulders of workers. That burden may come in the form of lower wages, higher premium contributions, or higher out-of-pocket costs. All these impacts are likely to have more severe consequences for low- and moderate-income workers, but rising health care costs affect the economic well-being of all workers with job-based coverage.

https://laborcenter.berkeley.edu…

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Comment:

By Don McCanne, M.D.

So what is happening to that hard-earned labor union health plan that everyone wants to keep, even during their retirement years? This article on the SAG-AFTRA health plan should make those relying on union insurance concerned about the future of their plans. According to the UC Berkeley Labor Center, “most of the burden of ever-increasing health care costs falls on the shoulders of workers.”

Besides, those employer-sponsored health plans that are so dearly cherished by all, what happens to them? In 2019, 67.9 million individuals in the labor market left their jobs (BLS). That can hardly be considered a stable source of health insurance coverage.

The much smaller individual insurance market, including the plans available through the ACA exchanges, is also a relatively unstable source of coverage. Keeping your coverage indefinitely? Very rare.

Reverence for private health plans is hardly a reason to reject a more equitable and comprehensive program that would ensure coverage for everyone, forever: single payer Medicare for All. Who is more likely to be there for you to provide comprehensive health care for life? Your union, your employer, or your government?

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By Joseph D. Bruch, B.A.; Suhas Gondi, B.A.; Zirui Song, M.D., Ph.D.
JAMA Internal Medicine, August 24, 2020

From the Introduction

Private equity investment in health care has markedly increased in recent years. The total disclosed value of private equity deals in health care reached $78.9 billion in 2019, up from $23.1 billion in 2015. Private equity firms use capital from institutional investors and individuals to acquire assets, such as hospitals and physician practices. After acquisition, private equity fund managers use the control offered by their newly purchased ownership stake to increase the value of the asset before selling it generally for a profit, typically in 3 to 7 years. Common strategies to enhance the value of acquired businesses include cutting costs and increasing efficiency.

From the Discussion

Private equity has a substantial and growing presence in the US health care system, especially in the hospital sector. Although private equity firms may seek to create efficiencies in the delivery of care, their financial incentives, especially the pressure to sell acquired assets for a profit on a short time horizon, might conflict with parts of the mission and priorities of health care clinicians. Anecdotal reports suggest that private equity–owned health care organizations may be more likely to operate in ways that maximize margin in the near term. Payers may be appropriately concerned about the potential for increased health care spending that may be lower value. Most worrisome are suggestions of risk to patient safety and health equity.

In this initial analysis of 204 hospitals acquired by private equity from 2005 to 2017, we found that relative to 532 control hospitals, private equity acquisition was associated with increases in annual net income, hospital charges, charge to cost ratios, and case mix index among hospitals. The proportion of patients discharged from hospitals acquired by private equity who were covered by Medicare decreased relative to control hospitals, whereas the proportion covered by Medicaid was unchanged, suggesting an increase in the share of discharges for patients who were privately insured or uninsured relative to controls. Patients who are privately insured typically garner higher reimbursements for hospitals than patients with Medicare or Medicaid.

Although the total hospital charge is the amount the hospital bills for care, it is typically not what insurers or patients pay the hospital (negotiated payment rates are less than the charge). Nevertheless, the charge represents the “asking price,” and is often the billed amount for patients paying out of pocket, including uninsured or out-of-network patients. Higher charges are also associated with greater payment among insured, in-network patients. The higher charge to cost ratio we observed may indicate that hospitals acquired by private equity firms began charging more for services, cutting operating costs, or both after the acquisition.

Increased charges following private equity acquisition provides insight into the strategic decisions made by fund managers or hospital leadership in response to new incentives hospitals face after an acquisition. Higher markups are associated with greater profitability. The increase in yearly case mix index suggests that hospitals saw reportedly sicker patients on average after acquisition. This could be due to selection effects if the composition of patients changed. However, it may also suggest that hospitals are engaging in more complete or aggressive coding. Upcoding can lead to higher diagnosis-related group payments for inpatient admissions and is another possible mechanism to increase net income.

In our main analysis, we observed greater improvements in process quality measures among private equity–acquired hospitals relative to controls, which may reflect better care for patients. However, it could also be consistent with better adherence to compliance standards or efforts to maximize opportunities for quality bonuses under pay-for-performance contracts.

