PNHP

The unhappy marriage of economics and health care

The unhappy marriage of economics and health care

By Gerald Friedman
All Unions Committee for Single Payer Health Care–HR 676, May 6, 2013

America’s health care system is collapsing, and we can blame the economics profession.

Most economists approach health care in the wrong way, viewing it as a commodity like shoes or the laptop on which I write. Instead, health care is an idiosyncratic commodity, subject to uncertainty and “asymmetric information” leading to destructive behavior.

Trying to force health care into a box, treating it like other commodities, economists have promoted cost sharing, market competition, and insurance oversight of health care providers that have inflated the administrative burden while denying ever more Americans access.

Health care spending has been rising throughout the world as aging and more affluent populations spend on their health. Nowhere, however, has the cost of health care risen as fast as in the United States where costs soared because of rising administrative expense.

Compared with other affluent countries in the Organization for Economic Cooperation and Development (the OECD), the United States spends over twice as much per person as is spent elsewhere.

Before 1971 when Canada enacted its Medicare program, a single-payer government-funded health care system, Canada spent a higher share of its national income on health care than did the United States. Since then, however, while Canada has controlled costs, spending has soared in the United States so that we now spend over $3,000 more per person. That is $12,000 for a family of four that is not available for travel, education, housing, or food.

Elsewhere, increases in health care spending have been associated with improvements in the provision of health care and, therefore, with increasing life expectancy. In the United States, however, spending has increased because of rising administrative costs and increases in the price of prescription drugs and, therefore, has yielded relatively few benefits in improvements in care.

Comparing changes in health care spending and life expectancy between 1971 and 2008, other affluent OECD members gained a year of life expectancy for every $453 in spending; in the United States, however, life expectancy has increased less and spending has risen sharply more so that each year of increased life expectancy has cost over twice as much as in these other countries.

Health care spending in the United States has increased by $1,283 for every additional year of life expectancy. Had our spending per year of added life increased at only the rate of other countries we would be spending over $4,500 less per person, or $18,000 saved for the average family of four.

Most of the difference in relative expenditures, most of the growing waste in spending in the United States, is due to increasing administrative costs in the provision of private health insurance and in the billing and insurance operations within doctors’ offices and in hospitals.

The average physician in the United States now spends four times as much interacting with insurance companies as does the average physician in Ontario, Canada, over $80,000 per physician compared with a little over $20,000 in Ontario.

Prescription drug prices and administrative expenses have been the fastest rising costs in the United States health care system. From 1980 to 2005, administrative costs rose by 1,300 percent while drug prices rose by nearly 2,000 percent. There are now 2.5 million administrative support personnel in the American health care system – more than the number of nurses, and five times the number of physicians. We now have more health care managers than physicians and surgeons.

Rising costs drive up health insurance premiums so that a family health insurance plan now costs about 40 percent of the average family wage income, up from 7 percent in 1960. Rising costs are denying ever more Americans access to health care even while businesses and governments wrestle with rising health care spending that squeezes resources available for other purposes.

While other countries have controlled health care costs by restraining administrative expenses and drug prices, ballooning costs in the United States come from policies promoted by economists who have urged governments and providers to control costs by making consumers responsible for more of the costs even while raising administrative costs and ignoring monopolistic pricing of pharmaceuticals.

Viewing the injured, sick, and disabled as “consumers,” economists see insurance as the source of rising costs because they are not responsible for the costs of care they receive and, therefore, overuse health care. Rising copayments and deductibles are intended to discourage “consumers” from “abusing” health care, as if the victims of auto accidents or cancer should shop around for cheaper treatments. Consumers are also supposed to favor competition among insurers who limit provider services by providing more administrative supervision.

Ignoring evidence that Americans are less likely to see doctors and other health providers than are residents of other affluent countries, these economists have blamed the high cost of our health care on insurance which, they assume, leads to wasteful over-practice and the provision of unnecessary health care services. Their solution is greater cost sharing, more regulation of providers, capitation, and even the end to insurance by substituting medical savings accounts for insurance.

For 40 years, many economists have promoted increasing cost sharing through higher copayments and deductibles, the replacement of fee-for-service payment systems with capitation where providers are paid a fixed amount for patients as in Health Maintenance Organizations, and competition where multiple insurers offer a variety of plans catered to individual consumer’s interests and in competition with each other. Far from limiting health care cost increases, these practices have produced the worst of all worlds, rising costs along with restrictions on access.

Costs have risen because these recommendations have inflated the administrative burden in health care, the costs of the billing and insurance activities within provider offices as well as the cost of the health insurance industry itself. While restricting access, limiting the benefit to Americans of some of the dramatic improvements in health care practice of the last decades, these practices have not bent the cost curve or slowed health care inflation even while denying more and more Americans access to affordable health care.

The failure of price incentives and competition to control health care costs could have been predicted had economists appreciated that health insurance is not a commodity and the sick are not consumers like those shopping for the best pair of sandals or brand of peanut butter.

Producers of commodities might try to accommodate consumer wishes because they can profit by selling more. Health insurers, on the contrary, can better increase their profits by selling less, by identifying people likely to need care and driving them away (“lemon dropping”) even while attracting the lucky and healthy (“cherry picking”).

Most health care expenditures go to a relatively few people, the unlucky who develop an illness or suffer an accident. Insurers, therefore, can dramatically lower their costs by finding those who will be expensive and getting rid of their business, encouraging them to find another insurance plan or even to die.

A form of “adverse selection,” or screening of potential customers by insurance companies, can be profitable for the individual firm but it comes at the cost of raising costs for the community as a whole.

