PNHP

A Business Owner Says Single Payer is the Answer to the Nation’s Health Insurance Crisis

A Business Owner Says Single Payer is the Answer to the Nation’s Health Insurance Crisis

Interview with Richard Master

By Rob Lorei
Radioactivity, WMNF (Tampa, Fla.), October 25, 2017

A documentary film called FIX IT: Health Care At The Tipping Point came out last year. It makes the case for American business leaders to support health care reform that would include establishing a single payer health insurance system in the U.S.

The film was two years in the making, with more than 40 voices advocating for reform, including: activists, health policy experts, economists, physicians, nurses, patients, and business and labor leaders.

FIX IT takes an in-depth look into how our complex health care system is damaging our economy, suffocating our businesses, discouraging physicians, and negatively impacting the nation’s health, while remaining un-affordable for a third of our citizens.

full audio:
https://sound.wmnf.org…

view the film:
https://fixithealthcare.com…

We are America’s future doctors. We support a Medicare-for-all health system.

By Augie Lindmark, Vanessa Van Doren, Bryant Shuey, and Andy Hyatt
STAT, October 25, 2017

Underneath a heap of hospital blankets, Stephen seemed small for a 7-year-old. His chest rose and fell rapidly, a frightening rhythm given his history of asthma. His parents stood nearby as veteran witnesses — Stephen had been admitted to a Cleveland safety net hospital for asthma four times already this year — but familiarity offers little comfort when your child struggles to breathe. When asked if their son used his asthma inhalers, they replied, “It depends. When we can afford them, he takes them. But when we can’t, it could be a few weeks.”

Stephen represents one of more than 430,000 hospitalizations each year due to asthma. At a cost of $56 billion annually, complications from asthma can be prevented with regular medications (inhalers), avoidance of triggers like dust and mold, and access to health care, which usually means access to health insurance. Stephen didn’t have the latter.

Of the diseases we are taught in medical school, a sudden worsening of asthma, known as an exacerbation, is a relatively common cause of illness in children and adults. To identify the cause of a disease, doctors are trained in the differential diagnosis. This bedrock of medical education encourages doctors — those in training, like us, as well as those with years of experience — to compile a list of causes that match a patient’s symptoms. In a way, the differential is half medicine, half Sherlock Holmes.

Chest pain, for example, might include differential diagnoses that range from heart attack to having eaten too many buffalo wings. Yet there’s a particular cause of illness — in Stephen’s case, a nonpulmonary culprit — that is unique to American health care: America’s private health insurance system.

Recent months provide ample context. As the latest Obamacare repeal efforts took the form of Graham-Cassidy 1.0 and 2.0, the GOP bill would have kicked 32 million Americans off their health insurance. Patients with preexisting conditions like asthma would have seen sharp increases in their health insurance premiums (in the case of metastatic cancer, to the tune of six digits), and Medicaid reimbursements to Planned Parenthood would have been banned, effectively barring millions of women from reproductive and preventive health care.

Both Republican and Democratic efforts have done little to change the fact that thousands of Americans die from lack of health coverage. America’s fragmented and inequitable health system is a sinking ship and recent fixes — often in the form of private health insurance industry bailouts or shutouts — are like placing tissue paper over the leaks in this doomed vessel.

No bacteria or viruses harm health more than policies that effectively prevent millions of individuals from access to affordable health insurance to pay for life-altering health care, including the recent ill-conceived executive order. As American health care maintains its appalling position as a leading cause of financial burden and bankruptcy, an equitable response is essential. That means creating a system in which access to health care is based on need, not the ability to pay. As future doctors, we are being trained to identify root causes of disease. That’s why we support Medicare for all.

Momentum toward an improved and expanded Medicare for all health system is at historic highs. The majority of American physicians now support single-payer health care, and 60 percent of Americans believe that the federal government has a responsibility to ensure health care for all citizens.

Last month, the Medicare for All Act was rolled out with fanfare as Sen. Bernie Sanders — joined by 16 co-sponsors — offered a blueprint for universal health care in America. Its sister bill in the House of Representatives, the Expanded and Improved Medicare For All Act, has 120 Democratic co-sponsors, making it the first single-payer bill in history to have a majority of Democratic support.

The overwhelmingly popular Medicare and Medicaid programs have saved millions of lives and offer strong, supportive health care to millions of Americans. Why not offer that to all Americans? As the life expectancy gap between rich and poor increases, the only path forward is to ensure that all Americans have affordable health care, regardless of socioeconomic background.

President Trump recently declared his desire to “stabilize markets” which, historically, has meant diverting funds to private insurers who have done an outstanding job of shrinking coverage and fattening corporate profits. Trump’s latest executive order, which eliminates select private insurance subsidies, will ironically dampen private profits at the expense of escalating premiums for the middle class.

Private insurance subsidies are Band-Aids on an already oozing wound, an inefficient private industry that prioritizes the depth of shareholder pockets over patient health. And while subsidies are short-term fixes inadequate for a long-term solution, removing them altogether, as has been the procedure in the latest GOP bills, would further limit patient access to affordable, comprehensive care. This worse-worst situation could be healed with an improved Medicare-for-all system that eliminates profit motives and preferentially places health above all else.

As medical students, we occupy a unique seat from which to view America’s health system. Our inexperience means we haven’t been indoctrinated into the damaging practices of the private health insurance industry. Our optimism tells us that the system can be changed. We entered medicine out of a desire to help people. But if we participate in a flawed health care system without advocating for structural and equitable change, we trend toward hypocrisy rather than Hippocrates.

Because Stephen’s parents couldn’t afford asthma medications, their son’s breaths were figuratively assigned a price tag. His family, like millions of Americans, is forced to make an impossible decision: pay for food and rent, or purchase medications and health insurance. Recent months have seen patients, students, and health professionals realize this crisis and mobilize toward a better alternative: Medicare for all. We advocate to practice in such a system, where every patient has health care. And where every patient can breathe freely.

Augie Lindmark, Vanessa Van Doren, Bryant Shuey, and Andy Hyatt are medical students the University of Minnesota, Case Western Reserve University, University of New Mexico, and Boston University, respectively, as well as board members of Physicians for a National Health Program, an organization that advocates for an improved and expanded Medicare for All health system.

https://www.statnews.com…

Health insurance competition continues to shrink

AMA study says competition among health insurers is shrinking

By Shelby Livingston
Modern Healthcare, October 23, 2017

A single health insurance company dominates the commercial insurance market in more than 4 in 10 of the nation’s metropolitan areas, according to an analysis by the American Medical Association.

The study released Monday showed that competition among health insurers continues to shrink, despite several proposed mergers falling through earlier this year, including deals between Aetna and Humana, and Anthem and Cigna. Previous studies have shown that consolidation among insurers leads to lower payments for doctors and higher premiums for patients.