Conclusions

As private equity increasingly influences health care delivery in the US, this study offers an initial national assessment of changes in hospital-level economic and quality measures associated with private equity acquisition. Although further research is needed, our findings suggest that policy makers should consider monitoring or thoughtful oversight of changes in care delivery and billing practices in hospitals acquired by private equity firms to ensure proper stewardship of societal resources and the prioritization of patient interests.

https://jamanetwork.com…

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Comment:

By Don McCanne, M.D.

These private equity investments in health care are designed to increase the value of the assets acquired and then to sell them for a large profit in just a few years. That is, they are designed to make money for the investors – a high profit in a short time span. These equity firms imply that their motivations are altruistic, that they are increasing value, quality, efficiency that makes their products worth the prices that must be paid to net high profits for the investors. So are they really serving the interests of the patients and providers, or are they just simply squeezing funds out of these deals for their own interests?

It appears that they are operating in ways that maximize margin in the near term. That means charging higher prices for the services. It means providing additional services that are of lower value which may actually increase risk to patient safety and health equity. This study showed that “private equity acquisition was associated with increases in annual net income, hospital charges, charge to cost ratios, and case mix index among hospitals.” The hospitals acquired by private equity had a decrease in Medicare patients with an increase in privately insured patients which provided higher reimbursements than did Medicare, suggesting that selective marketing efforts were successful in increasing margins. Increases in hospital charges resulted in higher out-of-pocket costs for the uninsured and for those who were receiving care out-of-network. Even in-network insured patients produced higher net incomes since negotiating leverage was greater for the private equity hospitals. After acquisition, “private equity firms began charging more for services, cutting operating costs, or both.” After acquisition, the private equity hospitals reportedly saw sicker patients warranting higher charges, but this likely represented more aggressive coding – upcoding just as we see with the private Medicare Advantage plans that result in increases in net income. These private equity-acquired hospitals also supposedly showed greater improvements in process quality measures when, in fact, this actually likely represented gaming in an effort to maximize opportunities for quality bonuses under pay-for-performance contracts.

The medical-industrial complex is more than ripe for equity investors. As if the greed in the system was not already excessive, bringing in the equity investors to squeeze more out of our overpriced and underperforming system is exactly what we should not be doing.

We really do need the single payer model of an improved Medicare for All, but if the stalling by our political leaders in both major parties continues, the economic structure of our health care delivery system will be damaged as with a blunderbuss to the degree that it may be hard to distinguish it from the economic structure of a war zone in need of a Marshall Plan. Really. Private equity acquisition is only one small example of the damage being done throughout the health care economic infrastructure – damage that will be very difficult to repair.

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By William Cummings
USA TODAY, August 23, 2020

Americans view the severity of the coronavirus pandemic and the effectiveness of the government’s response through a very partisan lens, a CBS News/YouGov poll released Sunday found.

More than 176,000 people in the U.S. have died from COVID-19. According to the poll, a 57% majority of registered Republican voters consider that number “acceptable” when “evaluating the U.S. efforts against the coronavirus pandemic,” compared with 31% of voters overall. Ninety percent of Democrats and 67% of independents said the death toll was “unacceptable.”

When asked about the survey Sunday on CBS News’ “Face the Nation,” and why there was such a discrepancy between how Republicans other voters view the pandemic, Republican National Committee Chairwoman Ronna McDaniel said it was “a really unfair poll.”

“Republicans do not want to see people suffering from this pandemic. We have all been affected by this. This is not a Republican or Democrat issue,” McDaniel said.

https://www.usatoday.com…

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CBS News Battleground Tracker – YouGov, August 19-21, 2020
Sample 2,226 Registered Voters, Margin of Error ±2.4%

15. In evaluating the U.S. efforts against the coronavirus pandemic, do you consider the number of U.S. fatalities from coronavirus so far to be…

Liberal

• 8% Acceptable
• 92% Unacceptable

Moderate

• 26% Acceptable
• 74% Unacceptable

Conservative

• 57% Acceptable
• 43% Unacceptable

Democrat

• 10% Acceptable
• 90% Unacceptable

Independent

• 33% Acceptable
• 67% Unacceptable

Republican

• 57% Acceptable
• 43% Unacceptable

https://drive.google.com…

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The White House, Press Briefing, March 23, 2020

President Trump: We have jobs, we have — people get tremendous anxiety and depression, and you have suicides over things like this when you have terrible economies. You have death. Probably and — I mean, definitely would be in far greater numbers than the numbers that we’re talking about with regard to the virus.

https://www.whitehouse.gov…

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Comment:

By Don McCanne, M.D.