As a country, we now spend almost $200 billion administering the health insurance industry and over $800 billion in administering the
health care industry, or over a quarter of total spending. Add to this the inefficiency in delivery that comes from a fragmented finance system that inhibits coordination of care, and the inflated prices for prescription drugs, and easily a third of total spending is wasted or going to monopolistic profits.

The waste involved in the current system has a redeeming feature: it provides abundant space for an improved system that could improve access and services even while dramatically lowering costs by eliminating administrative waste.

If we lowered administrative costs and drug prices to the Canadian level, we could save nearly $600 billion dollars, more than enough to provide coverage to all of the uninsured while improving access for the millions of underinsured.

If we see past the bad recommendations of market fundamentalists, we can improve health care and save money. An outcome that even economists should favor.

Gerald Friedman, Ph.D., is professor of economics at the University of Massachusetts, Amherst. He has written extensively on single-payer health care and Rep. John Conyers’ bill, the Expanded and Improved Medicare for All Act, H.R. 676. His article in Dollars & Sense explaining the economics of single payer is available here.

Distributed by All Unions Committee for Single Payer Health Care–HR 676, c/o Nurses Professional Organization (NPO), 1169 Eastern Parkway, Suite 2218 Louisville, KY 40217. Phone: (502) 636 1551. Website: http://unionsforsinglepayer.org/

Gerald Friedman: The Unhappy Marriage of Economics and Health Care

The Unhappy Marriage of Economics and Health Care

By Gerald Friedman, Ph.D., Professor of Economics, University of Massachusetts at Amherst
Unions for Single Payer Health Care, May 6, 2013

America’s health care system is collapsing, and we can blame the Economics profession. Most economists approach health care in the wrong way, viewing it as a commodity like shoes or the laptop on which I write. Instead, health care is an idiosyncratic commodity, subject to uncertainty and “asymmetric information” leading to destructive behavior. Trying to force health care into a box, treating it like other commodities, economists have promoted cost sharing, market competition, and insurance oversight of health care providers that have inflated the administrative burden while denying ever more Americans access.

While other countries have controlled health care costs by restraining administrative expenses and drug prices, ballooning costs in the United States come from policies promoted by economists who have urged governments and providers to control costs by making consumers responsible for more of the costs even while raising administrative costs and ignoring monopolistic pricing of pharmaceuticals. Viewing the injured, sick, and disabled as “consumers,” economists see insurance as the source of rising costs because they are not responsible for the costs of care they receive and, therefore, overuse health care. Rising copayments and deductibles are intended to discourage “consumers” from “abusing” health care, as if the victims of auto accidents or cancer should shop around for cheaper, and competition among insurers while limiting provider services by providing more administrative supervision. Ignoring evidence that Americans are less likely to see doctors and other health providers than are residents of other affluent countries, these economists have blamed the high cost of our health care on insurance which, they assume, leads to wasteful over-practice and the provision of unnecessary health care services. Their solution is greater cost sharing, more regulation of providers, capitation, and even the end to insurance by substituting medical savings accounts for insurance.

For 40 years, many economists’ have promoted increasing cost sharing through higher copayments and deductibles, the replacement of fee-for-service payment systems with capitation where providers are paid a fixed amount for patients as in Health Maintenance Organizations, and competition where multiple insurers offer a variety of plans catered to individual consumer’s interests and in competition with each other. Far from limiting health care cost increases, these practices have produced the worst of all worlds, rising costs along with restrictions on access. Costs have risen because these recommendations have inflated the administrative burden in health care, the costs of the billing and insurance activities within provider offices as well as the cost of the health insurance industry itself. While restricting access, limiting the benefit to Americans of some of the dramatic improvements in health care practice of the last decades, these practices have not bent the cost curve or slowed health care inflation even while denying more and more Americans access to affordable health care.

The waste involved in the current system has a redeeming feature: it provides abundant space for an improved system that could improve access and services even while dramatically lowering costs by eliminating administrative waste. If we lowered administrative costs and drug prices to the Canadian level, we could save nearly $600 billion dollars, more than enough to provide coverage to all of the uninsured while improving access for the millions of underinsured. If we see past the bad recommendations of market-fundamentalists, we can improve health care and save money. An outcome that even economists should favor.

http://unionsforsinglepayer.org/articles/2013-05-05/the-unhappy-marriage-of-economics-and-health-care

Comment:

By Don McCanne, M.D.

Which comes first, economic theory or policy? Intuitively, it seems that a solid understanding of economics should form the basis for developing policies. The obvious flaw is that economics is not a hard science, allowing you flexibility to choose economic theory that conforms to whatever policy you favor.

In the United States we have relied heavily on economists who are market-fundamentalists. They begin with market theory, and then they establish policies that supposedly would provide us the greatest value in health care. Yet we have ended up with a profoundly expensive, highly wasteful system of mediocre-to-poor quality, while falling far short of the goals of making health care affordable and accessible for everyone.

It seems unlikely that the market-fundamentalists would contend that they choose policies first and then use market theory to reach their goals. If so, then they would have to explain to us why they wanted today’s outcomes.  So much for market fundamentalism.

Advocates of health care justice first choose policies that would ensure quality care for everyone that is affordable for society as a whole. Then they apply economic theory to achieve the goals of those policies. Other nations have shown that this works.

In his article, Massachusetts Professor Gerald Friedman explains how we can get it right – producing better health care while saving money – an outcome that all economists should favor, that is if they are pure to the art and science of their profession.