In 2016, a single insurer captured at least half of the commercial insurance market share in 43% of the 389 metro areas analyzed, according to the AMA. That’s up from 40% of metro areas in 2014. The AMA also said 89% of metro areas had at least one insurer with a commercial market share of 30% or more.

The findings are part of the AMA’s annual review of insurance market competition. It found that nearly 7 out of 10 commercial markets have a significant lack of competition, with 9 in 10 of the health insurance exchange markets lacking competition.

http://www.modernhealthcare.com…

AMA release:
https://wire.ama-assn.org…

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Comment:

By Don McCanne, M.D.

Although we have by far the world’s highest health care costs we continue to rely on competition between private health insurers to bring costs down. But the AMA shows us once again that private health insurance markets are not competitive while per capita costs remain twice the average of other wealthy nations. So do we continue on the same path simply wishing that someday it would work?

We pay the private insurers a huge amount for their administrative services while tolerating the costly administrative burden that they place on the health care professionals and institutions. Since this hasn’t brought us lower costs through competition, then what are we actually purchasing with these extra payments? Plans with high deductibles and other cost sharing that erect financial barriers to care? Plans with narrow networks that take away choices of physicians and hospitals? Plans that manipulate markets to avoid more costly patients with greater needs? These are negatives, and we are paying extra for them?

The insurers need us, but we certainly don’t need them. It’s time to extricate ourselves from the capture by this industry. Let’s replace them with our own system – an improved Medicare for all – designed to help us get the health care we need, at costs that are reasonable.

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A net of 3.5 million Americans have lost their insurance this year

U.S. Uninsured Rate Rises to 12.3% in Third Quarter

By Zac Auter
Gallup News, October 20, 2017

The percentage of U.S. adults lacking health insurance rose in the third quarter of 2017 to 12.3%, up 0.6 percentage points from the previous quarter and 1.4 points since the end of 2016.

The uninsured rate, measured by Gallup and Sharecare since 2008, had fallen to a record low of 10.9% in the third and fourth quarters of 2016. However, the 1.4-point increase in the percentage of adults without health insurance since the end of last year represents nearly 3.5 million Americans who have entered the ranks of the uninsured.

Several marketplace factors could be contributing to the growth of the uninsured rate since 2016. Some insurance companies have stopped offering insurance through the exchanges, and the lack of competition could be driving up the cost of plans for consumers. As a result, the rising insurance premiums could be compelling some Americans to forgo insurance, especially those who fail to qualify for federal subsidies.

Uncertainty about the healthcare law also may be driving the increase. Congressional Republicans’ attempts to replace the healthcare law may be causing consumers to question whether the government will enforce the penalty for not having insurance.

The uninsured rate has increased at least one point among all key demographic subgroups since late 2016, except for those aged 65 and older. The growth has been concentrated mostly among middle-aged Americans, racial minorities and lower-income Americans.

http://news.gallup.com…
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Comment:

By Don McCanne, M.D.

The uninsured rate of U.S. adults, at the end of last year, was 10.9%. Since then it has increased to 12.3%, representing a net of nearly 3.5 million Americans who have entered the ranks of the uninsured. This increase in the numbers of uninsured, in spite of the Affordable Care Act, provides us with two important lessons.

The politicians that we elect play a very important role. Americans have chosen leaders who believe that reducing government spending is more important than ensuring health care for all. Thus we have seen a targeted effort both in Congress and especially in the Trump administration to reduce government subsidies of health care. If you don’t mind seeing more Americans, especially racial minorities and those with low incomes, going without affordable access to health care, then keep electing the same politicians. Those who do care (the majority) need to become more involved in political activism.

The other even more important lesson is that the infrastructure of the financing system is absolutely crucial. Right now we have a highly fragmented system which allows manipulation to favor both the vested interests and the political ideologues. This study showed that the only group that did not have at least a one point increase in the uninsured was those aged 65 and older – Medicare!

Medicare is a highly stable social insurance program that belongs to everyone as an entitlement. It is ours; we earned it. The politicians currently in control are telling us once again that Medicare is going broke, and we have to do something about that, but fortunately over the last half century the program has remained resistant to their attacks. Their agenda this year includes premium support (vouchers) which would be very damaging to the program since they chisel away government support. But as long as Americans keep defending Medicare, it should always be there for us.

The obvious conclusion is that we should improve Medicare so it works better, and then expand it to include everyone. Contrast that to the expansion program we are supporting today – ACA – as we watch 3.5 million Americans lose their coverage!

When the politicians in public forums answer questions about single payer by telling us that single payer may be in the future but for now now we have to keep supporting ACA, remind them that their response to the decline in coverage is to add copper plans that pay only half of average medical costs (bipartisan Alexander-Murray legislation), just so they can say more people are insured – though that is a sure path to a skyrocketing rate of medical bankruptcies. Copper plans should fit well with our outrageous deductibles, with our empty health savings accounts, with our loss of choice through narrow provider networks, and with our unaffordable premiums that support such egregiously excessive administrative costs. They want more of that?!

It seems that boos and catcalls have lost their impact. Maybe it’s time to revitalize the Bronx cheer. Yes, that’s rude, but what could be more rude than them telling us that we should be thankful that they are going to try to get us copper plans.

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Is lowering Medicare eligibility to age 55 a wise incremental step?

A New Plan To Rescue The ACA: Medicare-At-55

By Thomas Bodenheimer
Health Affairs Blog, October 16, 2017

On October 12, 2017, the Trump Administration announced that it would end subsidies that reduce out-of-pocket payments for low-income individuals. This action might drive insurers out of the exchanges and might encourage younger people to drop their individual insurance plans — thereby destabilizing the individual insurance market.

Extending Medicare to the 55-64 age group—who have relatively high health care costs—is a potential fix that could insure the near-elderly and provide stability to the marketplaces. It would remove expensive individuals and families from coverage by private insurance companies, who could in turn reduce premiums for individuals and families below the age of 55.

Under this proposal, Medicare-at-55 would be universal for people in the 55-64 age group and they would leave their current private insurance. It would require an increase in the Medicare payroll tax contribution which has not increased proportionately to increases in Medicare spending; other countries sustain their health insurance programs by gradually increasing their payroll tax contributions. To make this plan fiscally sustainable, the United States would need to do the same.

The Problem With Making Medicare-At-55 Optional

Medicare-at-55 is quite different from proposals suggested by Democrats in 2009 and 2017, which allowed people aged 55-64 to voluntarily buy into Medicare as an alternative to private insurance. The problem with the idea of Medicare buy-in is that relatively few of the near-elderly would choose it. Medicare premiums for this age group—about $8,200 per year for an individual—would be significantly higher than what they currently pay with employer-sponsored insurance and with individual insurance subsidized under the Affordable Care Act (ACA).

In addition, under an optional buy-in there would be confusion among potential enrollees on whether to use the buy-in and person-by-person enrollment would be administratively complex. Moreover, the buy-in would raise vexing legislative questions around premium levels, Medigap and Medicare Advantage policies, and whether people could buy-in to Parts A, B, and D separately.