It is absolutely shocking that 8% of liberals and 10% of Democrats find the number of U.S. fatalities from coronavirus to be acceptable. But 57% of conservatives and 57% of Republicans – over half – do find such deaths to be acceptable. Really? Professing to be the pro-life party, this comes as a quite a revelation.

In defense, Republican National Committee Chairwoman Ronna McDaniel said this was “a really unfair poll.” How is that? Reviewing the entire poll to see what might be unfair, a couple of points can be made. One is that those polled were not told that the number of deaths was 176,000, but if withholding that fact was unfair, it would suggest that 90% of Democrats would find any coronavirus deaths to be unacceptable whereas 57% of Republicans would tolerate a much larger number of deaths.

Two questions earlier, over half of the Republicans and conservatives rated Donald Trump as doing a “very good” job in handling the coronavirus outbreak. The question on fatalities was qualified by, “In evaluating the U.S. efforts against the coronavirus pandemic…” Since the majority of Republicans responding had already said that Trump was doing a very good job with the pandemic, it made it more difficult for them to agree that the number of deaths was unacceptable. Perhaps the Republicans felt that this was entrapment and thus made the poll unfair.

Also, the view was often expressed by Trump’s advisers and the conservative media, especially Fox, that the damage to the economy was greater than the damage caused by the virus, and thus it was more important to “open up” the economy in spite of reported death rates. Even Donald Trump expressed the view that deaths from a terrible economy “definitely would be in far greater numbers than the numbers that we’re talking about with regard to the virus.”

Regardless, comparing the morality of an allegedly unfair poll with that of 176,000 deaths, there is no contest. We should elect politicians who understand the difference.

PNHP does not endorse any political parties nor any candidates for political office; rather we endorse health care justice for all.

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By Brian J. Miller Robert E. Moffit
Health Affairs Blog, August 20, 2020

The renewed national health care debate represents a conflict of visions of how to create better value: government central planning versus patient-centered, consumer-driven competition.

Market-driven approaches based upon defined-contribution financing (premium support), the states as insurance laboratories, and addressing the employer-sponsored insurance (ESI) tax exclusion would all serve to increase competition and engender insurance affordability and portability.

Previous legislative attempts at solving cost and access challenges in health policy have viewed health insurance and care delivery markets through a national lens, focusing on standardizing benefits and care delivery. As any patient or clinician will volunteer, health care markets are intensely local, and policy solutions must navigate the complex interplay of local, state, and federal stakeholders.

Recent progressive health policy efforts remain firmly anchored in a political philosophy that champions national regulation and central control, sitting in direct conflict with consumers who strive for mass-customized health care. Currently, consumers and clinicians are persistently frustrated, as both strive for choice, flexibility, and modernity in an otherwise dysfunctional system. In selecting health benefits, consumers face an impossible task: to predict their trajectory as patients, a challenge when the healthy office worker one day can become a terminal cancer patient the next. In this setting, a single benefits package is at its core unfair—a person’s needs change over time, and they should be able to change and customize their coverage as they progress through different stages of life.

Part I:
https://www.healthaffairs.org…

Part II:
https://www.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

Universal publicly-administered and publicly-financed health care programs work well for everyone. In contrast, the most expensive health care system of all – ours – uses a fragmented system of administering and financing that includes choice and competition of private insurers, and that has been a disaster, leaving tens of millions with inadequate coverage or no coverage at all.

It is difficult to understand the obsession with injecting consumer-driven choice and competition into the mix when the private plans and the burden they place on the health care delivery system have defeated the goals of universality, equity, efficiency, affordability, accessibility, and social solidarity. Yet here we have another article advocating for this market-driven approach.

