PNHP

Premium support would affect much more than the premiums

Premium support would affect much more than the premiums

Transforming Medicare into a Premium Support System: Implications for Beneficiary Premiums

By Gretchen Jacobson, Tricia Neuman and Anthony Damico
Kaiser Family Foundation, October 2012
Over the past several decades, the idea of transforming Medicare from its current structure to one known as “premium support” has been raised intermittently as an approach for reforming the Medicare program, often in the context of efforts to reduce the federal debt and deficit.  The primary goals of a premium support system are to reduce the growth in Medicare spending, and rely more on a competitive marketplace.  While the parameters of various premium support proposals differ, the general idea is for the federal government to make a predetermined contribution on behalf of each person on Medicare that would be applied toward the premium for a health insurance plan.
This paper aims to help inform policy discussions by examining the potential implications of a leading premium support approach on Medicare premiums, the extent to which Medicare premiums would vary by state and by county, and the key factors that could drive variations in premiums under this approach.  The analysis looks at an approach to premium support that ties federal payments to the second lowest cost plan offered in an area or traditional Medicare, whichever is lower.  This approach is similar to the premium support proposal included in Chairman Paul Ryan’s (R-WI) budget proposal for FY2013 that was embraced by Presidential nominee Mitt Romney, and previously included in the Wyden-Ryan and Domenici-Rivlin proposals.  The study focuses on beneficiaries’ Medicare premiums, but does not take into consideration out-of-pocket spending due to the effects of changes in benefits, cost-sharing requirements and premiums for supplemental insurance.
From the Discussion
These findings underscore the potential for highly disparate effects of a premium support system for beneficiaries across the country.  The results show how individual decision making (plan choices), coupled with geographical variations in the cost of traditional Medicare and the private health plans, would play a major role in determining how well beneficiaries fare with respect to premiums under this approach.
The study estimates that the majority (59%) of Medicare beneficiaries would be expected to face additional premiums, based on current plan preferences, under the modeled premium support system.  Clearly, a smaller share of beneficiaries would pay higher premiums if they instead enrolled in a low-cost plan offered in their area.  In high-cost areas, such as Miami and Los Angeles, most beneficiaries in the traditional Medicare program would see a significant increase in Medicare premiums, unless they opted to enroll in a lower-cost private plan.  Conversely, in low-cost areas, such as Honolulu County in Hawaii and Multnomah County in Oregon (which includes Portland), the majority of beneficiaries would not pay additional premiums if they remained in their plan (based on current enrollment in that county), but a sizeable minority (17% and 43%, respectively) would pay at least $100 more in monthly premiums for their Medicare coverage in a private plan.
Further, this analysis shows that premiums for traditional Medicare would likely vary across states, and within states, by county.  If this system had been fully implemented in 2010, some would have paid the same Medicare premium, while others would have paid an additional $200 more per month in Medicare premiums, not considering other additional costs beneficiaries could potentially face, such as cost-sharing requirements for benefits covered by the plan, the cost of benefits not covered by the plan, and premiums for supplemental insurance.
Beyond premiums, other factors could be considered in choosing a plan, which may or may not be consistent with the choice of a low-cost plan.  First, enrolling in a low-cost plan, if it requires changing from another plan, may require beneficiaries to change their doctors and other health care providers, posing potential problems for beneficiaries with long-standing relationships with their doctors, especially those with chronic conditions.  Second, some beneficiaries may value the option to enroll in a highly-rated plan, but quality is not a factor in determining which plan is the benchmark plan.  Third, low-cost plans in a given area may or may not have the capacity to accommodate all beneficiaries who wish to enroll in the plan. Fourth, the low-cost plans offered in an area could change each year or so, as has occurred in the Medicare Part D program, potentially creating instability for beneficiaries with modest incomes who would have a strong financial incentive to remain in a low-cost plan each year.
Given a lack of specificity about some of the key policy elements and questions about the likely response of the insurance industry and beneficiaries, there remains great uncertainty about the expected effects of this approach for elderly and disabled Americans in the future.
Limitations
* This study focuses narrowly on the expected effects of a premium support system on beneficiaries’ Medicare premiums – an approach that excludes the effects of changes in benefits, cost-sharing requirements and premiums for supplemental insurance.
* This study models the effects of a premium support system in a given year, but not the expected costs for beneficiaries over the longer term, including the effects of adverse selection for beneficiaries in traditional Medicare or the potential for Medicare spending caps to increase premiums for beneficiaries over time.
* This study does not examine the effects of a premium support system for beneficiaries with low-incomes, including dual-eligible beneficiaries who could also be affected by changes made to Medicaid, such as a Medicaid block grant.
* This study considers potential changes in plan behavior (changes in bids), but does not analyze the potential for insurers’ responses to vary, based on local market conditions.
* This study does not capture the nuances of beneficiaries’ plan switching behavior and only allows for beneficiaries to switch into a benchmark plan, rather than a plan that is less expensive than their current plan, but is not a benchmark plan.
* This study does not consider whether benchmark plans (if not traditional Medicare) would have sufficient capacity to serve all potential enrollees.
* Finally, this analysis does not consider the effect of a premium support system for other payers, including the federal government, state governments (Medicaid), or employers.
http://www.kff.org/medicare/upload/8373.pdf

When reforms for health care are proposed, the first response by many is, what will it cost me? In the case of the premium support model (voucher, or defined contribution), most people want to know what the premium will be. This meticulous 48-page study by Kaiser Family Foundation shows that for the majority of individuals, premiums would increase. But there is much more to premium support than merely the premium to be paid.
Reading the full report might be of interest to individuals who would want to see the complexities involved in simply determining the impact on premiums. In the excerpts above, some of the factors that were not considered are emphasized, especially in the list of limitations of the study. Because the proposal depends heavily on private insurance plans, there are a slew of potential negative impacts which can increase costs and impair access for the Medicare beneficiary – impacts that are far beyond those suggested by the list of limitations.
If you aren’t convinced by now that premium support is a terrible idea, go to our website at www.pnhp.org and type in “premium support” in the search window and spend a an hour or so reading what we have to say. Then go back and read what Romney and Ryan have to say, and you’ll see what they deliberately left out. It is a scheme to slowly unwind the social contract of health care justice, when what we need to do is to improve that contract and expand it to cover everyone.

Physician advocacy, activism and politics

Physician advocacy: for patients and for social change

By Josh Freeman
Medicine and Social Justice, October 13, 2012

A recurring question for physicians and others in the health profession is what degree of health advocacy is expected or appropriate. For those of us in medical education, the question becomes how much of the training (and evaluation) of medical students and residents should be based on advocacy for their patients or populations.

In the United States, the clearest expression of the role of advocate is in the American Medical Association’s (AMA) Declaration of Professional Responsibility: Medicine’s Contract with Humanity, which contains, as item #8, “Advocate for social, economic, educational, and political changes that ameliorate suffering and contribute to human well-being.”

Dobson and colleagues propose a parsing of the concept of advocacy into two components. They call these “agency”, working on behalf of the interests of a specific patient, and “activism”, which is more directed toward changing social conditions that impact health, and whose effect is seen on populations more than individuals.

They note that “…several studies have concluded that although physicians generally endorse the idea of advocacy, they rarely engage in it.” They summarize the difference between agency and activism by saying “…whereas agency is about working the system, engaging in activism is about changing the system.”

There are, however, many physicians who do act as social activists, and we need more of them. The source will be medical students who then become residents. Luckily, there seem to be no shortage of entering medical students with this commitment. They demonstrate it by community volunteer work, creating and working in free clinics, volunteering their time to work in schools, and pursuing training in public health, public policy, and community involvement. Sadly, however, along with empathy, which has been shown to dramatically drop as medical students enter their clinical training (Hojat, et al.[2], and this blog, “Are we training physicians to be empathic? Apparently not.”, September 12, 2009), so does volunteerism and commitment to social change.