Health insurance: A painfully long wait

By the Editorial Board
The Boston Globe, May 6, 2013

One million hours. That’s how much time new Harvard research suggests psychiatrists spend each year obtaining insurance approval to hospitalize suicidal or mentally ill patients. That translates into time taken away from patient care but also, more importantly, means patients in crisis are stuck in emergency rooms for a median of 8.5 hours, more than twice the length for most other admissions. This bureaucratic roadblock needs to be streamlined.

The study, published April 23, looked at data from more than 1,000 patients, including a small sample at Cambridge Health Alliance. Unlike if they were suffering from a gunshot wound or appendicitis, privately insured patients with psychiatric illnesses generally need prior authorization for reimbursement to be admitted. Approval almost always comes, the study found, but doctors spent between less than 20 minutes and five hours on the telephone getting it. With 1.6 million psychiatric admissions per year, that adds up. One result is that emergency rooms are now being designed to ensure that waiting psychiatric patients can’t harm themselves or others in the meantime.

The study’s authors call for this extra approval step to be eliminated, suggesting the only benefit is cost-savings due to deterrence — or what they call “rationing by hassle factor.” But, given that doctors may also receive important medical history during the call, particularly for regular ER visitors, insurers should instead expedite the approval process. Right now patients’ — and doctors’ — best interest is being lost amid paperwork.

http://www.bostonglobe.com/editorials/2013/05/05/insurers-must-cut-wait-times-for-hospitalization-mental-health-patients/ESSSpzpL938LOYO6HXJkcJ/story.html

Congressional ‘Obamacare’ Issues Beg the Questions that Single-Payer Answers

By Donna Smith
CommonDreams, April 26, 2013

In recent days, many of us have read and tried to follow the reports that Congressional offices are engaged in discussions about how to make sure their health insurance coverage available under the Affordable Care Act (Obamacare) remains affordable for Congresspersons and their staff members.  If you’d like to read more about the hullabaloo, this piece from the Washington Post probably explains it as clearly as any.

Basically, a mischievous amendment drafted and inserted by Republicans and later agreed to by Democrats anxious to  pass the ACA leaves some challenging issues to be resolved regarding the employer’s (in this case the Federal government, a.k.a., you and me) contributions to paying their share of premiums for Congressional members and their staff members.  Negotiations and discussions continue, but some fear that some Congressional staff may leave their positions rather than take on the bigger financial burdens of paying more of their health insurance premiums.  Stay tuned, if you are worried about how this plays out.

For the human beings involved who have health needs and families to support just as the rest of us do, I hope a fair resolution is reached in the short term. In the longer term, this should serve as yet another reinforcement of the need to move well beyond the incredibly unaffordable Affordable Care Act to the common sense, common decency, and simplicity of a single-payer, Medicare for all for life model for our dysfunctional health care system.

If Congressional members and their staffs are having difficulties comprehending and navigating the details of the ACA, imagine the millions and millions of “average” Americans who will face incredible confusion, expense, and delays of access to needed health care as we slog through the details of the ACA.   Most of us will not have anyone to negotiate or advocate for us when we try to make decisions about health coverage.  We will have “navigators” who will explain various plans available on the exchanges but that’s vastly different from having true advocates to make sure we aren’t overburdened with costs or enrolling in coverage that really isn’t coverage at all but simply compliance with the mandate to carry the financial product that is insurance.  I am already worried, just as millions of others are.

Why would single-payer, Medicare for all for life be so much better?  Simplicity – everybody is in, nobody is out.  Vastly reduced administrative costs – strip out the profit made on misery and deception and advertising and claims denials and delays.  Incredibly improved access to providers of our choice.  No need to navigate me to one plan or another.  No need to bankrupt me with co-pays, deductibles and out-of-pocket  expenses.  No need for anyone in charge of profit-making to lemon drop (get rid of those with costly medical conditions or who are aging) or cherry pick (keep the healthy, less costly folks enrolled).  We all have one single standard of high quality care under a social insurance model, not a model aimed at maximizing profits.

Some of us will face harsh realities more quickly than Congressional members of staffers on the Hill.  In just four days, I must decide once and for all whether or not to spend more than $800 a month on my coverage for the next several months or just go bare until the exchange (more stealthily named the “marketplace”) is up and running here in Colorado in January 2014.   No matter what I, as a two time cancer survivor and 58 year old, think is possible financially for me or even wisest from a health standpoint over the next eight months, once I get to October of this year, I will be able to begin exploring what I may be able to find under the ACA for my coverage.  I am so grateful that my husband is covered under Medicare and a supplemental (as are many member of Congress, I suspect).

When my time comes to decide about my health and my life, there will be no committee convened that worries about my costs or my coverage as is the case with the current effort on behalf of the Congressional members and staffs my tax dollars cover.  I will decide alone, likely in front of my computer screen, making calculations about paying my bills and other living expenses.  And I guarantee that my coverage will be bare bones as no one will want to cover me and though under the ACA they will not be able to deny me coverage, insurance companies will be able to age-rate my premiums and make sure they factor in my health history.  My premiums will likely be so high that I will either have to opt to pay a penalty for not having coverage or I will be grossly under-insured.  

None of this is necessary.  None of it.  Under a Medicare for all for life, single-payer model, we are all in one risk pool, we all pay a fair and progressive tax or premium for our coverage, and our medical and health decisions will no longer be business calculations.  We will be free of this mess.  We must thunder forward through the confusion of this difficult transition to the unnecessary complexity of the ACA to the day when we all are covered simply as a matter of human right and public good.