Automatic Enrollment, Just Ten Years Earlier

 The better approach would be to implement a Medicare-at-55 concept in which everyone would be automatically enrolled in Medicare — just like the current system does for those 65 and above. Upon reaching the age of 55, eligible individuals (almost everyone in the 55-64 age group) would simply receive their red-white-and-blue Medicare card. Private insurers and employers would no longer be responsible for this age group, which would allow private insurers to reduce premiums on younger families because they would have a younger, and typically healthier, pool of people to cover. In 2015, per capita health care costs for people between 55 and 64 years of age were $9,707 compared with $6,637 for the 45-54 age group, $4,442 for the 26-44 cohort, and $2,915 for those between 19 and 25.

Once on Medicare at the age of 55, people could choose to get a Medicare supplement through their previous insurer or join a Medicare Advantage plan. While the 55-64 age group has higher health care costs than younger people, they have lower costs than current Medicare beneficiaries, which in 2015 incurred per capita spending of $11,904.

Keep in mind that this is not small group to be adding to Medicare’s risk pool. In 2015, there were 41.1 million people in the 55-64 age group. 24 million have access to employer-sponsored insurance, 3 million have subsidized individual insurance under the ACA, 2 million purchase unsubsidized individual insurance, and 3.4 million are uninsured. This leaves an estimated 8 to 9 million already on Medicare and/or Medicaid.

How Would We Pay For Medicare-At-55?

First, it is noteworthy that from 2010 to 2016, per capita Medicare spending growth was 1.3% compared with 3.5% for private insurance. Second, it would be impossible for most people in the 55-64 age group to pay for their Medicare plan and—given the high per capita costs of this age group—it would be very expensive for the federal government to subsidize their plan. The costs of Medicare-at-55 would have to be borne by the younger population, who would benefit greatly as they reached 55.

The best revenue source for Medicare-at-55 is the current Medicare financing model: payroll tax for Medicare Part A, individual premiums and general federal revenues for Medicare Part B, and Part D through general federal revenues and out-of-pocket costs. The same model could be extended to the 55-64 age group, with an increase in the payroll tax, for example, from 2.9% (half from employers and half from employees) to 3.9% and an increase in the higher-income payroll tax from 2.35% to 3.35%. The precise increases would have to be calculated by federal actuaries and these increases could also be used to extend Medicare’s life from the current date of 2029.

To add to these Medicare revenues, which are distributed throughout the entire population, the new 55-64 beneficiaries would still pay their Part B premiums ($134 per month for incomes of $85,000 or less, more for higher incomes) and Part D (prescription drugs) premiums. Their out-of-pocket costs would depend on whether they have a Medicare supplement or Medicare Advantage plan. The 55-64 population would be subject to the same Medicare rules as the over 65 Medicare population.

To pay for the 55-64 age group to be folded into Medicare, not only the payroll tax, but the portion of Medicare financing provided by general federal revenues, needs to increase. Employers that insure their employees would be required to contribute through Medicare-earmarked payments. Otherwise these employers would receive a windfall since they would no longer be responsible for the health care costs of their 55-64 year-old employees.

Medicare-at-55 is a reasonable proposal to stabilize the ACA while providing reliable health insurance for the 55-64 age group. As the most expensive group insured through the ACA marketplaces moves to Medicare, insurers could reduce premiums for the remaining younger and healthier age groups. The transfer of the 55-64 cohort from employer-sponsored insurance to Medicare would allow insurers to also moderate their premiums in the employer market.

Many questions have yet to be answered in developing the concept of Medicare-at-55, but the idea deserves to be added to the mix of proposals designed to extend our nation’s insurance coverage and repair the ACA marketplaces.

Copyright ©2017 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

http://healthaffairs.org/blog…

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Comment:

By Don McCanne, M.D.

Most individuals who are serious about health care reform recognize that the improvements brought to us through the Affordable Care Act have been insufficient in that costs have not been adequately contained while far too many people remain uninsured or underinsured with detrimental consequences to their health and financial well being. Further reform is mandatory.

Yet sincere reform advocates remain divided with some supporting incremental measures that would gradually repair some of the flaws in our system while others support transformation, in one step, to a universal, comprehensive program that addresses essentially all of the major defects in health care financing today. That step would be the enactment of a single payer system – an improved Medicare for all.

The divide between these two groups is not always that clear. Of those who support incremental steps some would merely tinker with the current system while supporting relatively ineffectual concepts such as value-based financing or consumer empowerment. Other incremental supporters recognize that changes should represent significant steps forward that would eventually result in a truly universal system.

Thomas Bodenheimer describes a true step forward – that of lowering Medicare eligibility to age 55. He contrasts that with the recommendation of others to allow individuals to purchase Medicare coverage. He explains some of the flaws of the Medicare buy-in, and there are others such as disruption of risk pools. Other than the fact that we do not arrive at single payer as fast, are there any other problems with this first step in moving more people into Medicare by reducing the eligibility age? Well, yes.

The traditional Medicare program is inadequate in its coverage. The cost sharing, especially coinsurance, places too great of a financial burden on retirees with modest resources, especially since there is no cap on the out-of-pocket costs. Most Medicare beneficiaries have additional coverage through Medigap, Medicare Advantage, employment retiree programs or Medicaid. Before Medicare is expanded to include those over 55, the program should be improved so that it prevents financial hardship for all beneficiaries. Also the benefits need to be expanded so that the coverage is more comprehensive. Expanding the population covered without improving the program would make it even more difficult later on to address the problems of excessive cost sharing and inadequate benefits. These defects would tend to be locked in.

Also leaving Medigap, Medicare Advantage and retiree plans as supplemental options would perpetuate the fragmentation and administrative excesses of our system, not to mention the perpetuation of inequities, especially for those who cannot afford or are not eligible for such coverage.The supplemental benefits of these plans need to be rolled into the traditional Medicare program.

Of course, that would make the expansion more expensive. The additional taxes required would likely meet with greater resistance, which is a problem anyway. But it seems more logical to face this tax issue with a single expansion to include everyone rather than fighting it over and over again with each incremental expansion.

Medicare at 55 does address the problem of covering this age group, but there is a downside to doing this as an incremental step. With other programs covering the elderly, children, pregnancy, the disabled, the poor, and the invincibles, there would be less pressure for comprehensive reform since many of the incrementalists would decide that we’ve done about all we can. They would, of course, continue to ignore the other important features of a well designed single payer system that would bring us greater administrative efficiency, equity, access, improved resource allocation, and, yes, true universality. Just try to superimpose those features on a system that the incrementalists say that we’ve already fixed.