When we look at the American political landscape, we see a fair number of physicians involved in politics. It could be argued that, in these roles, they are advocating for social, economic, educational, and political changes. What is disconcerting is that the majority of these physician politicians seem to ignore the second half of that sentence, “…that ameliorate suffering and contribute to human well-being”. They are often found among, and sometimes as leaders, in advocating policies that slash the social safety net, decrease funding for public education, and oppose universal health insurance. Too frequently, they act as agents of their own social class than as advocates for those most in need.

That doctors will most often adopt the “agency” role when it comes to issues that most directly affect the health of their patients, that can be arguably seen as “medical”, is very reassuring.

The advocacy role is more complex. Not only are many physicians socially conservative and not, perhaps, in support of policies “…that ameliorate suffering and contribute to human well-being,” physicians are busy people who mostly see themselves in the role of providing direct patient care, not advocating for systemic societal change.

I would like to think that all physicians manifest advocacy in the “agency” sense for their patients. It may be wishful thinking to hope that all physicians will manifest advocacy in the “activist” sense, that they will fulfill the AMA’s Declaration by actually advocating “…for social, economic, educational, and political changes that ameliorate suffering and contribute to human well-being.” But if we do not make this a core value for physicians that is ubiquitously taught in medical school and residency, if we do not select students because of their commitment to advocacy, we will have much less of it.

And we need it badly.

(Joshua Freeman, MD is Chair of the Department of Family Medicine, University of Kansas Medical Center. These excerpts are from his blog and do not represent the views of the University of Kansas.)

http://medicinesocialjustice.blogspot.com/2012/10/physician-advocacy-for-patients-and-for.html

And…

GOP Doctors Caucus, U.S. Congress

True health care reform can only begin with a complete repeal of Obamacare.

The Doctors Caucus is committed to ensuring that all Americans have access to quality health care. Doctors believe that chronic illness and cost are two main barriers between patients and quality coverage. Consumer-driven health reforms that seek to put the patient and their physicians in control of how care is accessed can greatly increase a patient’s access to quality health care.

http://doctorscaucus.gingrey.house.gov/

21 members of the GOP Doctors Caucus:
http://doctorscaucus.gingrey.house.gov/whoweare/members.htm

Comment:

By Don McCanne, MD

What is the disconnect between the activism of physicians who serve in Congress advocating for social, economic and political changes, and physicians in the community who advocate for ameliorating suffering while contributing to human well-being? Didn’t they all enter medical school with the same altruism? Apparently not.

We now have a politically polarized nation. The medical profession has not escaped this dichotomy. In Congress, it is not as balanced as it is throughout the nation. The GOP Doctors Caucus has twenty-one members, whereas there are only two Democratic physicians in Congress and one of those, as a delegate, is not even allowed a vote on the House floor.

When you read the Priorities of the GOP Doctors Caucus, it is loaded with warm, fuzzy, feel-good language. But if you are a student of health policy, you recognize that they support policies that would greatly increase the numbers of uninsured, and would expand a market of “affordable” health plans that really just shift costs to users, making health care access unaffordable for far too many. That might meet the social, economic and political goals of the GOP Doctors Caucus, but at the cost of exacerbating suffering and further impairing human well-being.

We wish that the partisan divide wasn’t a chasm, but it won’t go away. Voters do bear some responsibility for having selected these physicians to be their senators and representatives in Congress, but it is difficult to blame them when the GOP Doctors Caucus stated mission is “Utilizing medical expertise to develop patient-centered health care reforms focused on quality, access, affordability, portability, and choice.” That sounds pretty good. How could the voters be expected to understand the nefarious policy positions behind that statement?

For health care, many would agree that the filter should be at the medical school admissions committee. Medical schools should select students for whom ameliorating suffering and contributing to human well-being is a part of their soul. The problem is that it may be difficult to find enough admissions committee members who can pierce the obfuscating feel-good language used by too many of the applicants – the type of language that is so effectively used by the GOP Doctors Caucus.

(I apologize to Republican single payer supporters who might object to what seems to be a partisan message. In my defense, the message is about physician politicians and health care justice. It is the Republican physicians in Congress who have made it partisan.)

Private Insurance Companies Cost Medicare $34 Billion This Year

By David Wallechinsky
Allgov.com, Oct. 15, 2012

Supplemental Medicare plans provided by private insurance companies are wasting billions of tax dollars annually in overpayments.

The Medicare supplements, designed to cover gaps in government coverage, have consumed more than $282 billion since 1985. Much of this waste has come about in the last nine years, following the Bush administration’s decision to boost Medicare Advantage (MA) payments to insurers.

According to a new study by Dr. Ida Hellander and two doctors from City University of New York School of Public Health at Hunter College, Steffie Woolhandler and David U. Himmelstein, “In 2012 alone, we estimate that private insurers are being overpaid $34.1 billion, $2,526 per MA enrollee, 6.2 percent of total Medicare spending this year.”

The three doctors, who are members of Physicians for a National Health Program, concluded that Medicare supplements aren’t helping the problem of providing care to elderly Americans. But they are draining the federal budget of enormous sums of money.

Private Medicare plans are used by 27 percent of Medicare enrollees. The biggest players in the plan are UnitedHealth and Humana, which account for one-third of the participants. Medicare pays these companies an average of $10,123 per person per year to cover anticipated hospital and doctor expenses. But the authors of the study have identified five ways in which health insurance companies increase their profits while the government pays.

* People who enrolled before 2004 did so at rates that were evaluated with few risk factors. So a healthy 70-year-old paid as much as an unhealthy one. The private plans used marketing techniques to recruit healthier enrollees while discouraging those with more serious problems.

* Since 2004, more risk factors have been taken into account when enrolling Medicare customers. The private plans adjusted to this. If a potential enrollee could be proven to be prone to a serious condition, the companies could charge Medicare more for their premiums. So the companies identified people with mild cases of such conditions as arthritis, heart failure and bronchitis, and billed them as if they had serious cases of the same problems.

* In 2003, the health insurance industry pushed through Congress the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), which increased premiums allegedly to indirectly cover medical education. These added fees were supposed to go to hospitals, but are in fact usually absorbed by the insurance companies.

* The multi-billion dollar “Medicare Advantage Quality Bonus Payment Demonstration” program, which was part of President Barack Obama 2010 health care reform, was supposed to give extra money to private plans that do a good job of providing high-quality care, Instead, the bonus payments have been given to “virtually all MA plans.”

* Medicare pays the insurance companies full benefits even a patient’s care is provided and paid for by the Veterans Administration, so the government ends up paying twice for the same treatment.

http://www.allgov.com/news/where-is-the-money-going/private-insurance-companies-cost-medicare-34-billion-this-year-121015?news=845951

