By Drew Altman
Axios, November 22, 2017

Thanksgiving is always a time to think about those in need. How about, then, a group we don’t worry about enough: the many lower and moderate income Americans who can’t cover their cost sharing if they get sick? It raises the question: How much cost sharing is too much?

High deductible plans, which require people to pay large amounts out of pocket before their medical bills are covered, are a good deal for some middle and upper income people. But many lower and moderate income Americans simply don’t have $1,500 to $3,000 to pay for the colonoscopy that might save their life, or a stress test that might reveal the heart disease which is the cause of their chest discomfort.

Share of non-elderly households with liquid assets less than their deductibles, among people with private insurance:

Deductible of $1500 single/$3000 family:
28% – All non-elderly households
63% – Less than 150% of federal poverty level (FPL)
44% – 150-400% of FPL
10% – 400% or more of FPL

Deductible of $3000 single/$6000 family:
40% – All non-elderly households
76% – Less than 1505 of FPL
60% – 150-400% of FPL
20% – 400% or more of FPL

The chart, drawn from a new study, tells the tale: More than four in 10 households with private coverage and incomes between 150% and 400% of the federal poverty line do not have enough liquid assets to cover a deductible of $1,500 for single people and $3,000 for families.

* That’s not a high deductible plan, but about the average in an employer-provided insurance plan.

* Sixty percent couldn’t cover deductibles double those amounts, which are not uncommon, especially in the individual insurance market.

For many families, even if they have insurance, any significant illness could wipe out all their savings, making impossible to fix a broken car to get to work, or pay for school, or make a rent or mortgage payment.

Congress has passed no law declaring that the country will go with high deductible coverage as its main approach to health insurance.

https://www.axios.com…

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Comment:

By Don McCanne, M.D.

Over one-fourth of all households with a $1500/$3000 deductible plan (average employer-sponsored plan) do not have enough liquid assets to pay their deductible and two-fifths of those with a $3000/$6000 deductible (modest high-deductible plan) cannot either, yet these plans have become fairly standard today. And as many as three-fourths of low-income families with private insurance do not have enough funds to pay their deductibles.

Tomorrow we are supposed to be giving thanks for what we do have, but how difficult will it be for families to give thanks when they wiped out their savings and still owe more because their health insurance coverage was inadequate? Too many couldn’t fix their broken car they need to get to work; they couldn’t pay for school; they couldn’t make the rent payment.

Tomorrow let us resolve to reach the day wherein absolutely everyone will be able to give thanks for being able to access the health care that they need without having to face financial hardship. Giving thanks for what we, as a nation, already have is not enough.

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By Gregg Bloche & David A. Hyman
Health Affairs Blog, November 20, 2017

Is a deal on health care possible? Conventional wisdom says no.

We’re alarmed. One of us is a Cato Institute-friendly “free-market”eer who wrote a book arguing (tongue in cheek) that Medicare is the work of the Devil. The other helped to develop President Barack Obama’s 2008 campaign health plan and believes that failure to ensure everyone’s access to health care is an assault on human decency. But we’ve come together because we believe that failure to resolve the present impasse will have hugely destructive consequences for millions of Americans’ access to health care.

Designing A Deal

We think a bipartisan “grand bargain” to stabilize the US health care system is feasible — if key decision makers can move beyond showmanship and spite. To this end, we outline a deal that: honors but balances the competing values at stake, steadies both market and public mechanisms of medical care financing, and puts the nation on a path toward sustainability in health spending.

Our grand bargain builds on federalism. Allowing states to sort out controversial matters within broader limits than the ACA now imposes would permit creative policy alternatives to unfold and encourage local buy-in.

The Long Game: Seven Steps Toward a Compromise that Can Work And Endure

1) Moving Beyond Maximalism — Medicaid Rollback And “Medicare for All”

Republicans should end their campaign to roll back the ACA’s Medicaid expansion, and Democrats should stand down on their quest for single payer. Both pursuits inspire true believers but will go nowhere on Capitol Hill for the imaginable future.