Donna Smith is the Executive Director of Health Care for All Colorado and the Health Care for All Colorado Foundation.

https://www.commondreams.org/view/2013/04/26-4

Aetna favors "margin over membership"

Q1 2013 Earnings Conference Call

Mark Bertolini – Chairman, CEO and President, and Shawn Guertin – Chief Financial Officer
Aetna, April 30, 2013

Guertin:  On the individual and small group, it is not a function of irrational pricing in any way, shape or form. We’ve talked before about the importance of having solid operating margins going into 2014, and so we have continued to err on the side of caution in our pricing on that product. And as I mentioned we’ll favor sort of margin over membership on this.

Bertolini:  We are entering these exchanges very carefully. We are about two-thirds of the way contracted for our exchanges. Those tend to be narrow networks that are generally 25 to 50 percent of the size of our base networks in those marketplaces. Currently the rates we’re getting for most of those networks is between Medicare and commercial, based on the narrower networks, the closer we get to Medicare. The rates will really be based on geography and probably, more importantly, will be based on how much we get the network contracted. So our approach in the initial pricing that we’ve submitted to the exchanges has been focused on where we have rates on a document inked. We’ve included those into our cost structure. Where we do not, and we need to add providers for network sufficiency, we’re pricing those at commercial pricing until we otherwise know that we have a better rate. And, as you know, the negotiations will take place through the summer and into the fall. Obviously, at the end of all of this, we have an opportunity to pull out in September, and we continue to hold that as an option should the exchanges not develop favorably, or they ask for unreasonable rates by the time we need to close on participation.

http://investor.aetna.com/phoenix.zhtml?p=irol-eventDetails&c=110617&eventID=4889118

Comment:

By Don McCanne, M.D.

In this quarterly earnings conference call, Aetna’s Mark Bertolini and Shawn Guertin demonstrate their executive skills in guiding this large insurance corporation in the direction of providing the greatest returns for the investors. From a corporate governance perspective, that’s exactly as it should be. How well does that work from the perspective of our health care system?

Chief Financial Officer Guertin says that they will favor “margin over membership.” That is, they will sacrifice the option of bringing more people under the insurance umbrella in exchange for greater profits for the Aetna investors. Is limiting access to the payer of health benefits a policy decision that we want driving our health care system?

Chairman Bertolini says that they intend to reduce the size of their already-limited provider networks by one-half to three-fourths in order to use that leverage to squeeze payment rates for their remaining providers. So they are deliberately removing choices that patients would have in selecting their health care professionals and institutions for the purpose of increasing their margins (profits). Is impairing access by restricting choice a policy decision that we want made for our health care?

Chairman Bertolini also says that they will continue to hold onto the option of pulling out of the exchanges if they do not “develop favorably” or if “they ask for unreasonable rates.” Is this a policy to take care of patients, or one to take care of investors?

Imagine a public single payer program, such as an improved Medicare that covered everyone. “Margin over membership” would be unheard of. As a universal system, everyone would be included. It would be inconceivable that the stewards of the system would limit the numbers enrolled as a means of generating more favorable balance sheets.

It’s the model that’s wrong. We need to change it.

The Court of Public Opinion

Reflections on a trip to West Virginia

By Andrew D. Coates, M.D., F.A.C.P.
WAMC Northeast Public Radio, May 3, 2013

Last week I had the privilege to visit West Virginia. I’ve been there before. My first impressions, made years ago, returned. If our everyday consciousness results from our everyday experience, it must be intense to live in West Virginia. There the phrase “king coal” leapt to mind at every turn.

Coal miners. Coal trains. Coal trucks. Barges of coal. Mountains of coal. And whole mountains devastated by open mining, called “mountaintop removal.” A simple trip across town, an afternoon walk, almost any regular activity, and upon your mind the great social importance of coal will amass and weigh.

One of my physician friends who lives in the state capital, Charleston, used the phrase “coal is king in West Virginia” on several occasions. “King Coal” is a 1917 novel by Upton Sinclair, inspired by the Colorado “coal wars” of 99 years ago. Sinclair explored the human consequences of the duplicitous inhumanity of the coal companies.

This week in a St. Louis bankruptcy court a company called Patriot Coal has proposed to liquidate the retirement benefits for about 13,000 retirees and their families. When Patriot Coal was created as a spinoff from Peabody in 2007, the miners explain, it took 16 percent Peabody’s assets but 60 percent of Peabody’s obligations to retirees. Arch Coal had also spun off a part its business in a similar manner in 2005. These companies, also loaded with pension and benefit obligations to Arch Coal retirees, were later acquired by Patriot Coal.

A lawsuit filed by the United Mine Workers of America against the Peabody Energy Corporation and Arch Coal, Inc., alleges that these two companies deliberately set up Patriot Coal as a way to cheat the retirees and their families.

In addition to litigation, over recent months miners, their families and their allies have been protesting across the nation, exposing the perfidy of king coal and demanding justice. In an official statement Peabody Energy sounded a note of contempt. “The UMWA is fully aware that this is a matter solely between the union and Patriot Coal, and the proper process for deciding such issues is through the bankruptcy court – not the court of public opinion,” the company’s statement read.

When I was in West Virginia what was mostly on my mind, besides coal, and what I discussed with my host and colleagues, and also participants in the discussions there, were ideas about the concept of caregiving. In medicine we champion our commitment to caregiving. We work to achieve expertise in diagnosis, prognosis and treatment. Yet to provide care we keep the human aspect in the forefront.

When confronting illness this is inescapable. In the end, we physicians and nurses and all of us in the allied healing professions, offer our services with a consciousness of “there but for the grace of God go I.” We recognize that our patients do not choose to suffer. We recognize that in our lives we too depend on our own caregivers.