Physician advocacy, activism and politics

Physician advocacy: for patients and for social change

By Josh Freeman
Medicine and Social Justice, October 13, 2012
A recurring question for physicians and others in the health profession is what degree of health advocacy is expected or appropriate. For those of us in medical education, the question becomes how much of the training (and evaluation) of medical students and residents should be based on advocacy for their patients or populations.
In the United States, the clearest expression of the role of advocate is in the American Medical Association’s (AMA) Declaration of Professional Responsibility: Medicine’s Contract with Humanity, which contains, as item #8, “Advocate for social, economic, educational, and political changes that ameliorate suffering and contribute to human well-being.”
Dobson and colleagues propose a parsing of the concept of advocacy into two components. They call these “agency”, working on behalf of the interests of a specific patient, and “activism”, which is more directed toward changing social conditions that impact health, and whose effect is seen on populations more than individuals.
They note that “…several studies have concluded that although physicians generally endorse the idea of advocacy, they rarely engage in it.” They summarize the difference between agency and activism by saying “…whereas agency is about working the system, engaging in activism is about changing the system.”
There are, however, many physicians who do act as social activists, and we need more of them. The source will be medical students who then become residents. Luckily, there seem to be no shortage of entering medical students with this commitment. They demonstrate it by community volunteer work, creating and working in free clinics, volunteering their time to work in schools, and pursuing training in public health, public policy, and community involvement. Sadly, however, along with empathy, which has been shown to dramatically drop as medical students enter their clinical training (Hojat, et al.[2], and this blog, “Are we training physicians to be empathic? Apparently not.”, September 12, 2009), so does volunteerism and commitment to social change.
When we look at the American political landscape, we see a fair number of physicians involved in politics. It could be argued that, in these roles, they are advocating for social, economic, educational, and political changes. What is disconcerting is that the majority of these physician politicians seem to ignore the second half of that sentence, “…that ameliorate suffering and contribute to human well-being”. They are often found among, and sometimes as leaders, in advocating policies that slash the social safety net, decrease funding for public education, and oppose universal health insurance. Too frequently, they act as agents of their own social class than as advocates for those most in need.
That doctors will most often adopt the “agency” role when it comes to issues that most directly affect the health of their patients, that can be arguably seen as “medical”, is very reassuring.
The advocacy role is more complex. Not only are many physicians socially conservative and not, perhaps, in support of policies “…that ameliorate suffering and contribute to human well-being,” physicians are busy people who mostly see themselves in the role of providing direct patient care, not advocating for systemic societal change.
I would like to think that all physicians manifest advocacy in the “agency” sense for their patients. It may be wishful thinking to hope that all physicians will manifest advocacy in the “activist” sense, that they will fulfill the AMA’s Declaration by actually advocating “…for social, economic, educational, and political changes that ameliorate suffering and contribute to human well-being.” But if we do not make this a core value for physicians that is ubiquitously taught in medical school and residency, if we do not select students because of their commitment to advocacy, we will have much less of it.
And we need it badly.
(Joshua Freeman, MD is Chair of the Department of Family Medicine, University of Kansas Medical Center. These excerpts are from his blog and do not represent the views of the University of Kansas.)
http://medicinesocialjustice.blogspot.com/2012/10/physician-advocacy-for…
And…
GOP Doctors Caucus, U.S. Congress
True health care reform can only begin with a complete repeal of Obamacare.
The Doctors Caucus is committed to ensuring that all Americans have access to quality health care. Doctors believe that chronic illness and cost are two main barriers between patients and quality coverage. Consumer-driven health reforms that seek to put the patient and their physicians in control of how care is accessed can greatly increase a patient’s access to quality health care.
http://doctorscaucus.gingrey.house.gov/
21 members of the GOP Doctors Caucus:
http://doctorscaucus.gingrey.house.gov/whoweare/members.htm

What is the disconnect between the activism of physicians who serve in Congress advocating for social, economic and political changes, and physicians in the community who advocate for ameliorating suffering while contributing to human well-being? Didn’t they all enter medical school with the same altruism? Apparently not.
We now have a politically polarized nation. The medical profession has not escaped this dichotomy. In Congress, it is not as balanced as it is throughout the nation. The GOP Doctors Caucus has twenty-one members, whereas there are only two Democratic physicians in Congress and one of those, as a delegate, is not even allowed a vote on the House floor.
When you read the Priorities of the GOP Doctors Caucus, it is loaded with warm, fuzzy, feel-good language. But if you are a student of health policy, you recognize that they support policies that would greatly increase the numbers of uninsured, and would expand a market of “affordable” health plans that really just shift costs to users, making health care access unaffordable for far too many. That might meet the social, economic and political goals of the GOP Doctors Caucus, but at the cost of exacerbating suffering and further impairing human well-being.
We wish that the partisan divide wasn’t a chasm, but it won’t go away. Voters do bear some responsibility for having selected these physicians to be their senators and representatives in Congress, but it is difficult to blame them when the GOP Doctors Caucus stated mission is “Utilizing medical expertise to develop patient-centered health care reforms focused on quality, access, affordability, portability, and choice.” That sounds pretty good. How could the voters be expected to understand the nefarious policy positions behind that statement?
For health care, many would agree that the filter should be at the medical school admissions committee. Medical schools should select students for whom ameliorating suffering and contributing to human well-being is a part of their soul. The problem is that it may be difficult to find enough admissions committee members who can pierce the obfuscating feel-good language used by too many of the applicants – the type of language that is so effectively used by the GOP Doctors Caucus.
(I apologize to Republican single payer supporters who might object to what seems to be a partisan message. In my defense, the message is about physician politicians and health care justice. It is the Republican physicians in Congress who have made it partisan.)

What is wrong with P4P schemes?

Financial incentives may sap motivation, undermine quality: Health Affairs article

Physicians for a National Health Program (PNHP)
Press Release, October 12, 2012

A leading authority on behavioral economics has teamed up with two health policy experts in an article at the Health Affairs blog to argue that pay-for-performance (P4P) schemes in medicine may do more harm than good by “crowding out” altruism and other intrinsic motivations to do a good job.

Such P4P schemes, which are being quickly adopted by Medicare and many private insurers under the new federal health law, typically involve giving bonuses to doctors and hospitals for hitting specific, numerical targets in such matters as prescribing certain drugs or ordering screening tests.

However, despite the widespread rush to embrace P4P, a growing body of research has found no evidence that these schemes actually benefit patients, write professor Dan Ariely and physicians Dr. Steffie Woolhandler and Dr. David Himmelstein. Their article was posted to the blog late Thursday afternoon.

Moreover, it’s likely the introduction of such schemes into the cognitively complex work of medicine will backfire, they say.

“Traditionally, economists have viewed extrinsic (i.e. monetary) reward as either the only motivator or as simply additive to intrinsic motivators such as purpose, altruism, mastery, or autonomy,” the authors write.

“According to this view, higher pay induces better performance. But this simple model of reward-induced performance ignores the complexity of human drive, particularly the role of intrinsic motivation – the desire to perform an activity for its own inherent rewards.

“Offering your dinner-party host a $10 reward for cooking a wonderful meal isn’t likely to motivate future invitations.”

The authors cite multiple research studies – involving blood donors in the United States, volunteer workers in Switzerland, and Israelis with children in day care, to name just a few – that show how introducing financial incentives into the picture led to diminished motivation to do the right thing.

They also cite a meta-analysis summarizing 128 studies that show such findings are representative of a consistent body of research.

In addition, the authors warn that “crowd-out” of doctors’ intrinsic motivation may be particularly severe when contracts are more detailed and controlling.  P4P incentives may also lead providers to game the system by checking boxes or exaggerating diagnoses when they know that doing so will garner bonuses.

Pay-for-performance programs also increase administrative costs, they say, citing the extensive economics literature on the downsides of overly detailed contracts.

The authors are recognized experts in their respective fields. Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University. He is the author of numerous research studies and three bestselling books on behavioral economics, including “The (Honest) Truth about Dishonesty.”

Dr. Steffie Woolhandler and Dr. David Himmelstein are physicians and professors at the City University of New York’s School of Public Health at Hunter College and visiting professors of medicine at Harvard Medical School. They have published many articles in leading medical journals on health insurance and mortality, medical bankruptcy and administrative costs in health care, among other subjects. They are also co-founders of Physicians for a National Health Program, a single-payer advocacy group. PNHP provided no financial or other support for their research.

https://pnhp.org/news/2012/october/financial-incentives-may-sap-motivation-undermine-quality-health-affairs-article

And excerpts from the cited article…

Will Pay For Performance Backfire? Insights From Behavioral Economics

By Steffie Woolhandler, Dan Ariely and David Himmelstein
Health Affairs Blog, October 11, 2012

Paying for performance (P4P) has strong intuitive appeal.  Common sense and rigorous studies tell us that paying more for, say, angioplasties or immunizations yields more of them.  So paying doctors and hospitals for better care, not just more of it, seems like a no-brainer.  Yet while Medicare and many private insurers are charging ahead with pay-for-performance (P4P), researchers have been unable to show that it benefits patients.

Findings from the new field of behavioral economics may explain these negative results.  They challenge the traditional economic view that monetary reward is either the only motivator or is simply additive to intrinsic motivators such as purpose or altruism.  Studies have shown that monetary rewards can undermine motivation and worsen performance on cognitively complex and intrinsically rewarding work, suggesting that P4P may backfire.