2) State Flexibility

Give states more flexibility to design their Medicaid programs and to govern their insurance exchanges. States could also be allowed but not required to offer a public option through their exchanges. Instead of an all-or-none answer to the public plan question, the nation would have a framework for market-driven, state-by-state resolution. Similarly, states should be allowed to decide whether to prohibit, permit, or require enrollment of Medicaid beneficiaries in private plans.

3) Health Savings Accounts That Appeal To Everyone

We propose that every lawful US resident be auto-enrolled in a health savings account (HSA), funded through a refundable tax credit, scaled to income and family size.

4) Repeal The Individual Mandate

Sacrilege, you’re surely thinking, if you’re a Democrat who’s spent seven-plus years defending the mandate, the ACA’s most disliked element. But the mandate isn’t needed to keep healthy people in community-rated risk pools — it’s the intensity of the incentives, whether framed as penalties or subsidies, that matters. Such subsidies could be supplied in conservative-friendly fashion by allowing all who buy coverage on the exchanges to put HSA funds (including the tax credit we urge) toward their premiums.

5) Congressional Authorization Of Funding For Both The ACA’s Cost-Sharing Reductions And CHIP

Congress should guarantee funding for the cost-sharing reductions for a two-year period, with automatic renewal for an additional two years if per capita subsidies rise by no more than the Consumer Price Index (CPI) during the prior two years. Likewise, Congress should renew CHIP’s funding for several years — we urge three as a compromise.

6) The “Long Game” — Reining In Medical Spending

A long-term effort to contain spending growth is essential for US fiscal stability and consumer well-being. The ACA created a framework for doing this. The Independent Payment Advisory Board (IPAB) can limit Medicare spending, subject to congressional veto, if growth exceeds target rates. And the 40 percent “Cadillac tax” on high-cost private health plans will cover a rising share of the private market as medical costs increase. Together, these policies have the potential to contain clinical spending by capping demand.

A grand bargain should follow through on both of these strategies, plus add similar restraints on Medicaid spending and on the amounts spent to subsidize coverage through the exchanges.

7) Pursuing Therapeutic Value

Much more must be done to use health care resources wisely as constraints tighten. Tying financial rewards closely to clinical value via payment practices, market exclusivity policies, and other incentives will be critical — and will require the clearing of legal and regulatory obstacles. Voluntary action must also play a role: The grand bargain we’ve sketched here creates myriad opportunities for providers, patients, and insurers to gain by insisting on value from a sector of the economy that too often fails to deliver it.

https://www.healthaffairs.org…

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Reader Comment:

By Don McCanne, M.D.

This is a “Grand Bargain”? Tweaking our highly dysfunctional, fragmented, administratively inefficient, overpriced, inequitable health care financing system?

This is a call for more of the same. Numerous studies have shown that this is the most expensive model of health care reform and that it falls far short on reform goals of universality, comprehensiveness, access, equity, efficiency, quality, and affordability.

A well designed single payer model would achieve those goals. Just because the current Congress would not enact an improved Medicare for all does not mean that the concept should be abandoned. The current Congress will not enact the tweaks called for in this Grand Bargain either.

We can get the policy right, but we need to change the politics. We need to align ourselves behind reform that works for everyone, not behind measures that enrich the stakeholders while perpetuating mediocrity for the rest of us.

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By Sungchul Park, Anirban Basu, Norma Coe, and Fahad Khalil
National Bureau of Economic Research, November 2017