Although this two-part article repeats many of the usual conservative talking points, the excerpt above reveals a fundamental flaw in their premises that alone shoots down their model of reform. They seem to understand that it is not the choices in health care itself that makes the market work but rather it is the choices in private insurance products that they seem to believe makes the health care market effective. They claim that a single benefits package that applies to everyone is unfair because “a person’s needs change over time, and they should be able to change and customize their coverage” to fit their needs. So they provide the example of “the healthy office worker one day can become a terminal cancer patient the next,” though they concede that consumers face an impossible task in predicting their trajectory as patients. Even if you knew you had a specific cancer, you could not purchase coverage for that cancer alone because the insurers must pool risk, and if such a product even existed, it would have to be sold to people without that cancer. Otherwise that insurance product would have to include the full costs of the care for that malignancy plus the administrative costs and profits of the insurer. Retail plus maybe twenty percent is not a bargain that would find a niche in the marketplace. Selecting in the market only the insurance you need is impossible.

We really don’t need these analyses anyway. Not only do we have the most expensive system of all nations, though we leave tens of millions out in the cold, private insurance is the most expensive component of health care financing when adjusted for the health of those covered. Of course, that’s how insurance markets work, selectively sell to the healthy while shoving the sick into government programs or simply into the street. That is why all that money we are already spending on health care plus insurance administrative costs is still leaving so many facing financial hardship or, even worse, leaving them with physical suffering or death due to lack of health care.

Throw out the private insurers, recover the wasted funds, establish a single universal risk pool, and then take care of all of us through our own public, single payer model of Medicare for All. Simple.

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McKinsey & Company, August 19, 2020

This article is a collaboration by Nikhil R. Sahni, a partner in McKinsey’s Boston office; Rachel Groh, a consultant in the Boston office; David Nuzum, a senior partner in the New York office; and Michael Chernew, a professor at Harvard Medical School and the Chair of Medicare Payment Advisory Commission (MedPAC).

From the Introduction

Broad consensus has long existed among public- and private-sector leaders in US healthcare that improvements in healthcare affordability will require, among other changes, a shift away from fee-for-service (FFS) payments to alternative payment models that reward quality and efficiency. The alternative payment model that has gained broadest adoption over the past ten years is the accountable care organization (ACO), in which physicians and/or hospitals assume responsibility for the total cost of care for a population of patients.

On the whole, ACOs in the Medicare Shared Savings Program (MSSP) have delivered high-quality care, with an average composite score of 93.4 percent for quality metrics. However, cost savings achieved by the program have been limited: ACOs that entered MSSP during the period from January 1, 2012 to December 31, 2014, were estimated to have reduced cumulative Medicare FFS spending by $704M by 2015; after bonuses were accounted for, net savings to the Medicare program were estimated to be $144M. Put another way, in aggregate, savings from Medicare ACOs in 2015 represented only 0.02 percent of total Medicare spending. The savings achieved were largely concentrated among physician-led ACOs (rather than hospital-led ACOs). In fact, after accounting for bonuses, hospital-led ACOs actually had higher total Medicare spending by $112M on average over three years.

While savings from MSSP have been relatively limited, in aggregate, numerous examples exist of ACOs that have achieved meaningful savings—in some cases in excess of 5 percent of total cost of care—with significant rewards to both themselves as well as sponsoring payers (for example, Millennium, Palm Beach, BCBSMA AQC). The wide disparity of performance among ACOs (and across Medicare, Medicaid, and Commercial ACO programs) raises the question of whether certain provider organizations are better suited than others to succeed under total cost of care arrangements, and whether success is dictated more by ACO model design or by structural characteristics of participating providers.