The Science Of Performance And Reward

The quality improvement literature has pinpointed many causes of quality breeches in medical care: fatigue; poorly designed workflow and care systems; undue commercial influence; knowledge gaps; memory lapses; reliance on inappropriate heuristics; poor interpersonal skills and insufficient teamwork, to name just a few.  But “not trying” is rarely cited.  Yet P4P implicitly blames lack of motivation for poor quality care.

But even when motivation is the problem, money isn’t always the solution.  Findings from the new field of behavioral economics indicate that performance bonuses often backfire, particularly for cognitively challenging work.

Traditionally, economists have viewed extrinsic (i.e. monetary) reward as either the only motivator, or as simply additive to intrinsic motivators such as purpose, altruism, mastery, or autonomy.  According to this view, higher pay induces better performance. (Figures appear at the end of this post.)

But this simple model of reward-induced performance ignores the complexity of human drive, particularly the role of intrinsic motivation — the desire to perform an activity for its own inherent rewards.

Conclusions

None can doubt health care’s grave quality deficits and cost excesses.  As remedy, P4P suggests manipulating greed, a fuel that’s powered exponential growth in productivity in the overall economy.  But Adam Smith, who first recognized greed’s awesome power, was also a moral philosopher who believed that commodity production required a parallel public service economy driven by social duty.

Sadly, greed has caused many of the worst abuses within the current system.  Injecting different monetary incentives into health care can certainly change it, but not necessarily in the ways that policy makers would plan, much less hope for.

http://healthaffairs.org/blog/2012/10/11/will-pay-for-performance-backfire-insights-from-behavioral-economics/

Comment:

By Don McCanne, MD

Many of us cringe when we see various pay-for-performance (P4P) schemes. Why should that be? After all, providing monetary rewards for improving quality and possibly reducing costs intuitively might seem like a good thing. Dan Ariely, an expert on behavioral economics, along with Steffie Woolhandler and David Himmelstein, provide us with insight. Most of us really did enter the health professions to serve patients, not to sell a commodity.

What is wrong with P4P schemes?

Financial incentives may sap motivation, undermine quality: Health Affairs article

Physicians for a National Health Program (PNHP)
Press Release, October 12, 2012
A leading authority on behavioral economics has teamed up with two health policy experts in an article at the Health Affairs blog to argue that pay-for-performance (P4P) schemes in medicine may do more harm than good by “crowding out” altruism and other intrinsic motivations to do a good job.
Such P4P schemes, which are being quickly adopted by Medicare and many private insurers under the new federal health law, typically involve giving bonuses to doctors and hospitals for hitting specific, numerical targets in such matters as prescribing certain drugs or ordering screening tests.
However, despite the widespread rush to embrace P4P, a growing body of research has found no evidence that these schemes actually benefit patients, write professor Dan Ariely and physicians Dr. Steffie Woolhandler and Dr. David Himmelstein. Their article was posted to the blog late Thursday afternoon.
Moreover, it’s likely the introduction of such schemes into the cognitively complex work of medicine will backfire, they say.
“Traditionally, economists have viewed extrinsic (i.e. monetary) reward as either the only motivator or as simply additive to intrinsic motivators such as purpose, altruism, mastery, or autonomy,” the authors write.
“According to this view, higher pay induces better performance. But this simple model of reward-induced performance ignores the complexity of human drive, particularly the role of intrinsic motivation – the desire to perform an activity for its own inherent rewards.
“Offering your dinner-party host a $10 reward for cooking a wonderful meal isn’t likely to motivate future invitations.”
The authors cite multiple research studies – involving blood donors in the United States, volunteer workers in Switzerland, and Israelis with children in day care, to name just a few – that show how introducing financial incentives into the picture led to diminished motivation to do the right thing.
They also cite a meta-analysis summarizing 128 studies that show such findings are representative of a consistent body of research.
In addition, the authors warn that “crowd-out” of doctors’ intrinsic motivation may be particularly severe when contracts are more detailed and controlling.  P4P incentives may also lead providers to game the system by checking boxes or exaggerating diagnoses when they know that doing so will garner bonuses.
Pay-for-performance programs also increase administrative costs, they say, citing the extensive economics literature on the downsides of overly detailed contracts.
The authors are recognized experts in their respective fields. Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University. He is the author of numerous research studies and three bestselling books on behavioral economics, including “The (Honest) Truth about Dishonesty.”
Dr. Steffie Woolhandler and Dr. David Himmelstein are physicians and professors at the City University of New York’s School of Public Health at Hunter College and visiting professors of medicine at Harvard Medical School. They have published many articles in leading medical journals on health insurance and mortality, medical bankruptcy and administrative costs in health care, among other subjects. They are also co-founders of Physicians for a National Health Program, a single-payer advocacy group. PNHP provided no financial or other support for their research.
https://pnhp.org/news/2012/october/financial-incentives-may-sap-motiv…
And excerpts from the cited article…

Will Pay For Performance Backfire? Insights From Behavioral Economics

By Steffie Woolhandler, Dan Ariely and David Himmelstein
Health Affairs Blog, October 11, 2012
Paying for performance (P4P) has strong intuitive appeal.  Common sense and rigorous studies tell us that paying more for, say, angioplasties or immunizations yields more of them.  So paying doctors and hospitals for better care, not just more of it, seems like a no-brainer.  Yet while Medicare and many private insurers are charging ahead with pay-for-performance (P4P), researchers have been unable to show that it benefits patients.
Findings from the new field of behavioral economics may explain these negative results.  They challenge the traditional economic view that monetary reward is either the only motivator or is simply additive to intrinsic motivators such as purpose or altruism.  Studies have shown that monetary rewards can undermine motivation and worsen performance on cognitively complex and intrinsically rewarding work, suggesting that P4P may backfire.
The Science Of Performance And Reward
The quality improvement literature has pinpointed many causes of quality breeches in medical care: fatigue; poorly designed workflow and care systems; undue commercial influence; knowledge gaps; memory lapses; reliance on inappropriate heuristics; poor interpersonal skills and insufficient teamwork, to name just a few.  But “not trying” is rarely cited.  Yet P4P implicitly blames lack of motivation for poor quality care.
But even when motivation is the problem, money isn’t always the solution.  Findings from the new field of behavioral economics indicate that performance bonuses often backfire, particularly for cognitively challenging work.
Traditionally, economists have viewed extrinsic (i.e. monetary) reward as either the only motivator, or as simply additive to intrinsic motivators such as purpose, altruism, mastery, or autonomy.  According to this view, higher pay induces better performance. (Figures appear at the end of this post.)
But this simple model of reward-induced performance ignores the complexity of human drive, particularly the role of intrinsic motivation — the desire to perform an activity for its own inherent rewards.
Conclusions
None can doubt health care’s grave quality deficits and cost excesses.  As remedy, P4P suggests manipulating greed, a fuel that’s powered exponential growth in productivity in the overall economy.  But Adam Smith, who first recognized greed’s awesome power, was also a moral philosopher who believed that commodity production required a parallel public service economy driven by social duty.
Sadly, greed has caused many of the worst abuses within the current system.  Injecting different monetary incentives into health care can certainly change it, but not necessarily in the ways that policy makers would plan, much less hope for.
http://healthaffairs.org/blog/2012/10/11/will-pay-for-performance-backfi…

Many of us cringe when we see various pay-for-performance (P4P) schemes. Why should that be? After all, providing monetary rewards for improving quality and possibly reducing costs intuitively might seem like a good thing. Dan Ariely, an expert on behavioral economics, along with Steffie Woolhandler and David Himmelstein, provide us with insight. Most of us really did enter the health professions to serve patients, not to sell a commodity.