So is lowering Medicare eligibility to age 55 a wise incremental step? As incremental steps go, it might be wise, but trying to get to an improved Medicare for all though incremental steps is clearly not wise, for the reasons mentioned. We likely would never make it to the altruistic program we envision. As Quentin Young said, we don’t want to cross that chasm in two steps.

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Copper plans are an unacceptable trade-off

Here's the Alexander-Murray bill

By Caitlin Owens
Axios, October 17, 2017

S.___  A bill to stabilize individual market premiums for the 2018 and 2019 plan years and provide meaningful State flexibility. (The Murray-Alexander Bill)

Sec. 4 Allowing all individuals purchasing health insurance in the individual market the option to purchase a lower premium copper plan.

https://www.axios.com…

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ACA Catastrophic Plans

HealthCare.gov

Catastrophic health insurance plans have low monthly premiums and very high deductibles. They may be an affordable way to protect yourself from worst-case scenarios, like getting seriously sick or injured. But you pay most routine medical expenses yourself.

Deductibles — the amount you have to pay yourself for most services before the plan starts to pay anything — are very high. For 2017, the deductible for all Catastrophic plans is $7,150.

https://www.healthcare.gov…

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Comment:

By Don McCanne, M.D.

Government means-tested cost sharing reductions (CSR) were designed to reduce out-of-pocket expenses for low-income individuals in order to make health care access more affordable. President Trump terminated the CSR payments. This can result in disruptions in the ACA exchange plans.

Sen. Lamar Alexander and Sen. Patty Murray have proposed legislation in which Sen. Alexander will agree to a two year extension of the CSR payments in exchange for concessions from Sen. Murray.

One of those concessions is to allow anyone to purchase on the exchange the catastrophic plans that are currently available only to individuals under 30 or those who qualify for certain hardship exemptions. These plans are sometimes referred to as copper plans, indicating that they have an actuarial value below the other metal tier plans (bronze, silver, gold, and platinum).

The appeal of these plans is that their premiums are very low, but that is because their actuarial value is only 50 percent – they cover an average of about half of health care costs. For 2017, the deductible for these plans is $7,150.

Yesterday’s message on the deteriorating financial protection offered by today’s health plans, especially those with larger deductibles, demonstrates that this trend has produced severe adverse consequences for both the physical health and financial well being of the insured. Because of the spartan nature of the copper catastrophic plans, the adverse consequences can be anticipated to be even more severe.

The concept that we can take beneficial policies and detrimental policies and combine them to come up with a reasonable compromise is a fallacy. Bad policies are bad policies, and they cannot be neutralized by political accommodations.

Under a well designed single payer national health program catastrophic plans would not exist. The sooner we get there, the better it will be for all of us – better for our health and better for our personal finances.

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Growth of underinsurance now rampant in employer-sponsored plans

How Well Does Insurance Coverage Protect Consumers from Health Care Costs?

By Sara R. Collins, Munira Z. Gunja, Michelle M. Doty
The Commonwealth Fund, October 18, 2017

Background

Congress intended for the ACA to do more than expand access to insurance; it aimed for the new coverage to allow people to get needed health care at an affordable cost.

For people covered by employer-based insurance — which includes more than half of Americans under age 65, or more than 150 million people — plans were historically far more comprehensive and cost-protective than individual market coverage. However, over the past decade, premium cost pressures have led companies to share increasing amounts of health costs with workers, particularly in the form of higher deductibles. At the same time, income growth has been sluggish, leaving families increasingly pinched by health care costs.

Survey Findings

Estimated 41 Million Adults Are Underinsured

As of July 2016 through November 2016, 28 percent of U.S. adults ages 19 to 64 who were insured all year, or an estimated 41 million people, were underinsured. This is more than double the rate in 2003 when the measure was first introduced in the survey, and is up significantly from 23 percent, or 31 million people, in 2014.

The underinsured population is predominantly composed of people in employer plans: 56 percent of underinsured adults had coverage through employers at the time of the survey. This reflects the fact that the majority of insured adults have employer coverage. However, people with coverage through the individual market, including the ACA marketplaces, and Medicare beneficiaries who are disabled adults under age 65, are disproportionately represented among the underinsured.

The share of adults who were underinsured has climbed over time in each coverage group. Among adults with employer-based coverage at the time of the survey, 24 percent were underinsured, which is more than double the rate in 2003, and is up significantly from 2014. People working in small firms historically have had somewhat higher underinsured rates than employees of larger firms. But in 2016, the share of adults in firms with 100 or more workers who were underinsured climbed significantly to 22 percent — the same rate as among workers in small companies.

People with individual market coverage, including those in marketplace plans, are significantly more likely to be underinsured than people in employer plans. In 2016, 44 percent of adults with individual market policies, including marketplaces plans, were underinsured.

One-quarter (26%) of adults with Medicaid coverage — the poorest adults in the survey — were underinsured in 2016. Medicaid requires little cost-sharing, but because people eligible for the program have very low incomes, minor out-of-pocket costs can comprise a large share of income.

Adults under age 65 with Medicare who were continuously insured are by far the sickest group of covered adults in the survey — 77 percent have a chronic condition or are in fair or poor health — and the second-poorest after Medicaid enrollees. Many have very high health expenditures and low incomes. Almost half (47%) of adults in this group were underinsured in 2016.

Underinsured Rates in the Four Largest States

The survey drew an additional sample of people in the nation’s four most populous states. Adults in Florida and Texas were underinsured at higher rates than those in California and New York. Among adults who were insured all year, 32 percent of Floridians and 33 percent of Texans were underinsured compared with 21 percent of Californians and New Yorkers.

Higher Deductibles Are Increasingly a Factor in the Underinsured Rate

Between 2003 and 2016, deductibles were increasingly a factor in underinsurance: more people than ever before have plans with deductibles and more have deductibles that are high relative to income.

The share of privately insured adults who had health plans without deductibles has fallen by nearly half over the past 13 years, from 40 percent in 2003 to 22 percent in 2016. At the same time, deductibles have grown in size. By 2016, more than one of 10 (13%) adults enrolled in a private plan had a deductible of $3,000 or more, up from just 1 percent in 2003.

Deductibles are outpacing growth in many families’ incomes, and thus representing a greater share of income. In 2016, 12 percent of adults with insurance coverage all year, or 18 million people, had a deductible that comprised 5 percent or more of their income, up from 3 percent, or 4 million people, in 2003.

Deductibles that are high relative to income are more common in the individual market, but have grown increasingly prevalent in employer plans. Among those insured all year, about one-quarter of adults with individual market policies and marketplace plans had deductibles that equaled 5 percent or more of their income, up from 7 percent in 2003. Among people who had employer coverage, the share with a high deductible grew from 2 percent in 2003 to 13 percent in 2016.

Large deductibles have been most common among small employers, but in 2016 the share of workers in large firms with high deductibles climbed significantly. Among adults with health benefits through their own employer who were working part-time or full-time in companies with 100 or more workers, the share with a high deductible relative to income climbed to 13 percent, the same rate as in small-employer plans.

