Insurers want to nudge you to better health. So they’re data mining your shopping lists

By Rebecca Robbins
STAT, December 15, 2015

Health insurers are scooping up huge quantities of personal information in a bid to figure out when you’re likely to get sick — and to design interventions to keep you healthy.

Insurance companies have always had access to your medical records, and in some cases your genetic data, too. Now, they’re paying data miners to sift through information on everything from what model car you drive to how many hours you sleep, from which magazines you read to where you shop and what you buy.

The goal: To decipher patterns that will allow them to steer you away from health emergencies. And to save themselves a whole lot of money in the process.

Shopping at home-improvement stores, for instance, turns out to be a great predictor of mental health. If you suddenly stop shopping at Lowe’s, your insurance company may suspect that you’re depressed, (Deloitte’s Dr. Harry) Greenspun said.

And if you drive a foreign-made car, you’re more likely to lose your eligibility for Medicaid in the coming year, according to Chris Coloian, president of Predilytics, a Massachusetts health-care data analytics company recently acquired by the firm Welltok.

Not all of this information is useful in crafting interventions to keep patients healthy. But with the help of data miners, insurers are finding that some patterns can make for powerful tools.

The intervention can be as simple as determining patients’ ethnicities to make sure they’re receiving information in the right language. Or it can be as aggressive as sending a patient a free digital scale — unprompted — if, say, she has congestive heart failure; unexpected weight gain from pooling fluids can be a sign the condition is worsening.

Privacy advocates worry that insurers are using all this highly personal, often sensitive information without informed consent and with little transparency or accountability.

Long before Big Data, of course, health insurers made decisions about which patients to prioritize. But using an algorithm to determine how and when to intervene raises troubling risks, said Kirsten Martin, an assistant professor at George Washington University who studies business ethics and Big Data.

Health insurers say they don’t deny care to anyone based on algorithms; they just use the data to customize the approach to each patient.

In one popular intervention, for instance, three health insurers in the Northeast designed outreach around neighborhood demographics. They staged outdoor health fairs for customers in walkable neighborhoods. Those more likely to drive everywhere were targeted instead with messages about healthy behaviors on social media, Coloian said.

Fifteen years ago, as a young Cornell physics graduate student, (Colin) Hill got swept up in the excitement around the Human Genome Project. He and a fellow physics graduate student started a company that aimed to harness the promise of all that new data.

For nearly a decade, GNS Healthcare worked mostly with pharmaceutical companies, mining genomic and lab test data to help discover drugs and evaluate them. But the firm, based in Cambridge, Mass., has since expanded its focus.

GNS helped the insurance giant Aetna predict which of about 37,000 policyholders were most at risk of developing metabolic syndrome or seeing their condition worsen within a year, using an analysis that took into account demographic variables including ethnicity, cigarette usage, and nightly hours of sleep.

GNS will also rank patients by how much return on investment the insurer can expect if it targets them with particular interventions, such as sending a text message reminding them to refill a prescription or sending a nurse to their home for a checkup. For example, the firm helped a group that manages pharmacy benefits for Regence Blue Cross Blue Shield’s policyholders in the Northwest make decisions about how to target patients who skip their pills.

All patients, of course, should take the medication prescribed to them, “but as a health plan with precious finite resources, where do you focus your energy?” asked Hill, the chief executive of GNS. The algorithm, he said, can tell the insurer not to waste time and money trying to get certain patients to take their pills — but to spend resources on other patients instead.

http://www.statnews.com/2015/12/15/insurance-big-data/

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Comment:

By Don McCanne, M.D.

The private insurers are masters at innovation. Now they are paying data miners to sift through extensive personal information on each of their clients. Is this really to keep patients healthy, as the insurers claim, or is it to simply to introduce an opaque process to create a new pathway to medical underwriting to benefit their own bottom line?

Big Data now impacts all of us. The attack on our privacy has placed all of us in the Emperor’s new clothes (nobody told you?). Although the Affordable Care Act greatly limited medical underwriting (smoking, age, etc.), insurers can introduce new innovations based on personal data that could have the same impact (e.g., telling the insurer not to waste time or money on certain patients, etc.).

We should ask, who should be partnering with the patient to provide the best health outcomes? Should it be the health care team with a mission to protect and improve the patient’s health, or should it be a private insurance company with a mission to compete for greater business success in the marketplace?