Financial incentives may sap motivation, undermine quality: Health Affairs article

Recent findings in behavioral economics may help explain how pay-for-performance schemes in health care can ‘crowd-out’ intrinsic motivation and worsen performance

FOR IMMEDIATE RELEASE:
October 12, 2012

Contact:
Steffie Woolhandler, M.D., M.P.H.
David Himmelstein, M.D.
Dan Ariely, Ph.D.
Mark Almberg, communications director PNHP, (312) 782-6006, mark@pnhp.org

A leading authority on behavioral economics has teamed up with two health policy experts in an article at the Health Affairs blog to argue that pay-for-performance (P4P) schemes in medicine may do more harm than good by “crowding out” altruism and other intrinsic motivations to do a good job.

Such P4P schemes, which are being quickly adopted by Medicare and many private insurers under the new federal health law, typically involve giving bonuses to doctors and hospitals for hitting specific, numerical targets in such matters as prescribing certain drugs or ordering screening tests.

However, despite the widespread rush to embrace P4P, a growing body of research has found no evidence that these schemes actually benefit patients, write professor Dan Ariely and physicians Dr. Steffie Woolhandler and Dr. David Himmelstein. Their article was posted to the blog late Thursday afternoon.

Moreover, it’s likely the introduction of such schemes into the cognitively complex work of medicine will backfire, they say.

“Traditionally, economists have viewed extrinsic (i.e. monetary) reward as either the only motivator or as simply additive to intrinsic motivators such as purpose, altruism, mastery, or autonomy,” the authors write.

“According to this view, higher pay induces better performance. But this simple model of reward-induced performance ignores the complexity of human drive, particularly the role of intrinsic motivation – the desire to perform an activity for its own inherent rewards.

“Offering your dinner-party host a $10 reward for cooking a wonderful meal isn’t likely to motivate future invitations.”

The authors cite multiple research studies – involving blood donors in the United States, volunteer workers in Switzerland, and Israelis with children in day care, to name just a few – that show how introducing financial incentives into the picture led to diminished motivation to do the right thing.

They also cite a meta-analysis summarizing 128 studies that show such findings are representative of a consistent body of research.

In addition, the authors warn that “crowd-out” of doctors’ intrinsic motivation may be particularly severe when contracts are more detailed and controlling.  P4P incentives may also lead providers to game the system by checking boxes or exaggerating diagnoses when they know that doing so will garner bonuses.

Pay-for-performance programs also increase administrative costs, they say, citing the extensive economics literature on the downsides of overly detailed contracts.

The authors are recognized experts in their respective fields. Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University. He is the author of numerous research studies and three bestselling books on behavioral economics, including “The (Honest) Truth about Dishonesty.”

Dr. Steffie Woolhandler and Dr. David Himmelstein are physicians and professors at the City University of New York’s School of Public Health at Hunter College and visiting professors of medicine at Harvard Medical School. They have published many articles in leading medical journals on health insurance and mortality, medical bankruptcy and administrative costs in health care, among other subjects. They are also co-founders of Physicians for a National Health Program, a single-payer advocacy group. PNHP provided no financial or other support for their research.

***

“Will pay for performance backfire? Insights from behavioral economics,” Steffie Woolhandler, M.D., M.P.H., Dan Ariely, Ph.D., David U. Himmelstein, M.D. Health Affairs blog, Oct. 11, 2012.

Physicians for a National Health Program (www.pnhp.org) is an organization of 18,000 physicians who advocate for a nonprofit, single-payer national health insurance program for the United States. PNHP had no role in funding the study mentioned above. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.

Howard Waitzkin on commodification and the search for a universal health program

The Commodification of Health Care and the Search for a Universal Health Program in the United States

By Howard Waitzkin, M.D.
Robert Wood Johnson Foundation, Human Capital Blog, October 11, 2012

For better or worse, we treat health care in the United States as a commodity. We buy and sell it, and would-be patients who don’t have enough money to buy it must either rely on limited public assistance or go without care. In very real terms, it’s not just health care that we have turned into a commodity, it’s health itself, so it should come as no surprise that poor Americans die sooner than affluent ones, by an average of close to five years.

I observed this dynamic up close for the first time about 40 years ago, while working as a primary care practitioner in the clinic system of the United Farm Workers (UFW) Union in the 1970s (which, for a time, my mentors in the RWJF Clinical Scholars Program viewed as my required activity in clinical medicine). As I treated hard-working patients living in unhealthy circumstances, it was easy to conclude that one does not need to travel outside the United States to find the so-called “Third World.” As I observed with many of the patients I treated while working with the UFW, the living conditions of the poor contribute to ill health.

Shortly after the military coup in Chile that occurred on September 11, 1973, while researching an article on the health consequences of the military dictatorship that later appeared in the New England Journal of Medicine, I discovered the work that President Salvador Allende had accomplished in the field of social medicine. In 1939, three decades before he became Chile’s democratically elected President, Allende wrote “La Realidad Médico-Social Chilena” (The Chilean Medico-Social Reality), in which he presented an analysis of the relationships among social structure, disease and suffering.  The book conceptualized illness as a disturbance of the individual fostered by deprived social conditions. Breaking new ground in Latin America at the time, Allende­—himself a pathologist—described the “living conditions of the working classes” that generated illness, with emphasis on the social conditions of underdevelopment, international dependency, and the effects of foreign debt and the work process. Growing out of those conditions, in his description, were a number of specific health problems, including maternal and infant mortality, tuberculosis, sexually transmitted and other communicable diseases, emotional disturbances, and occupational illnesses.

Making the case that improved living conditions exerted a more profound impact on population health than medical advances, Allende described the responsiveness of tuberculosis to economic advances rather than treatment innovations, the role of housing density in the causation of infectious diseases, and the adverse effects of the pharmaceutical industry’s financial practices (for instance, Allende offered the earliest known account of the differences between generic and brand-name pricing of essential medications). In this context, Allende also put his finger on a dynamic that has come to trouble physicians, patients, and policy makers worldwide during recent years, writing colorfully that a “problem in relation to the pharmaceutical specialties is…the excessive and charlatan propaganda attributing qualities and curative powers which are far from their real ones.”

After his election to Chile’s presidency in 1970, Allende began to move health care toward a universal model, while at the same time initiating a variety of public health initiatives, such as establishing maternity clinics in rural areas, imposing new health and safety requirements on mining companies, improving sanitation and housing in low-income areas, and more. But Allende’s nationalization of several industries dominated by North American interests, despite the compensation provided to those corporations, earned him powerful enemies, and a U.S.-supported military coup drove him from power three years into his administration, ending his efforts to improve Chileans’ health.

In Central and South America, the part of the world where I’ve focused much of my research, the United States and various international financial institutions have worked to support health care systems structured along the for-profit model. The World Bank, for example, worked to foster health care systems that served the objectives of private capital accumulation in less developed nations, with the inevitable result that health and health care became a commodity. Commodification burdens poor people’s health in many ways, and the adverse impacts of corporatized health care have spread throughout the world.

One irony, however, is that some less developed countries have found ways to uncouple health from wealth. But it hasn’t come easily. In recent years, the commodification of health in Latin America has receded somewhat, particularly in the wake of the worldwide economic crisis and widespread protests that have followed. Regimes that previously embraced corporate interests have grown weak and largely have disappeared, replaced by elected governments that have refused to accept the historical patterns of economic empire that fostered exploitation and poverty around the world. National and local leaders have entered into novel coalitions that have given rise to a new era of social medicine in Latin America.

In the 1990s, for example, El Salvador saw sustained efforts to resist efforts by the World Bank and the ruling right-wing political party to privatize public hospitals. Strikes by health care workers at affected hospitals spread elsewhere, leading to a commitment from the government that it would abandon the privatization push. When the government subsequently began contracting out hospital services to private entities, more strikes followed. Eventually, the World Bank flinched, backing away from a privatization requirement in a loan it was extending to the country, and efforts to expand public-sector health care are again under way.

Popular efforts to accomplish similar objectives have taken root in a number of Latin American nations, and the idea of universal health care has even taken root right here in the United States. It was a key part of the agenda on which Barack Obama rode to victory in the 2008 Democratic election. However, the principle of universal access to health services through a strengthened public sector largely disappeared from the health care reform bill he eventually signed into law.