This thinking raises the concept of a continuity of caregiving, from family members and friends to professionals and even systems of support, institutions for care. We might think of a continuity of caregiving through history and across cultures.

By ditching its obligations to retired miners in a bankruptcy proceeding, Patriot Coal aims to break the continuity of care in retirement these people earned for their families. The injustice is great, for benefits were never graciously and paternalistically granted, but wrested and won through self-sacrifice and solidarity of union activism. And we all know that the bankruptcy court is designed to work in favor of the company. As Woody Guthrie sang, “Some will rob you with a six-gun and some with a fountain pen.”

So we might take a moment to reflect on caregiving and the court of public opinion. Isn’t the purpose of having a society — of mining coal for electricity and other purposes for that matter — ultimately in order to share time with each other, our loved ones and friends? When it comes to access to care and good quality in caregiving – absolute necessities of modern life – isn’t the court of public opinion the proper place for the discussion of what to do with our caregiving resources?

Please go to the UMWA website and lend your voice to the effort to win justice for the retirees of Arch and Peabody. And please join with those of us who believe that the first step toward a system of caregiving that will protect all of us in our retirement, all of us who need care, would be a public national health program that leaves no one out.

Dr. Andrew Coates practices internal medicine in upstate New York. He is president of Physicians for a National Health Program.

You can listen to Dr. Coates’ radio broadcast here: http://www.wamc.org/post/andrew-coates-court-public-opinion

Focus on care, not profit streams of nonproviders

By Leonard A. Zwelling, M.D.
The Wall Street Journal, Letters, May 3, 2013

There could be no better argument for some sort of universal health-care system than Dr. Kessler’s op-ed (“The coming Obamacare shock,” April 30). The current system of health-care delivery, even if or after ObamaCare is fully implemented, denies access to millions, remains highly variable in quality and still costs too much because it is driven by the vast profits of mostly nonproviders within the health-care industrial complex.

All ObamaCare does is alter the way some health care is paid for and little else. If Congress really wants to improve the provision of care within the U.S., it needs to start again. This time it should focus on the care, not preserving the revenue streams of some nonessential intermediaries in the middle of the supply chain between doctors and patients.

Dr. Leonard A. Zwelling resides in Bellaire, Texas.

http://online.wsj.com/article/SB10001424127887324266904578456940046468784.html?KEYWORDS=zwelling

Oregon Experiment update: Medicaid works, sort of

The Oregon Experiment — Effects of Medicaid on Clinical Outcomes

By Katherine Baicker, Ph.D., Sarah L. Taubman, Sc.D., Heidi L. Allen, Ph.D., Mira Bernstein, Ph.D., Jonathan H. Gruber, Ph.D., Joseph P. Newhouse, Ph.D., Eric C. Schneider, M.D., Bill J. Wright, Ph.D., Alan M. Zaslavsky, Ph.D., and Amy N. Finkelstein, Ph.D. for the Oregon Health Study Group
The New England Journal of Medicine, May 2, 2013

Our study provides evidence of the effects of expanding Medicaid to low-income adults on the basis of a randomized design, which is rarely available in the evaluation of social insurance programs. We found that insurance led to increased access to and utilization of health care, substantial improvements in mental health, and reductions in financial strain, but we did not observe reductions in measured blood-pressure, cholesterol, or glycated hemoglobin levels.

http://www.nejm.org/doi/full/10.1056/NEJMsa1212321

And…

Protecting Finances and Improving Access to Care with Medicaid

By Richard Kronick, Ph.D., and Andrew B. Bindman, M.D.
Editorial, The New England Journal of Medicine, May 2, 2013

Insurance has three main purposes: to protect financial assets in the event of illness, to improve access to care, and to protect health.

First, Baicker and colleagues found that insurance provided a low-income population with considerable financial protection.

Second, Medicaid was associated with dramatically improved access to care.

It is less clear how well Medicaid accomplished the third goal — improving health.

The minimal effects of Medicaid coverage on measures of physical health are not entirely surprising given the many steps needed between the availability of insurance coverage and the delivery of appropriate care. In addition, the short follow-up period of the study, the small number of persons with chronic conditions in the study sample, and the limited number of outcomes may have contributed to a false negative result. This study did not or could not address many important potential health benefits of health insurance, including early detection of cancer, a reduction in sick days from school or work, and a reduction in mortality.

http://www.nejm.org/doi/full/10.1056/NEJMe1302107

The Oregon Health Insurance Experiment (A concise summary of findings): http://www.nber.org/oregon/

Comment:

By Don McCanne, M.D.

The Oregon Experiment unequivocally demonstrates that Medicaid improves access to care and provides considerable financial protection for the low-income population that it serves. Although it was not powered to demonstrate statistically significant improvements in health outcomes, a multitude of other research studies have already confirmed that the health-care interventions studied here are clinically effective.

Today there is a barrage of responses from conservatives and libertarians attacking Medicaid because this study supposedly shows that Medicaid had no significant effect on health outcomes. Thus they challenge the wisdom of implementing the Affordable Care Act provision that would greatly expand the Medicaid program.

Although there are many reasons to consider better options to Medicaid (e.g. single payer), withholding access to and affordability of care that has already been proven to be effective is certainly not one of them.

Perhaps the most significant set of observations in this study is the reduction in financial barriers to care. Most importantly, catastrophic expenditures (over 30 percent of household income) were reduced from 5.5 percent in the uninsured group to 1.0 percent in the Medicaid group. Those with medical debt were reduced from 57 percent to 44 percent, and those who had to borrow money to pay medical bills, or simply walked away from the bills, were reduced from 24 percent to 10 percent.