When we examined the data more closely in the individual market, we found differences by income that likely reflect the effects of the Affordable Care Act’s cost-sharing reductions. These reductions lower deductibles and other cost-sharing elements for lower-income enrollees in marketplace plans. In 2016, a smaller share of adults with incomes under 200 percent of poverty ($23,760 for an individual and $48,600 for a family of four) in the individual market had high deductibles relative to their income than did higher-income enrollees. In contrast, in employer plans, lower-income enrollees have higher deductible burdens than do higher-income employees because the deductible amount does not vary with income. We have found a similar pattern in analyses of other survey data since the ACA’s major coverage expansions in 2014.

Adults with Low Incomes or Health Problems Are at Greatest Risk of Underinsurance

People with low incomes in the United States are by far the most at risk of being underinsured. Among adults who had health insurance for the full year, 44 percent of those with incomes under 200 percent of the federal poverty level ($23,760 for an individual and $48,600 for a family of four) were underinsured in 2016, more than twice the rate of adults with incomes over 200 percent of poverty (20%). Low-income adults comprised 61 percent of the 41 million underinsured adults in 2016.

People with health problems are also at greater risk of being underinsured because of their relatively higher health care costs. Among adults who were insured all year, more than one-third (34%) of those in fair or poor health or those with a chronic health problem were underinsured in 2016, compared to 23 percent of those in better health.

Underinsured Adults Have High Rates of Medical Bill Problems

Greater cost exposure is leaving Americans burdened with medical debt. Half (52%) of underinsured adults reported problems paying their medical bills or said they were paying off medical debt. This is about the same rate as adults who were uninsured for some time during the year and more than twice the rate reported by insured adults who were not underinsured (25%).

Among adults with private coverage who had been insured all year, those with high deductibles were more likely to report problems with medical bills than those with low or no deductibles. Two of five (40%) adults with a deductible of $3,000 or more said they had difficulty paying their medical bills or had accumulated medical debt compared with 21 percent of those who did not have a deductible.

Among adults who were paying off medical bills over time, those who had high deductibles were carrying the largest debt loads. Nearly two of five (39%) privately insured adults with deductibles of $1,000 or higher were paying off accumulated medical bills of $4,000 or more.

Medical Bill and Debt Problems Have Long-Term Financial Consequences

Many adults who have struggled to pay their medical bills report lingering financial problems. People who are either underinsured or uninsured have the highest rates of such problems: both groups had higher debt loads and lower incomes than adequately insured adults. Half (47%) of underinsured adults who had problems paying medical bills or had medical debt said they had used up all their savings to pay their bills; 40 percent said they had received a lower credit rating because of their bills. Over one-third (38%) of underinsured adults with medical bill problems said they had taken on credit card debt to pay bills. About 6 percent of underinsured adults reported they had to declare bankruptcy.

Underinsured Adults Report Not Getting Needed Care Because of Cost

Underinsured adults are more likely to skip needed health care because of cost than are adults with more cost-protective insurance. More than two of five (45%) underinsured adults reported not getting needed care because of cost in the past year, including not going to the doctor when sick, not filling a prescription, skipping a test or treatment recommended by a doctor, or not seeing a specialist. This is twice the rate of continuously insured adults who were not underinsured (22%). It is also close to the rate reported by adults who were uninsured (52%).

Privately insured adults who had health plans with high deductibles were more likely than those with no deductibles to report cost-related problems getting health care. More than two of five (47%) privately insured adults who were insured all year with a deductible of $3,000 or more reported not getting needed care because of cost compared with 22 percent of adults who did not have a deductible.

Many underinsured adults with health problems reported difficulty getting appropriate care. Among underinsured adults with at least one chronic health condition, nearly a quarter (24%) said they had not filled a prescription for their condition or had skipped a dose of their medication because of cost, compared with 10 percent of those with adequate coverage.

Addressing the Key Driver of Insurance Costs: Health Care Cost Growth

Health care costs are the single largest factor in the growth of private insurance premiums in the United States. Insurers and employers have tried to manage premium growth by making consumers increasingly responsible through higher deductibles and other cost-sharing vehicles. Advocates of this approach argue that with more skin in the game, consumers will help to slow cost growth by choosing more-efficient providers and being more selective in the services they use. But years of experience with high-deductible health plans in the U.S. has yielded scant evidence that such a strategy is effective. Instead, as the survey findings indicate, many consumers have responded to higher deductibles by avoiding needed health care and skipping their medications.

Evidence suggests that consumers cannot do the heavy lifting required to reduce the rate of growth in medical costs in the United States.

http://www.commonwealthfund.org…

***

Comment:

By Don McCanne, M.D.

When the Affordable Care Act was crafted, a majority of Americans were enrolled in large employer-sponsored group plans which seemed to be working fairly well. It was decided that these plans should be left alone, other than slightly modifying them to ensure continued protection. Most enrollees seemed to be satisfied with these plans, and so President Obama said that you could keep them if you wanted to. Even today they tell us that that we would face a voter revolt if we tried to take these plans away from people and replace them with a more comprehensive single payer system.

This report reveals that protection provided by employer-sponsored plans is rapidly deteriorating, including in the highly touted large group plans. A relatively high percentage of individuals with these plans are finding that they are underinsured. They are experiencing financial barriers to health care and are suffering financial hardship when they must access that care. The percentages of individuals exposed are scattered through the excerpts above, and they are very significant.

Those who are fortunate enough to remain healthy and do not need much health care may be satisfied with their current plans, not realizing that they are only one serious illness or major injury away from being exposed to financial hardship. They assume that their insurance will take care of any problems, but the experience of those who need care has demonstrated the degree of deterioration in protection that has gradually taken place in recent years.

Those under 65 with long-term disabilities who are enrolled in Medicare are finding that their coverage is inadequate. That is why we need to improve Medicare if we are going to use it as a universal program that covers everyone. Although Medicaid has lower cost-sharing requirements, enrollees are low-income individuals who find that these modest out-of-pocket amounts may create a hardship. Individual and small group plans have traditionally provided more meager coverage, again leaving individuals financially vulnerable. Individual plans offered in the ACA exchanges have some protection for low-income individuals through cost-sharing reductions (if they are reinstated), but individuals with incomes above 250% of the federal poverty level are exposed to significant out-of-pocket costs because of the relatively low actuarial value of the silver plans. So now employer-sponsored insurance has joined the lineup of plans and programs that expose individuals to underinsurance.

It will only get worse. We spend too much and receive too little. We have been shifting to consumer empowerment by placing more of the burden on patients, but this report confirms that we are worse off for it. The report concludes, “Evidence suggests that consumers cannot do the heavy lifting required to reduce the rate of growth in medical costs in the United States.” The heavy lifting can easily be done by a well designed single payer national health program – an improved Medicare for all. Under such a program, nobody should be underinsured.