Conclusion

Based on ACO results published to date, physician-led ACOs generally do better and are more profitable than their hospital counterparts. Thus, the real question we aimed to unpack is how can hospital-led ACOs adapt to be more profitable? We created a series of scenarios in an attempt to represent most hospitals in the United States and found four common themes:

• Know the implications of your structure: As our results show, hospitals that commit to ACOs—high savings rate from taking on two-sided risk and a large number of lives—will find it easier for the math to work. But making the commitment itself is not enough: A hard look needs to be taken at the internal and external structure, both of the hospital and affiliated network, as well as the local market, to understand the probability of success. A hospital can take certain broad actions, such as having the right organizational structure or owning the right assets, to increase the probability of success. However, certain factors are unchangeable but important to account for, such as geographic isolation.
• Take a multi-year view: When a hospital fully commits to becoming an ACO, it is essential to take a multi-year view. This view applies to major contract terms, such as aligning on the re-baselining methodology, as well as investments in programs to manage the concepts of “demand destruction” and to improve physician satisfaction.
• Operationalize locally: As hospitals develop new programs, they must avoid using “blunt” instruments and instead take a nuanced and personalized approach. While vendors of population health programs may offer off-the-shelf solutions, those capabilities need to be tailored to manage the profile of the covered lives under the ACO. Furthermore, pulling the same levers (for example, post-acute care) may be common place for all ACOs, but how it is done (for example, network optimization, owning assets) may differ based on the local market. Accounting for the local market will be important to effectively manage spillover effects, which our results show can be a critical difference between profitability and unprofitability.
• Be smart about economies of scale when building infrastructure: No one doubts the additional operating expenses involved in becoming an ACO. Yet it is important to be strategic about what to build versus what to buy. Many of the needed capabilities, such as analytics, have been developed and can be leveraged off-the-shelf through partnerships, vendor arrangements, and the like. Accessing these services can lessen the burden of high fixed costs to aid hospitals when they first decide to participate in an ACO.

The above themes help determine why it is important to “know who you are.” Without access to all of these value levers and the ability to adjust each variable in the math equation, the success rate for a hospital-led ACO narrows significantly. Thus, not all hospitals are set up for success as an ACO, given the way ACOs currently operate. Completing a checklist of readiness that also contemplates timing of implementation is important to assess impact and the likelihood of success.

Likewise, for private and public payers, these findings should help identify potential modifications in ACO designs that will likely both increase the number of hospitals that could be successful and decrease the margin of error for a participating hospital to make programs more attractive. ACOs are important vehicles that can help the United States realize its healthcare spending goals, but they require further refinement to increase adoption and success.

https://www.mckinsey.com…

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Comment:

By Don McCanne, M.D.

Although this paper was produced by McKinsey & Company, consultants to the health care industry, it provides an important overview of the math of accountable care organizations because a principal co-author is Michael Chernew, a noted professor at Harvard Medical School and the Chair of Medicare Payment Advisory Commission (MedPAC). Acknowledging the bias in favor of ACOs, the reservations about the ACO model expressed in this report should command our strict attention.

Supposedly ACOs and other alternative payment models improve quality and reduce costs by shifting away from fee-for-service payments to payments based on value. Although that has become gospel, there is very little evidence supporting that dogma.

To determine quality, only a few parameters are measured, and the ACOs are informed in advance what will be measured – a form of teaching to the test. Of all of the great multitude of factors that go into the quality of health care that is being provided, only a minuscule fraction is measured. Under this system, all organizations should have high quality scores, and so their quality ratings are worthless. Well over 99 percent of quality factors are ignored.

Regarding producing savings, many comments that appear in this report indicate that the net savings are almost negligible. If there are any savings, they are often offset by the additional costs of complying with the administrative requirements of the ACO, not to mention the offset of any bonuses that might be paid out.

What this paper adds to our understanding is that there are many features that vary between the different organizations that can have a significant impact on the success or failure in cost savings, and many of these features are unchangeable no matter how efficient management is. Operating costs can be fixed or variable, but both are subtracted in the ACO math equation. Particularly relevant is “demand destruction” which is “loss of revenue due to reduced utilization from ACO population and spillover effects from non-ACO patients.” (Read the report to understand this.) Other factors include baseline costs, trend rates, benchmark for total cost of care, system leakage, shared savings rate, minimum savings/loss rates, risk corridors, frequency of rebasing, benchmark haircuts, and the like.

So how successful have the ACOs been? Repeating the quote from this report, “In aggregate, savings from Medicare ACOs in 2015 represented only 0.02 percent of total Medicare spending. The savings achieved were largely concentrated among physician-led ACOs (rather than hospital-led ACOs). In fact, after accounting for bonuses, hospital-led ACOs actually had higher total Medicare spending by $112M on average over three years.”