These reductions in financial barriers improve access which, in turn, improves health outcomes, although these numbers are still not good enough. With a well-designed single payer system, we could do much better.

Insurance fox guards henhouse of Obamacare

By Jonathan D. Walker, M.D.
The Journal Gazette (Fort Wayne, Ind.), April 26, 2013

Something worrisome just happened in Washington, but hardly anyone has noticed. The occurrence was a striking example of lobbyists exerting influence over our government and winning a profound victory for an industry we don’t need.

Most people don’t spend much time thinking about Medicare. If they do, they probably think of it as some old government insurance system that is too expensive. But the truth is that Medicare can be remarkably efficient. It has served as a model for health care systems in other countries. People eligible for it are much less likely to worry about their health and their money than the rest of us. Of course, Medicare could also be much better, but special-interest groups work hard to prevent improvements from being made. For instance, Medicare is the only health insurance on the planet forbidden to bargain over drug prices thanks to lobbying by the pharmaceutical industry.

However, Medicare’s problems go deeper. Americans have an ingrained attitude that for-profit entities can do things much better than the government, but numerous studies suggest that for-profit insurance companies cannot live up to this. They have too many expenses and they don’t have the market power to control costs. Plus, their business model demands that they do whatever they can to avoid paying for sick people – which is why you are now facing higher deductibles along with more restrictive networks and costlier premiums.

Yet politicians continue to insist that for-profit companies are better, and for that reason they created Medicare Advantage. Medicare Advantage plans are simply Medicare plans run by companies such as Humana and WellPoint but paid for by the taxpayers. Unfortunately, those plans have always cost more to cover people than standard Medicare. Because private insurance companies add so much bureaucracy and complexity, greater costs are inevitable.

We pay these companies on average about 14 percent more to do what Medicare already does. Then we pay an additional 14 percent on top of that because those companies are very good about adding more “diagnoses” to make their patients seem sicker. They get 28 percent more revenue for giving us extra hassles and less service than standard Medicare.

But if you are older than 65 and a smart shopper, these plans can offer you a great deal. Those extra taxpayer dollars allow the company to give you perks and still make a handy profit. If you have a Medicare Advantage plan that hasn’t abused you yet, you need to thank everyone around you who is younger than 65 for paying for your good fortune.

Multiple sources have shown that the Medicare Advantage program is a waste of money, including the Medicare Payment Advisory Commission (Congress’ advisory body on Medicare payments), the Congressional Budget Office and the Government Accountability Office. In fact, the one part of Obamacare that everyone agreed with was a plan to cut back on payments to those plans. But the for-profit companies rallied their lobbyists, and they were able to reverse the cut. And last week the private insurance companies were able to get the government to actually increase their payments by an additional 3.3 percent. A program that adds costs and creates more confusion is being rewarded with more money because we think it is better even when it isn’t.

And that is the real problem. Our gut tells us that for-profit companies have to be better, and those companies leverage that feeling to extract money from us. As we move forward into the new world of Obamacare, we need to keep that in mind. Those companies designed the basic principles of Obamacare – the mandate, subsidies and exchanges. A former WellPoint executive even helped draft the law, and back in 2009 Business Week announced that those companies had been able to get exactly what they wanted.

Obamacare actually has some great features, but it is also going to bring complexity, costs and confusion. We need to remember that all those things exist because we feel on a visceral level that for-profit companies can do things better. So much so that, rather than having a public option to buy Medicare, we handed over control of the new law to companies that avoid paying for our health care in order to make money. And they are so good at working the system that they were able to convince our government to pay even more to perpetuate a program that just plain doesn’t work.

Dr. Jonathan D. Walker is an assistant clinical professor at Indiana University School of Medicine in Fort Wayne. He wrote this for The Journal Gazette.

http://www.journalgazette.net/article/20130426/EDIT05/304269984/1144

Racial bias in health care: an interview with Dr. Claudia Fegan

Mississippi Public Broadcasting Radio, April 29, 2013

PNHP note: The following is an unofficial transcript of an interview that took place in the studios of Mississippi Public Broadcasting in Jackson, Miss., on April 19. Dr. Claudia Fegan is past president of Physicians for a National Health Program. Her two-day visit to Jackson included presentations at Tougaloo College and the University of Mississippi Medical Center.

Karen Brown: This is Mississippi Edition on MPB Radio and I’m Karen Brown. The infant mortality rate among educated Black women is higher than among less-educated white women. So says Dr. Claudia Fegan, chief medical officer for Cook County, Illinois. Dr. Fegan was in Mississippi raising awareness on what she says is racial bias in the health care system. She tells us that, statistics aside, disparity in health care boils down to one thing.

Dr. Claudia Fegan: We’re talking about racism, and how racism impacts upon the delivery of health care in this country. Though we would like to pretend that we’re past that, that we’re in a post-racial state, the reality is that in the delivery of health care in this country racism still plays an important role.

KB: Is this Black and white, or is it Hispanic?

CF: It’s all of that. What we know is that people of color in this country, despite their economic status, are less likely to get the care they need. And until we wrap our brains around that, until we come to grips with that, we can’t begin to address the problem.

KB: Is the problem worse in the South, because everyone thinks that racism is more prevalent in the South?

CF: I can’t say that. The data shows that health care providers, be they Black or white, brown or yellow, in the delivery of health care, do not treat people of color the same. And, as a result of that, people of color do not always get the care that they need. 

KB: What kind of data have you used to support that assertion?