As many critics have pointed out, Obamacare, the Patient Protection and Affordable Care Act (PPACA), uses public-sector funds and mandatory patient-generated premiums to buy insurance coverage from the private, for-profit insurance industry. This approach ultimately will provide coverage for only about half of the uninsured, with costs that will continue to rise over time due to the administrative waste inherent in private insurance. In addition, Obamacare will provide yet another enormous public subsidy for the private insurance industry, despite its dismal historical record. Ironically PPACA closely resembles the “neoliberal” health reforms promoted previously by the World Bank in Latin America and other regions, for instance the widely criticized reform that began in Colombia during 1994.

This paradoxical situation becomes quite striking because Medicare offered a model for a successful system. Medicare provides universal access to publicly financed services with low levels of administrative waste and more effective cost control than seen under private insurance. Although Medicare retains various flaws, these flaws are far less critical than the continued commodification of health as preserved under Obamacare. The Obama administration could have proposed an expansion of Medicare for the entire population of the United States. Obama himself favored this type
of “single payer” approach while he was a state legislator in Illinois but later changed his views when he began to accept large financial contributions from the private insurance industry.

Despite widespread support from professionals (see for instance Physicians for a National Health Program) and the general public (see for instance Health Care Now), “opinion leaders” like those who lead the RWJF have declined to advocate for the particular model of universal health care embodied in the Medicare for All approach. At the risk of appearing to bite the hand that feeds (which actually feeds only to a very minor extent), let me say that one of my major disappointments in the RWJF during its more than 40 years of trying to improve access to affordable health care is that its leaders consistently have declined to advocate for a coherent, unified model for a national health program.

The simple truth is that the United States remains the only economically advanced country without a viable national program that ensures access to needed care for all. As a result health care—and health—remain a commodity for sale. Until we in the United States decide to de-commodify our health care and health by implementing a universal, single, publicly financed, national health program such as Medicare for All, we will remain in our current state of ethical underdevelopment.

Howard Waitzkin, MD, PhD, is senior fellow at the Robert Wood Johnson Foundation (RWJF) Center for Health Policy at the University of New Mexico, as well as distinguished professor emeritus in the Department of Sociology, and clinical professor in the Department of Medicine. He is an alumnus of the RWJF Clinical Scholars Program. Waitzkin recently received the American Sociology Association Medical Sociology Section’s 2012 Eliot Freidson Outstanding Publication Award for his new book, “Medicine and Public Health at the End of Empire,” from which this blog post draws.

http://www.rwjf.org/en/blogs/human-capital-blog/2012/10/the_commodification.html

Comment:

By Don McCanne, MD

Howard Waitzkin’s article is too important to edit it for Quote of the Day. It is presented here in its entirety. No comment necessary.

The Commodification of Health Care and the Search for a Universal Health Program in the United States

By Howard Waitzkin, M.D.
Robert Wood Johnson Foundation Human Capital Blog, Oct. 11, 2012

For better or worse, we treat health care in the United States as a commodity. We buy and sell it, and would-be patients who don’t have enough money to buy it must either rely on limited public assistance or go without care. In very real terms, it’s not just health care that we have turned into a commodity, it’s health itself, so it should come as no surprise that poor Americans die sooner than affluent ones, by an average of close to five years.

I observed this dynamic up close for the first time about 40 years ago, while working as a primary care practitioner in the clinic system of the United Farm Workers (UFW) Union in the 1970s (which, for a time, my mentors in the RWJF Clinical Scholars Program viewed as my required activity in clinical medicine). As I treated hard-working patients living in unhealthy circumstances, it was easy to conclude that one does not need to travel outside the United States to find the so-called “Third World.” As I observed with many of the patients I treated while working with the UFW, the living conditions of the poor contribute to ill health.

Shortly after the military coup in Chile that occurred on September 11, 1973, while researching an article on the health consequences of the military dictatorship that later appeared in the New England Journal of Medicine, I discovered the work that President Salvador Allende had accomplished in the field of social medicine. In 1939, three decades before he became Chile’s democratically elected President, Allende wrote “La Realidad Médico-Social Chilena” (The Chilean Medico-Social Reality), in which he presented an analysis of the relationships among social structure, disease and suffering.  The book conceptualized illness as a disturbance of the individual fostered by deprived social conditions. Breaking new ground in Latin America at the time, Allende­—himself a pathologist—described the “living conditions of the working classes” that generated illness, with emphasis on the social conditions of underdevelopment, international dependency, and the effects of foreign debt and the work process. Growing out of those conditions, in his description, were a number of specific health problems, including maternal and infant mortality, tuberculosis, sexually transmitted and other communicable diseases, emotional disturbances, and occupational illnesses.

Making the case that improved living conditions exerted a more profound impact on population health than medical advances, Allende described the responsiveness of tuberculosis to economic advances rather than treatment innovations, the role of housing density in the causation of infectious diseases, and the adverse effects of the pharmaceutical industry’s financial practices (for instance, Allende offered the earliest known account of the differences between generic and brand-name pricing of essential medications). In this context, Allende also put his finger on a dynamic that has come to trouble physicians, patients, and policy makers worldwide during recent years, writing colorfully that a “problem in relation to the pharmaceutical specialties is…the excessive and charlatan propaganda attributing qualities and curative powers which are far from their real ones.”

After his election to Chile’s presidency in 1970, Allende began to move health care toward a universal model, while at the same time initiating a variety of public health initiatives, such as establishing maternity clinics in rural areas, imposing new health and safety requirements on mining companies, improving sanitation and housing in low-income areas, and more. But Allende’s nationalization of several industries dominated by North American interests, despite the compensation provided to those corporations, earned him powerful enemies, and a U.S.-supported military coup drove him from power three years into his administration, ending his efforts to improve Chileans’ health.

In Central and South America, the part of the world where I’ve focused much of my research, the United States and various international financial institutions have worked to support health care systems structured along the for-profit model. The World Bank, for example, worked to foster health care systems that served the objectives of private capital accumulation in less developed nations, with the inevitable result that health and health care became a commodity. Commodification burdens poor people’s health in many ways, and the adverse impacts of corporatized health care have spread throughout the world.

One irony, however, is that some less developed countries have found ways to uncouple health from wealth. But it hasn’t come easily. In recent years, the commodification of health in Latin America has receded somewhat, particularly in the wake of the worldwide economic crisis and widespread protests that have followed. Regimes that previously embraced corporate interests have grown weak and largely have disappeared, replaced by elected governments that have refused to accept the historical patterns of economic empire that fostered exploitation and poverty around the world. National and local leaders have entered into novel coalitions that have given rise to a new era of social medicine in Latin America.

In the 1990s, for example, El Salvador saw sustained efforts to resist efforts by the World Bank and the ruling right-wing political party to privatize public hospitals. Strikes by health care workers at affected hospitals spread elsewhere, leading to a commitment from the government that it would abandon the privatization push. When the government subsequently began contracting out hospital services to private entities, more strikes followed. Eventually, the World Bank flinched, backing away from a privatization requirement in a loan it was extending to the country, and efforts to expand public-sector health care are again under way.

Popular efforts to accomplish similar objectives have taken root in a number of Latin American nations, and the idea of universal health care has even taken root right here in the United States. It was a key part of the agenda on which Barack Obama rode to victory in the 2008 Democratic election. However, the principle of universal access to health services through a strengthened public sector largely disappeared from the health care reform bill he eventually signed into law.

As many critics have pointed out, Obamacare, the Patient Protection and Affordable Care Act (PPACA), uses public-sector funds and mandatory patient-generated premiums to buy insurance coverage from the private, for-profit insurance industry. This approach ultimately will provide coverage for only about half of the uninsured, with costs that will continue to rise over time due to the administrative waste inherent in private insurance. In addition, Obamacare will provide yet another enormous public subsidy for the private insurance industry, despite its dismal historical record. Ironically PPACA closely resembles the “neoliberal” health reforms promoted previously by the World Bank in Latin America and other regions, for instance the widely criticized reform that began in Colombia during 1994.