Abstract

The Centers for Medicare and Medicaid Services (CMS) has phased in the Hierarchical Condition Categories (HCC) risk adjustment model during 2004-2006 to more accurately estimate capitated payments to Medicare Advantage (MA) plans to reflect each beneficiary’s health status. However, it is debatable whether the CMS-HCC model has led to strategic evolutions of risk selection. We examine the competing claims and analyze the risk selection behavior of MA plans in response to the CMS-HCC model. We find that the CMS-HCC model reduced the phenomenon that MA plans avoid high-cost beneficiaries in traditional Medicare plans, whereas it led to increased disenrollment of high-cost beneficiaries, conditional on illness severity, from MA plans. We explain this phenomenon in relation to service-level selection. First, we show that MA plans have incentives to effectuate risk selection via service-level selection, by lowering coverage levels for services that are more likely to be used by beneficiaries who could be unprofitable under the CMS-HCC model. Then, we empirically test our theoretical prediction that compared to the pre-implementation period (2001-2003), MA plans have raised copayments disproportionately more for services needed by unprofitable beneficiaries than for other services in the post-implementation period (2007-2009). This induced unprofitable beneficiaries to voluntarily dis-enroll from their MA plans. Further evidence supporting this selection mechanism is that those dissatisfied with out-of-pocket costs were more likely to dis-enroll from MA plans. We estimate that such strategic behavior led MA plans to save $5.2 billion by transferring the costs to the federal government.

From the Introduction

Recent health care reforms have facilitated the transition from volume- to value-based payment models in hopes of achieving cost control and enhancing the quality of care. One such example is that the Centers for Medicare and Medicaid Services (CMS) reimburses Medicare Advantage (MA) plans with a capitated amount per beneficiary to encourage coordinated care in managed care settings. It has been shown that MA plans save money without sacrificing quality. However, as an unintended consequence, MA plans have selectively enrolled healthier people to receive overpayments, known as favorable selection. It remains inconclusive whether cost savings are attributable to cost-effective care management or to risk selection. To reduce risk selection, CMS has adjusted payments to MA plans to reflect the health status of their enrollees, a process known as risk adjustment. To more accurately estimate capitated payments, in 2004, CMS introduced a new risk adjustment model—the CMS-Hierarchical Condition Categories (HCC) model—which uses extensive inpatient and outpatient diagnostic information from the prior year to generate risk scores.

It is debatable whether the CMS-HCC model has been effective in reducing risk selection or whether it has led to strategic evolutions of risk selection. On one hand, it has been shown that the CMS-HCC model considerably reduced the phenomenon of avoiding sicker beneficiaries (i.e., those with high-risk scores) in traditional Medicare (TM) plans. As risk adjustment leads to neutral payments for beneficiaries with conditions included in the risk adjustment formula, MA plans no longer have incentive to avoid those with high-risk scores if their conditions are included in the CMS-HCC model.

On the other hand, there is suggestive evidence showing that MA plans could strategically respond to the CMS-HCC model. Brown et al. (2014) argue that the HCC model merely shifted the profitable population from healthy people (i.e., those with low-risk scores) to sick ones who are over-compensated, within their risk-score. This can be achieved because, first, there is considerable variability in actual expenditures of beneficiaries around their risk-adjusted payments. For all beneficiaries with a given health condition, the CMS-HCC model is designed to adjust payments to MA plans by the same rate. However, the severity of the condition and thus the cost of treating it can vary within a given condition (Medicare Payment Advisory Commission). Second, the variability of the within-risk-score expenditures is larger for those with higher risk scores. Because the CMS-HCC model only accounts for about 100 major conditions, this generates underpayments for those whose conditions are not accurately measured by the model, who tend to have multiple chronic conditions.

We examine these competing claims and analyze the risk selection behavior of MA plans in response to the CMS-HCC model. Specifically, we hypothesize that MA plans engage in service-level selection, in which they provide relatively lower coverage levels for some services to discourage enrollment of certain beneficiaries. While the CMS-HCC model encouraged MA plans to accept TM beneficiaries with high-risk scores, we claim that MA plans strategically behave to avoid beneficiaries who could be unprofitable under the CMS-HCC model (i.e., those with higher expenditures than their risk-adjusted payments). Although there is a large literature on investigating service-level selection as a risk selection strategy, to the best of our knowledge, there is no research explaining mechanisms through which MA plans could engage in service-level selection as a strategic risk selection behavior in response to risk adjustment.