CF: There’s very blunt data. The idea that Black women are less likely to get breast cancer than white women and yet their mortality rates are 32 percent higher than white women. There’s data that shows …

KB: Wait, I want to stop you there. Is it because Black women don’t seek out medical care, they don’t have access to medical care, or they’re under-treated or not diagnosed properly?

CF: All of those. So it’s a very complicated problem. If you look at the infant mortality rate, you’ll find Black women with college degrees have births that do not have as good an outcome as white women who do not have a high school diploma. So it’s not as simple as socioeconomic status, and the notion that you can earn your way out, or educate your way out of these problems.

KB: That’s a very interesting statistic or example, because I have done many interviews with many experts talking about disparity and in particular about breast cancer being more deadly among Black women than among white women. The infant mortality rate is very high in this state, Mississippi, and I’ve never heard it said that an educated Black woman has a greater chance of having a child die in infancy than a white woman who is not educated.

CF: What I’m saying is that we as a country have not come to grips with all that is involved in the delivery of health care. So, for example, there’s something very important that’s happening between a patient and a physician. I’m boarded in quality; I look at quality a great deal. If you take a patient and a physician in the exam room, and then after that visit you talk to the physician about what he or she thinks happened in that room, and then talk to the patient about what they think happened in that room, there’s a great difference. There’s a gap there. And until we come to grips with that, we tend to focus on what we can quantify, but we need to understand that the way we are delivering health care does not meet the needs of the people to whom we’re trying to deliver it – we’re trying to care of people. Because that’s something we can’t count well. What we can count are things like death, morbidity, illness, complications – we can’t count that non-tangible part of that visit. What did we miss? Why is that when you look at the patient’s perception of what occurred, and the doctor’s perception of what occurred, there’s a disparity?

KB: How do you find that out?

CF: There are no simple answers, but the first thing you do is acknowledge that there’s a problem. That maybe what we’re delivering is not culturally competent care. That maybe we’re not meeting people where they are. Because, despite the amount of education we have, we still have our cultural bias. We still bring to the table whatever we were raised with, whatever we were brought up with.

KB: Tell me if this factors into it. Would a Black individual be likely to be more uncomfortable with a white doctor or a white person uncomfortable with a Black doctor?

CF: Well, that is the assumption. What you have to really understand is that if a … I heard someone yesterday say to me, “We don’t go to the County [hospital], because County care is not good care.” And if they’ve been raised with the impression that the care they would get there by a physician of color is not good and that they would be better served by a white doctor, then that’s where their comfort level is. That’s a bias that they bring to the table.

KB: And we should say that you’re coming at this from the doctor’s point of view, the health care institution’s point of view. You’re charging your fellow doctors to take this on, is that right?

CF: I’m charging society to take this on. Because while the doctors cannot – while we can lead, I would say we should participate. But we as a society have to accept the notion that everyone should have access to care. Everyone should have access to health care. We accept as a society that everyone should have access to education. We provide access to education. We accept the notion that we don’t expect a single individual to make sure that their water is clean. We as a society make sure they have clean water. We no longer expect someone, if there’s a fire in their house, to put it out by themselves. We realize that you need multiple hands.

KB: How do you focus on doctors who may be showing a bias toward patients? Is there a way, is there a program for doctors to address that or even to recognize that they might have a bias when it comes to treating their patients?

CF: Yes, there’s a wake-up moment: for people to think about the way in which they do their jobs every day, and even though they say I’ve done it this way every year for the last 20 years or 30 years. They’ve always had a reticence to do that.

KB: Let me wrap all this up by asking what, in your mind, is justice in health care?

CF: A patient being able to get what they need when they need it. I always ask: Who does not deserve health care? Is there someone you think who doesn’t deserve health care? And if they deserve health care, who does not deserve the best health care we have to deliver? And how can you ensure that everyone gets the best health care they deserve? And that’s by ensuring that everyone in this country is insured. And until we can guarantee every person coverage for the care they need, when they need it, we will not have justice in health care.

KB: Dr. Claudia Fegan is executive medical director for the Cook County Health and Hospital Systems. I thank you very much for being with us.

CF: Thank you.

You can listen to the broadcast here (Dr. Fegan’s segment starts at the 13:30-minute mark): http://mpbonline.org/mississippiedition/ME042913/

Freestanding emergency departments?

Freestanding emergency department growth creates backlash

By Sue Ter Mat
American Medical News, April 29, 2013

Dr. McLaughlin, part-owner of Texas-based Elite, is among those embracing one of the growing segments of health care — freestanding emergency departments. The stand-alone emergency departments have similar equipment as hospital emergency departments but are usually miles from main hospitals. They can look from the outside like urgent care centers, but freestanding EDs can take more severe cases. If the centers take Medicare or Medicaid, they are subject to the federal Emergency Medical Treatment and Active Labor Act and must accept all patients regardless of their ability to pay.

Centers are opened by hospitals and physicians, sometimes separately, sometimes in alliance. Generally, local hospital EDs have agreements with the centers to take cases too severe for the freestanding centers, or to admit patients.

The centers’ numbers have doubled during the past decade, up to 284 in 45 states.

With that growth, however, has come a backlash over freestanding EDs charging, or attempting to charge, a facility fee, as a hospital ED would. Facility fees are charges that hospitals collect from insurers for operating EDs and cover the cost of running the departments.

Urgent care centers also have viewed freestanding emergency departments as a competitive threat.

Freestanding EDs are more lucrative than urgent care centers. Average net revenue per patient for urgent care centers range from $105 to $135, while average revenue is $350 to $500 for freestanding EDs.