This paradoxical situation becomes quite striking because Medicare offered a model for a successful system. Medicare provides universal access to publicly financed services with low levels of administrative waste and more effective cost control than seen under private insurance. Although Medicare retains various flaws, these flaws are far less critical than the continued commodification of health as preserved under Obamacare. The Obama administration could have proposed an expansion of Medicare for the entire population of the United States. Obama himself favored this type of “single payer” approach while he was a state legislator in Illinois but later changed his views when he be
gan to accept large financial contributions from the private insurance industry.

Despite widespread support from professionals (see for instance Physicians for a National Health Program) and the general public (see for instance Health Care Now), “opinion leaders” like those who lead the RWJF have declined to advocate for the particular model of universal health care embodied in the Medicare for All approach. At the risk of appearing to bite the hand that feeds (which actually feeds only to a very minor extent), let me say that one of my major disappointments in the RWJF during its more than 40 years of trying to improve access to affordable health care is that its leaders consistently have declined to advocate for a coherent, unified model for a national health program.

The simple truth is that the United States remains the only economically advanced country without a viable national program that ensures access to needed care for all. As a result health care—and health—remain a commodity for sale. Until we in the United States decide to de-commodify our health care and health by implementing a universal, single, publicly financed, national health program such as Medicare for All, we will remain in our current state of ethical underdevelopment.

Howard Waitzkin, MD, PhD, is senior fellow at the Robert Wood Johnson Foundation (RWJF) Center for Health Policy at the University of New Mexico, as well as distinguished professor emeritus in the Department of Sociology, and clinical professor in the Department of Medicine. He is an alumnus of the RWJF Clinical Scholars Program. Waitzkin recently received the American Sociology Association Medical Sociology Section’s 2012 Eliot Freidson Outstanding Publication Award for his new book, “Medicine and Public Health at the End of Empire,” from which the following blog post draws.

http://www.rwjf.org/en/blogs/human-capital-blog/2012/10/the_commodification.html

Study: Medicare Has Overpaid Private Insurers $283B Since 1985

By Bob Herman
Becker’s Hospital Review, Oct. 11, 2012

Three physicians and health policy directors with Physicians for a National Health Program conducted a study on how Medicare pays private insurers, also known as Medicare Advantage plans, and they identified overpayments totaling $282.6 billion since 1985.

Medicare Advantage plans, also known as Medicare Part C and formerly known as Medicare HMOs, are Medicare plans run through private companies to provide beneficiaries with their Part A and Part B benefits. MA plans also compete with the traditional fee-for-service plans.

Ida Hellander, MD, David Himmelstein, MD, and Steffie Woolhandler, MD, conducted the study, which will appear in the International Journal of Health Services. The researchers found MA insurers gained excess payments from the Medicare program in five ways:

1. Selective enrollment of healthier beneficiaries before 2004 ($41 billion).

2. Enrolling Medicare beneficiaries who have lower health costs and are within Medicare’s “Hierarchical Condition Categories” after 2004 ($122.5 billion).

3. Overpayments mandated within Congress’ 2003 Medicare Prescription Drug, Improvement, and Modernization Act, including duplicate payments for indirect medical education ($84.4 billion, which includes point four).

4. Bonus payments from CMS’ Medicare Advantage Quality Bonus Payment Demonstration, which the Government Accountability Office said will cost $8.35 billion over 10 years.

5. Duplicate payments on behalf of beneficiaries who receive all or part of their care at VA facilities, which is already covered by the government ($34.8 billion).

The researchers used several sources to collect the data, including the GAO, the Medicare Payment Advisory Commission, the National Bureau of Economic Research, the Commonwealth Fund and others.

“We’ve long known that Medicare has been paying private insurers more than if their enrollees had stayed in traditional free-for-service Medicare, but no one has assessed the full extent of these overpayments,” Dr. Hellander, lead author of the study, said in a news release. “Nor has anyone systematically examined the many ways that private insurers have gamed the system to maximize their bottom line at taxpayers’ expense.”

http://www.beckershospitalreview.com/racs-/-icd-9-/-icd-10/study-medicare-has-overpaid-private-insurers-283b-since-1985.html

Howard Waitzkin on commodification and the search for a universal health program

The Commodification of Health Care and the Search for a Universal Health Program in the United States

By Howard Waitzkin, M.D.
Robert Wood Johnson Foundation, Human Capital Blog, October 11, 2012
For better or worse, we treat health care in the United States as a commodity. We buy and sell it, and would-be patients who don’t have enough money to buy it must either rely on limited public assistance or go without care. In very real terms, it’s not just health care that we have turned into a commodity, it’s health itself, so it should come as no surprise that poor Americans die sooner than affluent ones, by an average of close to five years.
I observed this dynamic up close for the first time about 40 years ago, while working as a primary care practitioner in the clinic system of the United Farm Workers (UFW) Union in the 1970s (which, for a time, my mentors in the RWJF Clinical Scholars Program viewed as my required activity in clinical medicine). As I treated hard-working patients living in unhealthy circumstances, it was easy to conclude that one does not need to travel outside the United States to find the so-called “Third World.” As I observed with many of the patients I treated while working with the UFW, the living conditions of the poor contribute to ill health.
Shortly after the military coup in Chile that occurred on September 11, 1973, while researching an article on the health consequences of the military dictatorship that later appeared in the New England Journal of Medicine, I discovered the work that President Salvador Allende had accomplished in the field of social medicine. In 1939, three decades before he became Chile’s democratically elected President, Allende wrote “La Realidad Médico-Social Chilena” (The Chilean Medico-Social Reality), in which he presented an analysis of the relationships among social structure, disease and suffering.  The book conceptualized illness as a disturbance of the individual fostered by deprived social conditions. Breaking new ground in Latin America at the time, Allende­—himself a pathologist—described the “living conditions of the working classes” that generated illness, with emphasis on the social conditions of underdevelopment, international dependency, and the effects of foreign debt and the work process. Growing out of those conditions, in his description, were a number of specific health problems, including maternal and infant mortality, tuberculosis, sexually transmitted and other communicable diseases, emotional disturbances, and occupational illnesses.
Making the case that improved living conditions exerted a more profound impact on population health than medical advances, Allende described the responsiveness of tuberculosis to economic advances rather than treatment innovations, the role of housing density in the causation of infectious diseases, and the adverse effects of the pharmaceutical industry’s financial practices (for instance, Allende offered the earliest known account of the differences between generic and brand-name pricing of essential medications). In this context, Allende also put his finger on a dynamic that has come to trouble physicians, patients, and policy makers worldwide during recent years, writing colorfully that a “problem in relation to the pharmaceutical specialties is…the excessive and charlatan propaganda attributing qualities and curative powers which are far from their real ones.”
After his election to Chile’s presidency in 1970, Allende began to move health care toward a universal model, while at the same time initiating a variety of public health initiatives, such as establishing maternity clinics in rural areas, imposing new health and safety requirements on mining companies, improving sanitation and housing in low-income areas, and more. But Allende’s nationalization of several industries dominated by North American interests, despite the compensation provided to those corporations, earned him powerful enemies, and a U.S.-supported military coup drove him from power three years into his administration, ending his efforts to improve Chileans’ health.
In Central and South America, the part of the world where I’ve focused much of my research, the United States and various international financial institutions have worked to support health care systems structured along the for-profit model. The World Bank, for example, worked to foster health care systems that served the objectives of private capital accumulation in less developed nations, with the inevitable result that health and health care became a commodity. Commodification burdens poor people’s health in many ways, and the adverse impacts of corporatized health care have spread throughout the world.
One irony, however, is that some less developed countries have found ways to uncouple health from wealth. But it hasn’t come easily. In recent years, the commodification of health in Latin America has receded somewhat, particularly in the wake of the worldwide economic crisis and widespread protests that have followed. Regimes that previously embraced corporate interests have grown weak and largely have disappeared, replaced by elected governments that have refused to accept the historical patterns of economic empire that fostered exploitation and poverty around the world. National and local leaders have entered into novel coalitions that have given rise to a new era of social medicine in Latin America.
In the 1990s, for example, El Salvador saw sustained efforts to resist efforts by the World Bank and the ruling right-wing political party to privatize public hospitals. Strikes by health care workers at affected hospitals spread elsewhere, leading to a commitment from the government that it would abandon the privatization push. When the government subsequently began contracting out hospital services to private entities, more strikes followed. Eventually, the World Bank flinched, backing away from a privatization requirement in a loan it was extending to the country, and efforts to expand public-sector health care are again under way.
Popular efforts to accomplish similar objectives have taken root in a number of Latin American nations, and the idea of universal health care has even taken root right here in the United States. It was a key part of the agenda on which Barack Obama rode to victory in the 2008 Democratic election. However, the principle of universal access to health services through a strengthened public sector largely disappeared from the health care reform bill he eventually signed into law.
As many critics have pointed out, Obamacare, the Patient Protection and Affordable Care Act (PPACA), uses public-sector funds and mandatory patient-generated premiums to buy insurance coverage from the private, for-profit insurance industry. This approach ultimately will provide coverage for only about half of the uninsured, with costs that will continue to rise over time due to the administrative waste inherent in private insurance. In addition, Obamacare will provide yet another enormous public subsidy for the private insurance industry, despite its dismal historical record. Ironically PPACA closely resembles the “neoliberal” health reforms promoted previously by the World Bank in Latin America and other regions, for instance the widely criticized reform that began in Colombia during 1994.
This paradoxical situation becomes quite striking because Medicare offered a model for a successful system. Medicare provides universal access to publicly financed services with low levels of administrative waste and more effective cost control than seen under private insurance. Although Medicare retains various flaws, these flaws are far less critical than the continued commodification of health as preserved under Obamacare. The Obama administration could have proposed an expansion of Medicare for the entire population of the United States. Obama himself favored this type of “single payer” approach while he was a state legislator in Illinois but later changed his views when he began to accept large financial contributions from the private insurance industry.
Despite widespread support from professionals (see for instance Physicians for a National Health Program) and the general public (see for instance Health Care Now), “opinion leaders” like those who lead the RWJF have declined to advocate for the particular model of universal health care embodied in the Medicare for All approach. At the risk of appearing to bite the hand that feeds (which actually feeds only to a very minor extent), let me say that one of my major disappointments in the RWJF during its more than 40 years of trying to improve access to affordable health care is that its leaders consistently have declined to advocate for a coherent, unified model for a national health program.
The simple truth is that the United States remains the only economically advanced country without a viable national program that ensures access to needed care for all. As a result health care—and health—remain a commodity for sale. Until we in the United States decide to de-commodify our health care and health by implementing a universal, single, publicly financed, national health program such as Medicare for All, we will remain in our current state of ethical underdevelopment.
Howard Waitzkin, MD, PhD, is senior fellow at the Robert Wood Johnson Foundation (RWJF) Center for Health Policy at the University of New Mexico, as well as distinguished professor emeritus in the Department of Sociology, and clinical professor in the Department of Medicine. He is an alumnus of the RWJF Clinical Scholars Program. Waitzkin recently received the American Sociology Association Medical Sociology Section’s 2012 Eliot Freidson Outstanding Publication Award for his new book, “Medicine and Public Health at the End of Empire,” from which this blog post draws.
http://www.rwjf.org/en/blogs/human-capital-blog/2012/10/the_commodificat…