This blatant invasion of our privacy is one more reason that we should get rid of the private insurers and replace them with a well designed single payer national health program – an institution that would be expected to protect our privacy (think of HIPPA).

Kaiser Health Tracking Poll: December 2015

By Bianca DiJulio, Jamie Firth, and Mollyann Brodie
Kaiser Family Foundation, December 17, 2015

From the Tracking Poll:

As the presidential primaries inch closer and candidates begin to debate the intricacies of their platforms, a long-discussed health policy option has reemerged in debate between democratic candidates; the idea of creating a national health plan in which all Americans would get their insurance through an expanded, universal form of health insurance called Medicare-for-all.  When asked their opinion, nearly 6 in 10 Americans (58 percent) say they favor the idea of Medicare-for-all, including 34 percent who say they strongly favor it. This is compared to 34 percent who say they oppose it, including 25 percent who strongly oppose it. Opinions vary widely by political party identification, with 8 in 10 Democrats (81 percent) and 6 in 10 independents (60 percent) saying they favor the idea, while 63 percent of Republicans say they oppose it.

From the Press Release:

Recently Democratic presidential candidates Hillary Clinton and Bernie Sanders debated the idea of “Medicare-for-all,” which involves creating a national health plan in which all Americans would get their insurance through an expanded version of the Medicare program. A large majority of Democrats (81%) support the idea of Medicare-for-all, as do most independents (60%), while most Republicans (63%) oppose the idea. The poll did not ask about details or tradeoffs.

At the same time, few Democrats say the issue will be the driving force behind their vote: just 5 percent of Democrats say that it will be the single most important factor in their presidential vote. A third of Democrats (34%) say it will be very important, but not the most important factor, while others say it will be one of many factors they will consider (36%) or that it won’t matter at all (5%). Future polls may explore the issue in greater depth.

KFF December 2015 Tracking Poll:

http://kff.org/uninsured/poll-finding/kaiser-health-tracking-poll-december-2015/

Press Release:

http://kff.org/health-costs/press-release/few-uninsured-know-date-of-pending-deadline-for-obtaining-marketplace-coverage-many-say-they-will-get-coverage-soon-though-cost-is-a-concern/

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Comment:

By Don McCanne, M.D.

Many political insiders contend that a single payer national health program – an improved Medicare for all – is off the table, so essentially all current political efforts are directed to paring back or modifying the Affordable Care Act – Obamacare. Bernie Sanders does not agree and has injected Medicare for all back into the political arena. So what do Americans think about Medicare for all?

This new poll shows that there has been no decline in support of Medicare for all in that  58 percent of Americans still support the concept, in spite of implementation of the Affordable Care Act. Although there is a partisan divide – 81 percent of Democrats support it and 63 percent of Republicans are opposed – it should be noted that 60 percent of independents also support the idea.

Although this poll did not identify reasons for the opinions, it is likely that many who do not support the concept are simply ideologically opposed to social solidarity, though they would likely use different labels (freedom, markets, individual responsibility, etc.). Others may be opposed because they believe the system is working for them and are concerned about the uncertainties of change.

The poll asked Democrats who support Medicare for all whether this issue might affect their vote in the 2016 presidential election. Although they report that only 5 percent of all Democrats consider it to be the most important factor in their vote, in fact most Democrats do consider it to be a factor to some degree, with only 5 percent saying that it is not important.

So now that the Affordable Care Act has been implemented, Americans still want something better. The majority of Americans, including the majority of independents, support Medicare for all. Let’s work on it.

MEXICAN AMERICAN LEGAL DEFENSE AND EDUCATIONAL FUND
NATIONAL HEALTH LAW PROGRAM
CIVIL RIGHTS EDUCATION AND ENFORCEMENT CENTER
FEINBERG, JACKSON, WORTHMAN & WASOW LLP

To:  Office for Civil Rights, U.S. Department of Health & Human Services

December 15, 2015

ADMINISTRATIVE COMPLAINT

Re: Inadequate Access to Health Care Violates Latino Civil Rights in California’s Medi-Cal Program

Excerpts:

I.  INTRODUCTION

This administrative complaint challenges ongoing civil rights violations in Medi-Cal, California’s Medicaid program. The Medicaid Act is intended to ensure that state programs like Medi-Cal provide access to medical services equal to the access that other Americans have, notwithstanding the low income of those who qualify for Medi-Cal.