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The collapse of Trumpcare and the rise of single payer

Single payer bills signal a new era in American healthcare politics

By Adam Gaffney, M.D. and Zackary D. Berger, M.D., Ph.D.
thebmj, October 17, 2017

Two major developments in September upended US healthcare politics. The month’s end saw the failure of a last-ditch blitz by Senate Republicans to dispatch the Affordable Care Act (ACA) via the Graham-Cassidy bill, a painful defeat for opponents of Obamacare, including President Trump. And on 13 September, Senator Bernie Sanders’ single-payer “Medicare-for-All” bill was released, galvanizing proponents of progressive healthcare reform.

Among the notable aspects of Sanders’ bill was its co-sponsorship by 16 Senators (as opposed to zero for Sanders’ last bill), among whom were most of the potential Democratic 2020 presidential contenders. Rising support for single-payer in the Senate follows a similar shift in the House of Representatives, where a majority of Democratic lawmakers now support Representative John Conyers’ single-payer bill.

The immediate impact of these single-payer bills—given that neither will pass in the current Congress—may seem modest. Yet in conjunction with the collapse of Republicans’ ACA repeal efforts, they could signal a new era in American healthcare politics.

Firstly, on the political level, Democrats’ growing embrace of single-payer is tantamount—as many have noted—to a historic shift in the so-called “Overton window,” or the boundaries of the politically possible. Indeed, it now seems likely that single-payer healthcare reform proposals will figure prominently not only in the 2020 Democratic presidential primaries, but in the general election as well.

Secondly, the bills—or something like them—could serve as a framework for legislation under a new government. Sanders’ bill (like Conyers’) would achieve the long-sought goal of universal coverage for US residents through a single public programme. It would eliminate most “cost-sharing”—e.g. copayments and deductibles— a radical departure from trends towards high patient exposure to healthcare costs. Indeed, the bill would cover comprehensive medical benefits without any fees at point of use; the only copayments are for prescription drugs (to incentivize the use of generics), and even these are capped and would not apply to “preventive” medications.

Such fundamental reform could do much good; given that lack of healthcare coverage (28 million remain uninsured at present, despite Obamacare) has been associated with premature deaths, it could be lifesaving. [1] The shift away from cost-sharing could also bring dramatic improvements in the financial and physical well-being of American patients. “Underinsurance” appears to be rising: one recent survey of insured patients seeking cancer treatment found that more than one in three had an unexpectedly high financial burden from care, and about one in six had “high or overwhelming financial distress.” For the latter group of cancer patients, out-of-pocket healthcare spending consumed nearly a third of income despite insurance coverage. [2,3]

Still, even supporters of single-payer reform recognize that Sanders’ bill is merely the first step. First, unlike the House counterpart, the Senate bill excludes long-term care from the new universal programme; it would continue to be provided through the current federal-state Medicaid programme and so would still be a means-tested, rather than a universal, benefit. Advocates also stress other areas for improvement in Sanders’ bill, including shifting hospitals to global budgets (to reduce hospital administrative spending); planned capital expenditures (to control long-term cost growth); and the exclusion of investor-owned health facilities (given concerns about the quality and inefficiency of corporate healthcare). [4]

No one claims, however, that this version of the bill will constitute final legislative text. It also lacks a funding mechanism. Most importantly, its passage will require a shift in the power balance in Washington, as well as greater familiarity and understanding among the electorate, given that new taxes will be needed to replace current spending private healthcare spending. Nonetheless, in addition to providing a potential model for future legislation, the bill serves a number of useful functions now: it has already spurred discussion of the inadequacies of the healthcare status quo (including unsustainable costs), and it provides a vision of the future that contrasts with the bleak plans of both the Republican Party and insurance company lobbyists.

Lawmakers from across the political spectrum are taking notice. “To my friends to the Left,” Senator Lindsey Graham (R-SC), sponsor of Republicans’ Graham-Cassidy bill, said, “I will do everything I can to stop and put a stake into the heart of single-payer healthcare.” [5]

Yet there is a reason why Graham’s bill crashed and burned, and why single-payer may one day succeed despite such threats of impalement. 52% of Americans disapproved of Graham’s bill; even among Republicans, only 46% were in favour, with 21% opposed and a third uncertain. [6] Single-payer, by contrast, is favoured by 53% of Americans, including 64% of Democrats, 55% of Independents, and even 28% of Republicans. [7]

Such poll numbers portend a grim prognosis for the conservative healthcare project. By contrast, as the notion of healthcare as a right—and not a commodity—increasingly becomes part of the national ethos, the prospects for single-payer reform continue to sweeten.

Dr. Zackary Berger is an associate professor of General Internal Medicine at Johns Hopkins School of Medicine and member of the Core Faculty at the Johns Hopkins Berman Institute of Bioethics. He is the founder and treasurer of Clinicians for Progressive Care.

Dr. Adam Gaffney is an Instructor in Medicine at Harvard Medical School and a pulmonary and critical care physician at the Cambridge Health Alliance. He is a board member in the advocacy organization Physicians for a National Health Program and is the author of “To Heal Humankind: The Right to Health in History.”

http://blogs.bmj.com…

References

1. Woolhandler S, Himmelstein DU. The relationship of health insurance and mortality: Is lack of insurance deadly? Ann Intern Med, 2017 doi: 10.7326/M17-1403.

2. Collins SR, Rasmussen PW, Beutel S, et al. The Problem of Underinsurance and How Rising Deductibles Will Make It Worse—Findings from the Commonwealth Fund Biennial Health Insurance Survey. The Commonwealth Fund, 2015.

3. Chino F, Peppercorn JM, Rushing C, et al. Out-of-pocket costs, financial distress, and underinsurance in cancer care. JAMA Oncology, 2017 doi: 10.1001/jamaoncol.2017.2148.

4. Physicians for a National Health Program. Doctors’ group welcomes Sen. Sanders’ Medicare-for-all bill. (Accessed September 29, 2017).

5. Leonard K. Lindsey Graham vows to ‘put a stake into the heart of single-payer’. The Washington Examiner, September 25, 2017. (Accessed September 28, 2017).

6. De Pinto J, Backus F, Khanna K, et al. Poll: Most disapprove of Graham-Cassidy health care bill. CBS News, September 25, 2017. (Accessed September 29, 2017).

7. Hamel L, Wu B, Brodie M. Data Note: Modestly Strong but Malleable Support for Single-Payer Health Care. Kaiser Family Foundation, July 5, 2017. (Accessed September 29, 2017).

UnitedHealth celebrates Trump’s executive order

Top U.S. Health Insurer to Look at Trump Obamacare Alternatives

By Zachary Tracer
Bloomberg, October 16, 2017

UnitedHealth Group Inc., the U.S.’s biggest health insurer, said it’s excited about the the chance to sell health plans President Donald Trump is promoting as alternatives to Obamacare.