Howard Waitzkin’s article is too important to edit it for Quote of the Day. It is presented here in its entirety. No comment necessary.

Report: Private Insurers Cost Medicare Billions In Excess Payments

By Rachel Zimmerman
CommonHealth blog, WBUR (Boston NPR), Oct. 11, 2012

The doctors over at Physicians for a National Health Program, advocates of a single-payer system, sure are prolific researchers, and here’s the headline from their latest report: Private insurers have cost Medicare $282.6 billion in excess payments since 1985.

From the group’s news release:

Researchers say privately run Medicare Advantage plans have undermined traditional Medicare’s fiscal health and taken a heavy toll on taxpayers, seniors and the U.S. economy

In the first study of its kind, a group of health policy experts has determined the amount of money that Medicare has overpaid private insurance companies under the Medicare Advantage program and its predecessors over the past 27 years and come up with a startling figure: $282.6 billion in excess payments, most of them over the past eight years.

That’s wasted money that should have been spent on improving patient care, shoring up Medicare’s trust fund or reducing the federal deficit, the researchers say.

The findings appear in a paper by Drs. Ida Hellander, Steffie Woolhandler and David Himmelstein titled “Medicare overpayments to private plans, 1985-2012” which they say is forthcoming in the International Journal of Health Services.

(Hellander is policy director at Physicians for a National Health Program, a nonprofit research and advocacy group. Woolhandler and Himmelstein are professors at the City University of New York School of Public Health, visiting professors at Harvard Medical School and co-founders of PNHP.)

The work is timely because national proposals, notably from vice presidential candidate Paul Ryan (set to debate vice president Joe Biden tonight) rely on great expansions of private Medicare plans.

Here are more of the group’s findings on private Medicare plans, known as Medicare Advantage plans:

The authors find that private insurers have exploited loopholes to garner overpayments above and beyond what it costs them to care for their enrollees. For instance, Medicare gives private insurers a full premium for each enrollee, even for those who get most of their care for free at the Veterans Health Administration.

In addition, through heavy lobbying, the insurance industry induced Congress and the Bush administration to add bonus payments to Medicare Advantage premiums beginning in 2003.

Finally, private plans cherry-pick by enrolling seniors whose care will cost far less than the premiums, guaranteeing large profits. Although private plans must accept all seniors who choose to enroll, they cherry-picked by selectively recruiting the healthiest seniors through advertising, office location, etc., and induced sicker ones to disenroll by making expensive care inconvenient.

After Medicare began risk adjusting the premium payment for each patient’s diagnoses in 2004, the plans began cherry-picking in a new way. They recruited otherwise healthy seniors with very mild (and inexpensive) cases of sometimes serious conditions – automatically triggering higher premiums from the risk-adjustment scheme, but escaping payments for expensive care. For instance, many seniors have very mild cases of arthritis, heart failure and bronchitis that require little or no treatment.

The full report includes further details on these and other schemes that private insurers have used to increase their Medicare payments.

“We’ve long known that Medicare has been paying private insurers more than if their enrollees had stayed in traditional free-for-service Medicare, but no one has assessed the full extent of these overpayments,” said Dr. Ida Hellander, lead author of the study. “Nor has anyone systematically examined the many ways that private insurers have gamed the system to maximize their bottom line at taxpayers’ expense.”

“In 2012 alone, private insurers are being overpaid $34.1 billion, or $2,526 per Medicare Advantage enrollee,” Hellander said.

Co-author Dr. Steffie Woolhandler said: “It’s clear that having Medicare Advantage programs compete with Medicare doesn’t save us money. In fact the opposite is the case. The private plans only add waste, and the aggregate waste is staggering – enough to be a significant drag on the economy.

“Unfortunately, recent legislative and technical attempts to reduce Medicare’s overpayments to these insurance firms have had little or no impact,” she said.

“It’s time we look to proven, cost-effective ways of providing high-quality care to Medicare’s beneficiaries and to the entire population,” Woolhandler said. “That means taking a fresh look at the single-payer model of reform.”

Blogger, CommonHealth Rachel Zimmerman worked as a staff reporter for The Wall Street Journal for 10 years, most recently covering health and medicine out of the paper’s Boston bureau. Rachel has also written for The New York Times and the (now-defunct) Seattle Post-Intelligencer, among other publications. Rachel co-wrote a book about birth, published by Bantam/Random House, and spent 2008 as a Knight Science Journalism Fellow at MIT.

http://commonhealth.wbur.org/2012/10/private-insurers-cost-medicare-billions