Medi-Cal’s inadequate, extremely low reimbursement rates—in both the fee for service and managed care settings—and its failure to adequately monitor access to medical care, effectively deny the full benefits of the Medi-Cal program to the more than seven million Latino enrollees who rely on Medi-Cal for their healthcare. Over the past fifteen years, the level of Medi-Cal reimbursements has fallen in tandem with a rise in the number and proportion of Latinos covered by the Medi-Cal program. Today, no other type of health insurance in California covers a population that is so heavily Latino. The separate and unequal system of healthcare thus violates the protections of Title VI of the Civil Rights Act and the Department of Health and Human Services’ implementing regulations, as well as Section 1557 of the Affordable Care Act, as described below.

VI. DISCUSSION

B. Low Reimbursement Rates Limit Access to Care for Medi-Cal Enrollees.

1. Background on Medi-Cal Rate Setting in California.

Medi-Cal rates in California are set differently based on two payment mechanisms: (1) fee for service; and (2) managed care.

In the fee for service mechanism, the State sets per-service reimbursement rates for a particular procedure, treatment, or service. These rates are near the lowest in the country relative to Medicare rates. Medi-Cal’s 2014 reimbursement rate for primary care was just 42 percent of Medicare’s, ranking forty-ninth out of fifty Medicaid programs in the United States. For all services, including both primary and specialty care, the ratio of Medi-Cal fee for service reimbursement to Medicare reimbursement in California was 14 percent below the national average ratio. This ratio ranks forty-eighth out of fifty Medicaid programs in the United States. Notably, these numbers have likely only worsened in 2015, given reductions implemented this year.

In managed care, which now covers about 77 percent of the Medi-Cal population, plans are reimbursed on a capitated basis with a set amount per member per month regardless of the amount of services provided to that individual. Pursuant to federal regulation, the State is required to set capitation rates for MCOs sufficient to cover a minimum level of services for the populations enrolled in each MCO. Once these capitation rates are set, CMS reviews them to determine whether they are “actuarially sound.” In other words, it reviews them to determine whether they are sufficient to provide the minimum level of services predicted by a third-party actuarial contractor. Additionally, under the Medicaid law, the MCO must also make services available to the same extent as they would be available to Medi-Cal fee-for-service beneficiaries (and thus to the same extent as required by § 30(a)). See 42 U.S.C. § 1396b(m)(1)(A)(i).

Although the rates paid to MCOs are proprietary, it is widely recognized that they are set arbitrarily low due to the use of the low Medicaid fee-for-service fee schedule as a benchmark, or another set of benchmarks provided by plans that may be even lower than the Medicaid fee-for-service fee schedule. Further, the evidence will show that the State typically reverse engineers its capitation rates from budgetary decisions, first deciding how much money to allot for Medi-Cal managed care, then coming up with capitation rates within that budget by manipulating the potential prices for services such that the predicted utilization (from the actuaries) when combined with pricing information, will be within budget. Finally, the State typically selects rates that are at the lower of the range of rates recommended by the actuary.

2. Restricted Access for Medi-Cal Beneficiaries.

The data show that non-elderly adults enrolled in Medi-Cal have substantially less access to health care than Medicare beneficiaries, individuals covered by private insurance plans and/or other groups in the general population.

In 2013, on the eve of the implementation of the Affordable Care Act, the care available to non-elderly adult Medi-Cal enrollees was worse than the care available to those covered by employer-sponsored insurance plans. Medi-Cal enrollees faced disparities at levels that were statistically significant for such measures of availability of care as (a) not having a usual source of care other than an emergency room; (b) not having a personal physician as the main medical provider; (c) difficulty getting a needed doctor’s appointment; (d) difficulty finding a doctor who would see them or accept their health insurance; (e) difficulty communicating with their doctors; (f) being less likely to receive flu
vaccinations; (g) not having a doctor visit in the last year; and (h) delaying medical care because of cost.