Last week, Trump signed an executive order promoting short-term health insurance plans, “association health plans” for business owners who could band together, and tax-advantaged savings accounts that could be used to pay for health services. The order — which Trump has acknowledged as a move to effectively dismantle Obamacare — rattled some health insurance and hospital stocks last week.

“We have a great deal of experience in the areas covered in the order — short-term policies, association plans and expanded use of HRAs,” Chief Executive Officer David Wichmann said on a call with investors. “We will be engaging with policymakers as the regulatory frameworks in these areas are developed.”

UnitedHealth said in a statement Tuesday that its medical-loss ratio, a measure of how much of every premium dollar is spent on care, was 81.4 percent.

The company’s shares rose 4.4 percent to $201.75 at 9:41 a.m. in New York, after earlier rising as much as 5.3 percent for the biggest intraday gain in a year. They’re up about 26 percent so far this year.

https://www.bloomberg.com…

***

Comment:

By Don McCanne, M.D.

As President Trump signs an executive order designed to help dismantle Obamacare, look who is celebrating – UnitedHealth Group, Inc., the nation’s largest health insurer. UnitedHealth has already mastered Trump’s tools to increase profits through short-term health insurance plans, association health plans, and health reimbursement arrangements – tools which reduce the amount the insurers have to pay for health care.

Wall Street also wants its piece of the action, as demonstrated by the boost in UnitedHealth’s share prices, now up about 26 percent this year.

UnitedHealth is touting its medical-loss ratio of 81.4 percent, which means that they divert 18.6 percent of their premium revenue to their own purposes, including high executive compensation and shareholder profits. Compare that to Medicare’s spending on health care which is about 98 percent of revenues.

And this afternoon we learn that Sen. Lamar Alexander and Sen. Patty Murray have reached an agreement that would temporarily extend cost-sharing payments in exchange for softening the rules to allow for cheaper, skimpier plans – shifting yet more health care costs away from insurers.

And when we try to offer the single payer solution, our progressive colleagues jump up and say we can’t have a litmus test. We must continue to support those (neoliberals) who have led us down this path to health care purgatory.

What is your next step? A champagne toast with UnitedHealth’s executives? That seems to be all that we are getting out of D.C. Or are we finally going to do something about this? Like demanding an improved Medicare for all. No, really. We have to make that demand and make it in an effective manner. They are not going to volunteer it.

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Now is time for universal health care

By Rob Stone, M.D.
Bloomington (Ind.) Herald-Times, October 16, 2017

Donald Trump has done for health care what no Democrat was ever able to do: He has made the Affordable Care Act popular. The Senate has tried and failed three times to repeal and replace the ACA. What next?

One thing is certain — it is difficult to predict the future. The most unlikely things have come to pass the last two years: Almost no one predicted that Donald Trump would win the Republican nomination, Bernie Sanders would win the Indiana Democratic primary, and then Trump would win the presidency. Absolutely no one in either party predicted the ACA would still be standing at the end of September 2017.

Is there a way for Republicans to repeal their hated Obamacare and replace it with something that both keeps Trump’s campaign promise to “cover everybody” and that Democrats would get behind? A bipartisan solution?

The answer is hiding in plain sight — repeal Obamacare and replace it with universal Medicare. It will never happen, you say? Stranger things keep happening. Bernie Sanders has introduced such a bill in the Senate, with 16 Senate co-sponsors. The companion bill in the House has 120 co-sponsors.

The great humanitarian-physician Dr. Paul Farmer said, “I can’t show you exactly how health care is a basic human right. But what I can argue is that no one should have to die of a disease that is treatable.”

Especially in the richest nation on earth. I believe everyone deserves health care. You may not believe health care is a “right,” but please tell me whom you believe does not deserve health care.

Medicare already takes care of the sickest and most expensive Americans. Simply expand it to cover everyone. In the process, improve it, remove the co-pays and deductibles and add better hearing and dental coverage. We don’t have to re-invent the wheel.

There is wide agreement that a universal Medicare program is the ideal way to take care of everyone and control costs. The greatest barrier is those who say it can never happen, that it is pie-in-the-sky, that the corporate power against it is too great.

Why have large corporations not championed universal health care? Because it would cause the disintermediation of the private health insurance industry. Disintermediation (a seven syllable mouthful of a word) is what happens when the free market economy figures out how to remove a middleman and let people deal directly with the services they want. Like buying airplane tickets online, or Uber for a taxi, or Airbnb for a hotel room.

We don’t have a true free market for health care. Some say that is because there is too much government regulation, but that turns out not to be the case. Purchasing health care is not like buying a new car. It starts with a doctor and a patient. Patients want choices, but not the choice of which insurance policy to buy. We don’t want insurance companies coming between us and our doctor. We want the freedom to choose our doctor and our hospital. That’s what traditional Medicare does. You can seek care anywhere and not worry about being “in-network.”

The health insurance industry is an expensive middleman that adds no value, but adds huge complexity, cost and inefficiency. Can this unpopular industry be dis-intermediated? Actually, it is inevitable. We can’t afford not to. Private for-profit health insurance is superfluous and obsolete.

Universal health care is where we draw the line; where we make our stand. This is our wedge issue — the people against the powerful and corrupt corporations. I’m betting on the people. Now is the time.

Dr. Rob Stone is director of Hoosiers for a Commonsense Health Plan and Indiana coordinator for Physicians for a National Health Program.

https://www.heraldtimesonline.com…

Medicare for All would offer Americans better health care

By Pamella Gronemeyer, M.D.
St. Louis Post-Dispatch, Letters, October 16, 2017

Now that President Trump has found ways to destroy Obamacare without the need for Congressional approval or our democracy, we must open our eyes and push for the Improved Medicare for All plans supported by Rep. John Conyers, D-Mich., and a majority of congressional Democrats and Sen. Bernie Sanders, I-Vt., and numerous Democratic senators.

A majority of the American people support federal government involvement in the delivery of health care to all Americans. The federal government already pays for about two thirds of health care costs through Medicare, the Veterans Administration and Medicaid. As a physician, I know that Medicare works. It is only at the age of 65 that one sees the curve of health care outcomes improve in relation to other nations because of Medicare.

Medicare for All is publicly funded and privately delivered. The health care bills are paid by one payer, the federal government, not a myriad of insurance companies, personal checks or credit cards. Even more important, there are no people who must turn to Go Fund Me pages to pay their bills or file bankruptcy.

We need to demand that the government represent us and not let edicts of our president control our health and welfare. Call your congressman and senators and ask them to support The House and Senate bills. Learn about Medicare for All through websites at Physicians for a National Health Program or HealthcareNow.

The money that we currently pay for premiums, copay, and deductibles would be reduced by a combination of a progressive tax, employers’ tax and other creative funding. This would be a solution that all Americans can proudly support.