We find that the CMS-HCC model achieved the goal of reducing favorable selection based on health; however, we also find that it led to increased disenrollment of unprofitable beneficiaries from MA plans, leading MA plans to save costs of $5.2 billion in 2007-2009. We explain this phenomenon via service-level selection. Building upon Ellis and McGuire (2007), we theoretically show that MA plans have incentives to effectuate risk selection through service-level selection, as unprofitable beneficiaries are more likely to use services that are expensive and are thus more vulnerable to under provision by MA plans. Specifically, we show that those with higher expenditures than their risk-adjusted payments are more likely to use services that health plans would ration more tightly (i.e., services with higher service-level selection index). This phenomenon is more likely to be pronounced for those with higher risk scores. Then, we find evidence supporting our theoretical prediction that MA plans have actually raised copayments disproportionately more for services with higher service-level selection index (i.e., ambulance, home health service, partial hospitalization, and inpatient hospital service) than services with lower service-level selection index (i.e., outpatient substance abuse services, outpatient X-rays, and outpatient hospital services). Such disproportionate increases in copayment induced unprofitable beneficiaries to voluntarily disenroll from MA plans. In additional analyses, we find evidence supporting this selection mechanism that those with dissatisfaction with out-of-pocket costs were more likely to disenroll from MA plans. Consequently, the variation of total Medicare expenditures for MA enrollees with high-risk scores reduced over time. These findings indicate that service-level selection allowed MA plans to avoid the risk of enrolling unprofitable beneficiaries.

Service-level selection

By Law, MA plans are not allowed to deny coverage based on beneficiaries’ health status. However, MA plans might practice risk selection in subtle ways so that unprofitable beneficiaries voluntarily disenroll from MA plans. To achieve such risk selection, MA plans could risk-select through collecting additional data or advertising. However, because such selection mechanisms would lead to substantial screening costs, MA plans are likely to seek screening approaches with lowest costs. One such approach that generates relatively low screening costs is service-level selection because MA plans do not need to predict each beneficiary’s expenditures but rather only need to predict services more likely used by beneficiaries who could be unprofitable under the CMS-HCC model.

Service-level selection is one type of risk selection, which is based on the phenomenon that unprofitable individuals are more likely to use services that are expensive to health plans subject to capitated payments and are thus more vulnerable to under-provision by health plans. As with risk selection, service-level selection occurs due to asymmetric information between two parties, in which health plans do not know individuals’ private information about health status and preferences for health care. The health plan only knows the probability of using the service at the population level, while the individual knows her need, or probability of need, for each health care service and chooses the best health plan that can satisfy her need. Since rational individuals respond to health plan design when selecting plans, reducing coverage levels for services related to financial losses (i.e., services more likely used by unprofitable individuals) would induce unprofitable individuals to voluntarily disenroll from the plan. In this way, service-level selection would allow health plans to reduce the scope of enrolling those who could be costly to them. Although unprofitable individuals enroll in the plan, service-level selection would also enable health plans to reduce their financial loss as they shift the costs to the individual.

From the Discussion and Conclusion

The goal of this paper is to shed light on the competing claims on the effectiveness of the CMS-HCC model and to comprehensively understand strategic risk selection behaviors of MA plans. We find that the CMS-HCC model reduced the phenomenon that MA plans avoid beneficiaries with high-risk scores in TM plans, whereas it led to increased disenrollment of high-cost beneficiaries, conditional on risk score, in MA plans. We explain this phenomenon through service-level selection. Through theoretical and empirical analysis, we show that after the full phase-in period of the CMS-HCC model, MA plans have the incentive to and did increase copayments disproportionately more for services that appeal to beneficiaries who could be unprofitable under the CMS-HCC model than other services. The disproportionate changes in copayments led to voluntary disenrollment of beneficiaries with need for these services, who tend to incur higher expenditures than their risk-adjusted payments. We also find evidence supporting our hypothesis that those who were less satisfied with out-of-pocket costs were more likely to disenroll from MA plans. Such strategic behavior led to MA plans to save $5.2 billion in 2007-2009 by simply transferring the costs to the federal government, thereby placing significant financial burdens on the federal government.