The ACA increased enrollment in Medi-Cal, but, as implemented by California, the ACA did not resolve pre-existing access problems. As a result of the Healthy Families transition, ongoing enrollment, and the ACA, over 4 million people enrolled in Medi-Cal over the past two years. A two-year, federally-funded increase in the Medi-Cal reimbursement for primary care to 100 percent of the Medicare reimbursement rate during 2013 to 2014 was allowed to expire without Respondents maintaining the increase through use of state funds (as done by fifteen other states). The increase was applicable to both fee for service and managed care populations and designed to improve access. This short-term investment in increasing primary care provider rates did not result in a sustainable increase in primary care access for Medi-Cal beneficiaries. The State implemented it late (going into effect in 2014 and retroactively reimbursing providers by paying the difference between the Medicare and Medicaid fee schedules after the fact). And, the additional investment of funds ended on December 31, 2014. Thus, regardless of whatever minimal increase in services may have occurred in 2014, it is likely that availability of primary care services for Medi-Cal enrollees has returned to pre-2014 levels.

Indeed, the Medi-Cal provider to population ratio was already substandard, but with the increase in enrollment and withdrawal of the temporary rate increase the gap can be expected to widen even further.

3. Evidence that Low Reimbursement Rates Limit Medi-Cal Beneficiaries’ Access to Care.

Both the fee-for-service and managed care rates fail to ensure equal access to quality care for Medi-Cal enrollees, as the insufficient reimbursements make it difficult to enlist Medi-Cal primary care and specialty care providers.

C. Disparate Outcomes for Medi-Cal Patients.

As a result of the low access that Medi-Cal enrollees have to primary care, many Medi-Cal recipients are not referred to specialists for treatment of acute conditions and illnesses. Chronic conditions and illnesses thus go untreated or are not adequately treated. Substantially fewer physicians provide care to Medi-Cal enrollees than Medicare beneficiaries in every major medical specialty except two. The two exceptions are obstetrics/gynecology and pediatric care, specialties that the Medicare population is unlikely to need to the same extent as Medi-Cal beneficiaries.

E. Medi-Cal’s Inadequate, Low Rates, Combined with the Lack of Monitoring and Enforcement, Have a Disparate Impact on Latinos.

The low reimbursement rates described above—including within fee for service and managed care—along with the lack of monitoring and enforcement, have an adverse, disparate impact on Latinos because this racial group is disproportionately represented among Medi-Cal enrollees.

F. There Is No Discernible Justification for the Disparate Impact Caused by Low Medi-Cal Reimbursement Rates.

Under Title VI, the HHS Title VI regulations, and Section 1557, a showing of disparate impact shifts the burden to Respondents to justify the adverse disparate impact on Latino Medi-Cal enrollees as necessary or legitimate under the Medicaid statute.

Complainants respectfully submit that Respondents are unable to justify the adverse disparate impact of denial and delay of care and adverse health consequences because a key purpose of the Medicaid Act is to provide Medicaid enrollees with the access to health care afforded other members of the general population irrespective of poverty.

G. The Record Also Demonstrates Intentional Discrimination.

The record demonstrates as well that Respondents engaged in intentional discrimination. Where official action has a racially disparate impact, and “a clear pattern, unexplainable on grounds other than race, emerges from the effect of the state action even when the governing legislation appears neutral on its face,” that gives rise to a strong inference of intentional discrimination. Village of Arlington Heights v. Metropolitan, 429 U.S. 252, 266-67 (1977).

Here, intentional discrimination is evident in the stark differences in reimbursement rates for Medi-Cal (a program overwhelmingly enrolling low- income Latino people), as compared to the rates for Medicare and employer- sponsored insurance plans (programs largely benefitting higher-income, White people). Comparing the higher reimbursement rates when Latinos were a smaller share of Medi-Cal enrollees further demonstrates intentional discrimination. See Arlington Heights, 429 U.S. at 266-68. Additional such evidence includes, as described above, the failure to follow appropriate procedures to set rates for managed care and fee-for-service care to provide equal access to medical care; and the failure to follow legally-mandated monitoring and enforcement procedures. See id. (substantive and procedural departures relevant to intent inquiry).

VII. CONCLUSION

Under 45 C.F.R. § 80.7(c), the Office for Civil Rights must undertake a prompt investigation of this Complaint. Based on the evidence discussed in this complaint and the attachments provided, the Office for Civil Rights should find that Respondents have violated Title VI, the HHS Title VI implementing regulations, and section 1557. The Office for Civil Rights should order Respondents to raise primary care and certain specialty care reimbursement rates to assure that Medi-Cal enrollees have access to medical care to the same extent as care is available to Medicare beneficiaries and individuals covered by employer- sponsored health insurance plans.