A major concern has been that freestanding EDs take care of minor health problems like urgent care clinics but charge emergency departments fees.

http://www.amednews.com/article/20130429/business/130429966/4/?utm_source=nwltr&utm_medium=heds-htm&utm_campaign=20130429

Comment:

By Don McCanne, M.D.

What is the difference between an urgent care center and a freestanding emergency department?

Urgent care centers are equipped and staffed to provide immediate care for urgent problems which arise when care may not be convenient or accessible at the patient’s primary source of health care. Emergency departments also provide urgent care, but, in addition, they triage patients, admitting patients with more serious disorders to the hospital with which they are associated.

Free standing emergency departments really are not much different from urgent care centers since the latter also can transfer patients to acute care hospitals when necessary. The primary difference seems to be that the freestanding emergency department will have an entrepreneurial arrangement with a hospital in order to be able to gouge patients and insurers with outrageous “facility fees” – a trick used by hospital emergency departments to increase revenues, partly to offset costs of EMTALA requirements that prohibit them from turning away uninsured or underinsured patients with conditions serious enough to require hospital admission. Urgent care centers typically have the facility fee built into their other charges.

Like urgent care centers, freestanding emergency departments do not have the financial responsibility for caring for patients requiring admission, yet they still charge the facility fee as if they did. If they accept Medicare and Medicaid patients, the only extra obligation of the freestanding emergency departments is to arrange transfer to an acute care hospital.

Freestanding emergency departments are established primarily to make money. Hospital emergency departments are established primarily to meet the health care needs of the community. They are different animals, as this scheme to cheat people by charging unwarranted facility fees demonstrates.

Under the PNHP single payer model, two issues presented here are addressed. One is that, through central planning, facilities are planned and developed based on the health-care needs of the community, rather than being based on the greatest opportunity for profit while avoiding communities with fewer resources. The other is that for-profit institutions are prohibited in the PNHP model; all resources go to patient care with none being diverted to investors.

Single payer is not just a matter of shooing away intrusive and wasteful private insurers. It is a matter of redesigning the health-care financing and delivery infrastructures to best meet the health-care needs of the community, while providing the greatest value in health care – for all of us.

Brookings' disappointing recommendations for bending the cost curve

Bending the Curve: Person-Centered Health Care Reform: A Framework for Improving Care and Slowing Health Care Cost Growth

Authors: Joseph Antos, Katherine Baicker, Michael Chernew, Dan Crippin, David Cutler, Tom Daschle, Francois de Brantes, Dana Goldman, Glenn Hubbard, Bob Kocher, Michael Leavitt, Mark McClellan, Peter Orszag, Mark Pauly, Alice Rivlin, Leonard Schaeffer, Donna Shalala, Steve Shortell
Engelberg Center for Health Care Reform, Brookings, April 29, 2013

We propose a framework for health care reform that focuses on supporting person-centered care. With continued innovation toward more personalized care, this is the best way to improve care and health while also bending the curve of health care cost growth.

Simplify and Standardize Administrative Requirements
 
The time cost to clinicians of interacting with health plans has been estimated to be as high as $23 to 31 billion annually. Further, clinicians, health plans, and other participants in health care reform are currently subject to a wide range of diverse reporting requirements that add to costs and reduce the availability of actionable information. Some steps have been taken recently to reduce these administrative costs through standardization. Further administrative simplification steps should include the following, all of which can be accomplished through existing standard-setting entities and public-private implementation initiatives:
 
*  Implementation of an updated standardized claim form.
 
*  Standard methods for quality reporting by providers and plans, including clinical, outcome, and patient-level measures — this would be an administrative benefit for providers that adopt value-based payment reforms across all of their payment systems and would lead to reduced reliance on cumbersome coding for specific types of providers.
 
*  Standard methods for timely data sharing by plans with health care providers and patients who are involved in the financing reforms described in this report. Data sharing accomplished according to consistent standards would reduce the burden on providers and patients, and the it vendors who serve them, for implementing the analytic tools needed to achieve greater improvements in care.
 
*  Support for state investments to update their Medicaid information systems including standard quality measure reporting and access to CMS data for quality improvement.

Reforms for Private Health Insurance Markets and Coverage

*  Support employer efforts to engage employees in reducing overall health care costs through Employment Retirement Income Security Act (ERISA) and other health plan regulations that promote value-based insurance designs and tiered benefit designs, narrow networks of providers that demonstrate high performance, and employees’ ability to share in the savings from health care choices and changes in behavior that reduce costs.

Bending the Curve (49 pages):
http://www.brookings.edu/~/media/research/files/reports/2013/04/person%20centered%20health%20care%20reform/person_centered_health_care_reform.pdf

Comment:

By Don McCanne, M.D.

This newest report on recommending changes to control health care costs is being presented as a “bipartisan” consensus representing “broad agreement” on reform. Those who have followed the national policy dialogue will recognize that the list of authors does, in fact, include representatives of both major political parties. Nevertheless, the views presented in the report confirms the presumption that these Democratic authors have moved into the Republican camp in the policy debate.

As an example, their recommendations for reducing administrative waste totally ignores the well documented sources of that waste, resulting in recommendations that will have no impact at all on the problem, when recovery of administrative waste should be front and center in reform.

As another an example of their right-wing approach, they recommend “value-based insurance designs and tiered benefit designs, narrow networks of providers that demonstrate high performance, and employees’ ability to share in the savings from health care choices and changes in behavior that reduce costs.” This is code language for consumer-driven approaches that shift more costs to those needing health care – terrible policies that defeat principles of health care justice.

The only good thing about this report is that you can quickly dump it with the “delete” button, without the environmental consequences of wasting 49 pages of paper.