Findings from this study indicate that the CMS-HCC model reduced the MA plans’ risk selection of avoiding TM beneficiaries with high-risk scores, whereas it induced MA plans to strategically behave in response to the CMS-HCC model via service-level selection. MA plans have raised copayments disproportionately more for services needed by high-need beneficiaries than for other services, thereby inducing unprofitable beneficiaries to voluntarily disenroll from their MA plans, mainly due to increased out-of-pocket costs. This allows MA plans to avoid the risk of enrolling unprofitable beneficiaries.

http://www.nber.org…

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Comment:

By Don McCanne, M.D.

Since private Medicare Advantage plans initially were paid a flat capitation rate for each enrollee, they selectively marketed their plans to healthier Medicare beneficiaries and that was successful in increasing their profits since their patients were healthier than those enrolled in the traditional Medicare program. To counter this, the government established the Hierarchical Condition Categories (HCC) risk adjustment model so that capitation payments were were made based on the health status of each beneficiary.

To no surprise, the plans then upcoded their diagnoses so that they received capitation rates that were higher than the actual level of care required. It was suspected that the plans were also gaming the system through service-level selection, and this study confirms that they were. Specifically they determined which services would be used by high-cost beneficiaries, and then they disproportionately increased copayments for those services. The dissatisfaction caused by the high out-of-pocket costs for individuals using these services caused them to voluntarily disenroll from the Medicare Advantage plans.

Although the insurers had already been paid at higher capitation rates for this population, they were able to avoid paying for those individuals with costs even higher than the capitation payments, by this devious scheme of shifting more costs to these patients, thus causing them to disenroll. The authors calculated that this shifted $5.2 billion in costs from the insurers to the federal government, that is, to us the taxpayers.

Ironically the system of capitation payments supposedly represents a transition from volume- to value-based payments, yet the insurers have figured out ways to decrease value instead by selectively marketing to the healthy, by upcoding to qualify for higher risk-adjusted payments, and now by chasing away patients who need more care by penalizing them for accessing services normally used by patients with more serious disorders (service-level selection).

How much longer do we put up with this? Throwing these crooks out and replacing their plans with our own single payer national health program would fix this problem right now. What’s holding us back?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

“The issue of universal coverage is not a matter of economics. Little more than 1 percent of GDP assigned to health could cover it all. It is a matter of soul.”

Uwe E. Reinhardt
September 24, 1937 – November 13, 2017

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By Kip Sullivan, J.D.
The Health Care Blog, November 9, 2017

The managed care movement thrives on misleading words and phrases. Perhaps the worst example is the incessant use of the word “quality” to characterize a problem that has multiple causes, only one of which might be inferior physician or hospital quality. To illustrate with a non-medical analogy, no one would blame auto repair mechanics if 50 percent of their customers failed to bring their cars in for regular oil changes. We would attribute the underuse of mechanics’ services to forces far beyond the mechanic’s control and would not, therefore, refer to the problem as a “quality” problem.

But over the last three decades it has become acceptable among American health policy experts and policy-makers to characterize any measurement of under- or over-use of medical care, or any measurement of a medical outcome, no matter how poorly adjusted to reflect factors outside provider control, as an indication of “quality.” The widespread, inappropriate use of “quality” long ago set off a vicious cycle. It helped spread the folklore that the quality of America’s doctors and hospitals is awful, and that in turn was used to justify taking even more crude measurements of quality, and so on.

In the early 1990s when the measurement craze was limited to a few “quality” report cards, and grades on those report cards were not used to punish or reward doctors and hospitals, the craze posed less risk to providers who treated a disproportionate share of the poor and the sick. But over the last 15 years, inaccurate “quality” grades on report cards have been linked with financial penalties and rewards. Payment schemes that link rewards and punishments to quality scores were dubbed “pay-for-performance” (P4P) circa 2003. Payment schemes that link rewards and punishments to both quality and cost scores, which began to materialize in the late 2000s, were dubbed “value-based purchasing” (VBP) schemes. (“Value” implies both quality and price have been taken into account). These VBP schemes go by various names, the most important being “accountable care organization” and “medical home.” MACRA is one big VBP scheme.