Administrative Complaint (24 pages):

http://www.seiu-uhw.org/wp-content/blogs.dir/166/files/2015/12/CivilRightsComplaint_Text_12.15.15.pdf

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Comment:

By Don McCanne, M.D.

There are over seven million Latinos enrolled in Medi-Cal – California’s Medicaid program. Although one of the most important features of the Affordable Care Act was to expand the Medicaid program to cover many more individuals and families who have incomes near or below the federal poverty level, the chronic underfunding of this program demonstrates “intentional discrimination” against low-income Latinos in California, since it denies them “access to health care afforded other members of the general population irrespective of poverty.”

Medi-Cal has more comprehensive benefits than does Medicare. But Medi-Cal beneficiaries frequently do not have near the same access to care as do Medicare beneficiaries or privately insured patients, as this Administrative Complaint describes. This is because of a lack of willing Medi-Cal providers since Medi-Cal frequently pays less than the costs of providing care. It is appalling that this then results in de facto discrimination against seven million of California’s low-income Latinos.

Imagine improving the benefits of Medicare so that they were at least comparable to Medicaid. Then place everyone in the same program – an improved Medicare for all. That certainly would not eliminate all discrimination in our nation, but at least it would be a giant step forward in our quest for equitable health care for all.

Over seven million! That’s not right.

The Experts Were Wrong About the Best Places for Better and Cheaper Health Care

By Kevin Quealy and Margot Sanger-Katz
The New York Times, December 15, 2015

GRAND JUNCTION, Colo. — As part of his push for the Affordable Care Act in 2009, President Obama came to Central High School to laud this community as a model of better, cheaper health care. “You’re getting better results while wasting less money,” he told the crowd. His visit had come amid similar praise from television broadcasts, a documentary film and a much-read New Yorker article.

All of the attention stemmed from academic work showing that Grand Junction spent far less money on Medicare treatments – with no apparent detriment to people’s health. The lesson seemed obvious: If the rest of the country became more like Grand Junction, this nation’s notoriously high medical costs would fall.

But a new study casts doubt on that simple message.

The research looked not only at Medicare but also at a huge, new database drawn from private-insurance plans – the sorts used by most Americans for health care. And it shows that places that spend less on Medicare do not necessarily spend less on health care over all. Grand Junction, as it happens, is one of the most expensive health care markets in the country for the privately insured – despite its unusually low spending on Medicare.

Health care researchers who have seen the new findings say they are likely to force a rethinking of some conventional wisdom about health care. In particular, they cast doubt on the wisdom of encouraging mergers among hospitals, as parts of the 2010 health care law did.

Larger, integrated hospital systems – like those in Grand Junction – can often spend less money in Medicare, by avoiding duplicative treatments. But those systems also tend to set higher prices in private markets, because they face relatively little local competition.

“Price has been ignored in public policy,” said Dr. Robert Berenson, a fellow at the Urban Institute, who was unconnected with the research. Dr. Berenson is a former vice chairman of the Medicare Payment Advisory Commision, which recommends policies to Congress. “That has been counterproductive.”

Just as in Grand Junction, the researchers found high private spending in Rochester, Minn., and La Crosse, Wis., two other places that spent relatively little on Medicare. But the paper found that spending in one system doesn’t predict spending in another. Some of the areas with the most cost-effective Medicare providers also have lower-cost private health care – but just as many places with relatively low Medicare costs have high private insurance spending.

The prices insurance companies pay for medical care are a major factor in which markets are expensive for private insurance and which are more moderate. Consider a knee replacement – a common procedure for Americans over 50. Private health insurers negotiate separate prices for those operations with every hospital in their network. That’s different from Medicare, which sets relatively standard rates for knee replacements around the country, with only slight adjustments for local conditions. The prices paid by private insurers vary widely. The least costly price in the study for the simplest type of knee replacement was only about $3,400. The most expensive one was about $55,800.

In Medicare, regional differences in spending are driven mostly by the amount of health care patients receive, not price per service. Researchers at Dartmouth Medical School have studied these differences extensively, creating an influential online map of Medicare spending known as the Dartmouth Atlas of Health Care.

“The reason why health insurance for the privately insured is expensive is because the prices from hospitals with a lot of market power are higher,” said Zack Cooper, an assistant professor of economics and health policy at Yale University, and the paper’s lead author.

Several prominent researchers who read the paper said they had become convinced that policy makers needed to do more to address the high prices charged by some health care providers.