Dr. Gronemeyer resides in Glen Carbon, Ill.

http://www.stltoday.com…

The pecuniary distortion of limited networks

NBER Working Paper 23742: Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets

By Kate Ho and Robin S. Lee
National Bureau of Economic Research, August 2017

Abstract

Why do insurers choose to exclude medical providers, and when would this be socially desirable? We examine network design from the perspective of a profit-maximizing insurer and a social planner to evaluate the welfare effects of narrow networks and restrictions on their use. An insurer may engage in exclusion to steer patients to less expensive providers, cream-skim enrollees, and negotiate lower reimbursement rates. Private incentives for exclusion may diverge from social incentives: in addition to the standard quality distortion arising from market power, there is a “pecuniary” distortion introduced when insurers commit to restricted networks in order to negotiate lower rates. We introduce a new bargaining solution concept for bilateral oligopoly, Nash-in-Nash with Threat of Replacement, that captures such bargaining incentives and rationalizes observed levels of exclusion. Pairing our framework with hospital and insurance demand estimates from Ho and Lee (2017), we compare social, consumer, and insurer-optimal hospital networks for the largest non-integrated HMO carrier in California across several geographic markets. We find that both an insurer and consumers prefer narrower networks than the social planner in most markets. The insurer benefits from lower negotiated reimbursement rates (up to 30% in some markets), and consumers benefit when savings are passed along in the form of lower premiums. A social planner may prefer a broader network if it encourages the utilization of more efficient insurers or providers. We predict that, on average, network regulation prohibiting exclusion has no significant effect on social surplus but increases hospital prices and premiums and lowers consumer surplus. However, there are distributional effects, and regulation may prevent harm to consumers living close to excluded hospitals.

From the Introduction

Since the passage of the Affordable Care Act (2010) there has been growing concern among policymakers about “narrow network” health insurance plans that exclude particular medical providers. Selective contracting by insurers — in which only particular providers are accessible — is not a new phenomenon. Dating back to the 1980s, managed care insurers have used exclusion to steer patients towards more cost effective or higher quality hospitals and physicians, and to negotiate lower reimbursement rates. While networks broadened somewhat with the “managed care backlash” of the 1990s (Glied, 2000), recent high profile exclusions from state exchange plans have reinvigorated the debate over the desirability of such practices. Amid concerns that restrictive insurer networks may adversely affect consumers by preventing access to high-quality hospitals (Ho, 2006), or may be used to “cream skim” healthier patients, regulators at the state and federal levels are considering formal network adequacy standards for both commercial plans and plans offered on state insurance exchanges.

In this paper, we examine the private and social incentives for exclusion of hospitals from insurer networks, and consider the potential effects of network adequacy regulations in the U.S. commercial (employer-sponsored) health insurance market. We begin with a simple framework that isolates the fundamental economic trade-offs when deciding whether or not to exclude a hospital, and identifies the empirical objects required to measure the costs and benefits from exclusion. We then extend the model of the U.S. commercial health care market developed and estimated in Ho and Lee (2017) — which incorporates insurer-employer bargaining over premiums and consumer demand for hospitals and health insurers — to capture exclusionary incentives on the part of insurers. Extensions include incorporating a stage of strategic network formation by an insurer and allowing for endogenous outside options in bargaining. Finally, we use our model to predict equilibrium market outcomes under hospital networks that would be chosen by an agent maximizing social or consumer welfare, or by a profit-maximizing insurer. By comparing outcomes across networks either maximizing different objectives or required to cover all hospitals in a market, we uncover circumstances when private incentives diverge from social or consumer preferences, and evaluate the effects of certain forms of network regulation.

Conclusion

Narrow provider networks have grown more prevalent in both exchange and employer-sponsored health care markets in recent years. Their presence raises important questions. Are these plans effective at reducing spending, and if so, through what means? And is regulation warranted — are the networks that are introduced too narrow from either a social or consumer welfare perspective?

Our paper addresses these and related questions. We extend the model of the commercial U.S. health care market developed in Ho and Lee (2017) by endogenizing an insurer’s hospital network and incorporating a new bargaining concept that explicitly captures an insurer’s incentives to exclude. In the employer-sponsored setting that we examine, we find that selective contracting and informed network design can have substantial effects on overall health care spending. Narrow hospital networks are preferred by a profit-maximizing insurer primarily due to their ability to substantially reduce negotiated rates — and not necessarily due to cream-skimming healthier enrollees or steering patients towards lower-cost hospitals. A private insurer tends to engage in exclusion more than is socially optimal, but typically does so to a lesser extent than the average consumer would prefer because consumers often benefit from substantial premium reductions.

These results support the argument that allowing insurers to exclude providers can substantially reduce hospital payments and premiums without significantly affecting social surplus. This tends to benefit consumers (and hence employers) on average, implying that employers and insurers may wish to work together to control spending through exclusion. Our framework may be useful for these and other interested parties to inform network design. It also can be used to address potential distributional consequences of exclusion by identifying affected populations and quantifying the transfers needed to offset harm from reduced access.

http://www.nber.org…

***

Comment:

By Don McCanne, M.D.

This paper looks at the motivation of insurers in establishing narrower hospital networks (profit-maximization, of course) and the perspective of the consumer (i.e., patient) and the social planner.

For the insurer, it’s simple. Contract with the hospital(s) that will agree to the lowest negotiated rates. Quality, cream-skimming or steering patients to lower-cost hospitals has little to do with it as long as the insurers save on negotiated rates.

These economists join others in concluding that consumers prefer narrower-network insurance plans. But it needs to be emphasized, once again, that patients are not choosing narrower-network plans simply because they prefer not to be burdened by having to make decisions regarding having a broader choice in their health care options. They choose narrower-network plans solely for one reason – lower insurance premiums. It would be incorrect to conclude that patients do not mind giving up provider choice as long as they can save some money. Rather it is that insurance premiums have become so expensive that they find paying them often creates a financial hardship. They do not want to give up their choice of health care providers, but many often feel that they have no other option since they have little or no disposable income.

From the standpoint of the social planner, health care resources should be made available based on need. Arbitrarily removing options for care based on pecuniary benefit to the insurer conflicts with optimal social planning. These and other economists tend to be somewhat, but not completely, dismissive of the social planner. They do concede that it could be beneficial to address “potential distributional consequences of exclusion by identifying affected populations and quantifying the transfers needed to offset harm from reduced access.” Or, “there are distributional effects, and regulation may prevent harm to consumers living close to excluded hospitals.”

It shouldn’t be just about money – about insurers’ profits and about patients’ spending as consumers. Social planning is crucial in providing optimal access to health care services. It doesn’t take much thought to conclude which model emphasizes social planning – the for-profit, private insurance model, or the patient service model of a well designed, single payer national health program – an improved Medicare for all. If you need a reminder, the traditional Medicare program does not use provider networks. Costs are contained in much more patient-friendly ways.

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