A growing body of research indicates P4P and VBP schemes (I will refer to both from now on as VBP schemes) pose a much greater threat to the health of poorer and sicker Americans than the old report cards did. They do so because they pose a much greater threat to the financial health of the providers who treat poorer and sicker Americans. Because minorities represent a disproportionate share of our nation’s sickest and poorest, and because the responsibility for treating minorities falls disproportionately on a few clinics and hospitals, many of them staffed by minority health care professionals, VBP schemes punish minority providers for no reason other than that they see more minority patients.

In this article I will document what I have just said by focusing on black doctors as well as hospitals and ACOs that serve a large number of black patients. I will argue that those who promote VBP are guilty of racial profiling – punishing black doctors and other providers who treat a high proportion of black patients and, ultimately, black patients. We will see that three intractable conditions guarantee that VBP penalizes black providers and their patients:

(1) Black physicians, and a small number of hospitals, treat a disproportionate share of black patients;

(2) black patients tend to be sicker and poorer than white patients, which means the clinics and hospitals that treat a disproportionate number of them have to spend more on them and yet have fewer resources to do that, and are therefore less likely to score well on cost and quality measures; and

(3) administrators of VBP schemes are incapable of adjusting quality and cost scores accurately to take into account factors outside provider control, including the lower health status, lower incomes, worse insurance, worse access to transportation, and greater exposure to stressors such as crime and food insecurity suffered by black Americans.

Note that I am not criticizing measurement per se. Measurement is essential to quality improvement in every field of human endeavor. I’m criticizing inaccurate measurement and the reckless use of inaccurate measurement.

You can continue reading this article at the following link:

http://thehealthcareblog.com…

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Comment:

By Don McCanne, M.D.

There are many problems in our health care system. There are many problems in our nation. And they inevitably interact.

At PNHP we tend to focus on our health care financing system and the interaction it has with the delivery of health care. Application of solid health policy is important in correcting the deficiencies in these interactions. But today’s message suggests that health policy science may still be in its primitive stages, not so much because of the lack of intellect in the health policy community but rather because of lack of enlightenment that has been suppressed by the memes of the free market approach to our nation’s problems, expressed in the concept that the government’s legitimate role is merely to help the private marketplace work.

Of course the needs unmet by the marketplace could not be ignored and thus public programs such as Medicare for the elderly and Medicaid for the poor were enacted. Yet we are shoving the beneficiaries of these programs into market models such as private Medicare Advantage plans and private Medicaid managed care organizations. We are also inundating the delivery system with nebulous market concepts such as shifting from volume to value – an ill conceived concept with which we are moving rapidly forward with implementation when the policy science studies to date have failed to give much support for such concepts.

In the marketplace resources are allocated based on the prospect for optimal business success; health care is distributed based on ability to pay. In publicly administered health programs resources are distributed based on need. Public funds are already used to pay for 60 to 70 percent of health care in the United States, yet we place control of much of our resources in the private sector.

What does this have to do with practicing medicine while black? It should be obvious. The private sector is not inclined to direct its resources to endeavors that do not provide greater revenue opportunities, whereas publicly administered programs distribute based on need – not only for health care but for correction of all of the other social deficiencies that have resulted in worse outcomes for the poor, a sector disproportionately represented by minorities.

A quick look at the current tax proposals tell us where we are. The greatest economic problem we face today is the transfer of income and wealth from the struggling masses to the plutocrats at the top. Yet the proposals before Congress would increase that upward transfer when the need is for public policies to improve social justice. This need screams out for progressive public financing rather than the regressive policies proposed.

We need to get our public priorities in order. We should be rewarding black physicians who dedicate themselves to caring for black patients and other ill-served populations who are sicker and poorer and thus a greater challenge to care for. Instead we penalize these virtuous physicians through payment reductions based on quality scores designed for business models rather than patient service models. Yes, we punish them. That isn’t right.

Changing to a more equitable financing system – an improved Medicare for all – is crucial, but it is only a first step. Since it is imperative that we also address these other social and economic issues, we’ve got a lot more work to do.

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