Tweaking won’t fix the math. The ACO experiment has failed. Yet the wish that ACOs would work has served as a distraction that has prevented us from moving to a model that really would work, as already proven in other nations: single payer Medicare for All.

Why do we keep playing this game when people are suffering and dying?

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By Sara R. Collins, Munira Z. Gunja, and Gabriella N. Aboulafia
The Commonwealth Fund, August 19, 2020

The survey began on January 14, 2020 — just before the outbreak of the coronavirus pandemic in the United States. We interviewed a nationally representative sample of 4,272 adults ages 19 to 64 about their health insurance coverage through June 5. Despite the severity of the pandemic and the abrupt disruption in economic activity beginning in March, the survey did not find statistically significant changes in coverage from the last time it was conducted in 2018. But it does show a persistent vulnerability among working-age adults in their ability to afford coverage and health care that could worsen if the economic downturn continues.

Survey Highlights

• In the first half of 2020, 43.4 percent of U.S. adults ages 19 to 64 were inadequately insured. This is statistically unchanged from the last time we fielded the survey in 2018.
• The adult uninsured rate was 12.5 percent. In addition, 9.5 percent of adults were insured but had a gap in coverage in the past year and 21.3 percent were underinsured. These findings are also statistically unchanged from 2018.
• There was no statistically significant change in coverage inadequacy between the months leading up to the pandemic and the months that followed, but this may change as the pandemic continues.
• Half of adults who spent any time uninsured or who were underinsured reported problems paying medical bills or said they were paying off medical debt over time. A quarter of those who were continuously insured and did not meet the threshold for underinsurance also reported problems paying bills.
• People who reported problems paying medical bills experienced lingering financial problems including damage to their credit ratings and depleted savings.

Conclusion and Policy Implications

The United States entered the pandemic with 30 million uninsured people and more than 40 million underinsured. These numbers are certain to climb this year. The Congressional Budget Office projects that the U.S. economy will contract by more than 5 percent in 2020 and 25 million fewer people will be working in the third quarter of 2020 compared to the end of 2019. The Urban Institute estimates that this employment disruption will leave 3.5 million more people uninsured by the end of the year. And millions more will suffer income loss through furloughs, wage cuts, and declining business revenue. Unless there is a significant drop in premiums and deductibles in private coverage, many households will face health care costs that take up a growing share of shrinking budgets.

Coverage insecurity will leave people with mounting medical debt, as well as significant financial barriers to getting the health care they need to survive the pandemic and lead healthy and productive lives. Several policy options at the federal and state levels could move the nation toward universal, comprehensive coverage and provide relief to U.S. families. These include:

• Expanding Medicaid in the 12 states that have yet to do so or providing a federal fallback option for people eligible in those states;
• Enhancing and extending the ACA marketplace subsidies both for premiums and cost-sharing;
• Allowing more people with unaffordable employer plans to purchase subsidized coverage through the marketplaces, possibly through a public plan;
• Increasing outreach and enrollment efforts to inform people of their coverage options, particularly those who lose employer coverage;
• Banning non-ACA-compliant plans like short-term policies that leave people exposed to catastrophic health care costs;
• Developing an autoenrollment mechanism that will enable people to enroll and stay enrolled in comprehensive coverage.

There are other paths to universal coverage and improved affordability, like a single payer or “Medicare for All” approach. The reforms outlined here don’t preclude such a path but could be a practical first step toward a more regulated insurance system that includes more public financing. But ongoing policy inaction on insurance coverage combined with the raging pandemic is certain to tip the nation’s health care affordability problems into crisis for U.S. households.

https://www.commonwealthfund.org…

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Comment:

By Don McCanne, M.D.

It looks like we’re stuck in that time machine: tens of millions uninsured, tens of millions more underinsured, and pervasive personal financial hardship.

The authors do propose a set of incremental patches that would expand coverage, though the system would still fall far short of covering everyone, plus the proposed measures would lessen financial hardship for some but by no means for all. The authors note that these reforms would not preclude single payer Medicare for All, but these steps would significantly increase our national health expenditures while falling far short of our goals for reform. Notably, they would further increase the administrative complexity which is the largest source of wasteful health care spending in the U.S. Also such reforms would allow our public stewards to walk away once again for another decade or two without enacting and implementing the reform we desperately need – single payer Medicare for All. This would perpetuate the financial hardship, physical suffering and even death from our uniquely American health care financing system that is so highly dysfunctional.

What are we going to do? Continue to receive these disconcerting reports, tsk tsk them, and put them in the files? Aren’t our files full enough already?

Incidentally, we have some files over at PNHP that we can pull out. Affordable, equitable, efficient, comprehensive care, for everyone, automatically, for life, without all of the administrative waste and without personal financial hardship. Might require a touch of social solidarity, but what on earth would be wrong with that?

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The ideology that Republicans love to hate is woven through the fabric of the country.

By Bruce Bartlett
The New Republic, August 17, 2020

The essence of the Republican attack is to lie about the nature of socialism, grossly exaggerating its negative excesses while completely ignoring its positive effects. When they are forced to concede that some socialistic government programs–such as disease prevention or temporarily higher unemployment benefits–may be valuable, they will nevertheless insist that it must be resisted because it’s the first step on the slippery slope to totalitarianism.

Republicans assert, endlessly, that the Austrian economist F.A. Hayek proved that the welfare state leads inevitably to socialism and tyranny in his 1944 book, The Road to Serfdom. While Hayek’s theory may have been plausible in the midst of World War II, all the evidence since then thoroughly contradicts it. There is no evidence whatsoever that welfare states morph into total state control of the economy and produce a concomitant loss of freedom and prosperity. There is not a single case of this happening anywhere. Nor is there anything in Hayek’s theory to explain why socialism collapsed in the Soviet Union or why privatization rolled it back in places like Britain.

One myth that permeates the right-wing attack on socialism is that America was founded as a sort of libertarian paradise based on the free market ideas of Adam Smith. However, this perspective is very much at odds with the actual views of Smith and the Founding Fathers.

Thomas Paine, whose pamphlet Common Sense underpinned the ideology of the American Revolution, was a virtual socialist. His most radical work, Agrarian Justice, proposed the revolutionary idea of a wealth tax to fund payments to citizens reaching maturity, a precursor to today’s idea of a basic income.

James Madison, principal author of the Constitution, agreed that providing income to the indigent was a core government function.

Of course, Alexander Hamilton was definitely a big government kind of guy, advocating direct government aid to industry, extensive public works, and a strong central government.

Even the sainted Thomas Jefferson, the most libertarian of the Founding Fathers, expanded government far beyond its constitutional limits when he made the Louisiana Purchase.

Since they’re unable to run against the actual expansion of the American welfare state, GOP propagandists retreat into fantasy. Always missing from the Republican critique is any clear definition of socialism. This is intentional. Republicans know that the term “socialism” is unpopular with many Americans—although a growing percentage embrace it. Republicans also know that numerous programs they view as socialistic are nevertheless very popular with voters. President Harry Truman often made this point in his speeches. He said in 1952: “Socialism is a scare word [Republicans] have hurled at every advance the people have made in the last 20 years. Socialism is what they called public power. Socialism is what they called social security. Socialism is what they called farm price supports. Socialism is what they called bank deposit insurance. Socialism is what they called the growth of free and independent labor organizations. Socialism is their name for almost anything that helps all the people.”

In truth, Republicans aren’t opposed to socialism per se but only socialism that benefits poor people and minorities. Socialism for farmers and industrialists is just fine as far as they are concerned.

According to the dictionary, socialism means that the government owns all the means of production, and Republicans are right that this system doesn’t work very well. But absolutely no one is advocating that. Today’s advocates of “socialism” merely want a somewhat expanded welfare state or even just a government that actually works. Republicans are running against a strawman, though history tells us that has never stopped them before.

https://newrepublic.com…

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Comment:

By Don McCanne, M.D.

One thing is certain, just because someone labels a public program that would ensure that everyone would have affordable access to all essential health care services “socialism” is clearly no reason to dismiss it. That would be about as stupid as trying to impair the function of the postal service because it represents socialism. Maybe there are people who think like that, but we can’t let them think and act for the majority of us. Socialism is a perfectly good word that has a very positive meaning in that it refers to all of us joining together for the common good. Why would anyone be opposed to that?

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