Many of the changes pioneered by the Affordable Care Act have been devised to reduce wasteful medical care, but few have been directly concerned about price.

Jonathan Skinner, a health economist who works on the Dartmouth Atlas, said that there were still lessons to be learned from places like Grand Junction, but he acknowledged that the new work showed the limitations of studying Medicare in isolation. “This idea that if the entire country turned into Grand Junction, that we’d suddenly save 20 percent on health spending, maybe that’s not totally true,” he said. “Prices are a real problem.”

http://www.nytimes.com/interactive/2015/12/15/upshot/the-best-places-for-better-cheaper-health-care-arent-what-experts-thought.html?_r=0

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The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured

By Zack Cooper, Stuart Craig, Martin Gaynor, John Van Reenen
National Bureau of Economic Research, December 2015

Abstract

We use insurance claims data for 27.6 percent of individuals with private employer-sponsored insurance in the US between 2007 and 2011 to examine the variation in health spending and in hospitals’ transaction prices. We document the variation in hospital prices within and across geographic areas, examine how hospital prices influence the variation in health spending on the privately insured, and analyze the factors associated with hospital price variation. Four key findings emerge. First, health care spending per privately insured beneficiary varies by a factor of three across the 306 Hospital Referral Regions (HRRs) in the US. Moreover, the correlation between total spending per privately insured beneficiary and total spending per Medicare beneficiary across HRRs is only 0.14. Second, variation in providers’ transaction prices across HRRs is the primary driver of spending variation for the privately insured, whereas variation in the quantity of care provided across HRRs is the primary driver of Medicare spending variation. Consequently, extrapolating lessons on health spending from Medicare to the privately insured must be done with caution. Third, we document large dispersion in overall inpatient hospital prices and in prices for seven relatively homogenous procedures. For example, hospital prices for lower-limb MRIs vary by a factor of twelve across the nation and, on average, two-fold within HRRs. Finally, hospital prices are positively associated with indicators of hospital market power. Even after conditioning on many demand and cost factors, hospital prices in monopoly markets are 15.3 percent higher than those in markets with four or more hospitals.

http://www.healthcarepricingproject.org/sites/default/files/pricing_variation_manuscript_0.pdf

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Comment:

By Don McCanne, M.D.

Much of health policy today is based on the landmark Dartmouth studies demonstrating the regional variation in spending in the Medicare program, with the concept that controlling total health care spending would be possible by making physicians and hospitals more accountable for higher levels of spending. Thus we have accountable care organizations and other models of paying for quality instead of quantity. But are these variations in Medicare spending duplicated in the private insurance markets where more people receive their care? The quick answer is no.

This new NBER study shows us that there is very little correlation between variation in Medicare spending on hospital services, which is primarily due to variation in the volume of services, and variation in private insurer spending which is primarily due to varying effectiveness of insurer price negotiation that relates to the market power of hospitals as determined by their degree of market concentration. With increasing concentration of hospital market power, prices and thus private insurance payments escalate, whereas Medicare prices remain stable.

This is really important. Current policies are designed to cut back on use of health care services more than on prices. Narrow provider networks and high deductibles reduce access but actually have little impact on prices since only a minuscule fragment of patient contacts with the health care system are amenable to price negotiation, even with health savings accounts. These policies are detrimental because they do reduce access to beneficial health care services and they do expose patients to financial hardship in the event of medical need. Also, the experimentation with accountable care organizations to date has not shown any significant benefit though they have added to the administrative burden of our health care system.

Mind you, these are policies that have been sold to us as being important to control high use of services, as demonstrated by the Dartmouth data. But what we needed were policies to control high prices. This study demonstrates, once again, that the private insurers have been ineffective in controlling prices. In contrast, Medicare has been very effective in maintaining steady prices.

Regarding reducing wasteful services, we actually have a greater problem with providing inadequate services, especially to patients with financial barriers. Much of the reported variations demonstrating areas with greater utilization of health care services actually represent normal Bell curve variations in intensity of medical disorders plus various socioeconomic contributors to population health. For those actual outliers, we can identify both overutilization and underutilization and make appropriate corrections.

Other studies have shown that high prices are unique to the United States and are responsible for a very large portion of the differences between our national health expenditures and the average expenditures of the OECD nations.

Many say that we need to be careful when we use blunt instruments to reduce access to health care services. No. We should be improving access to health care. That means that we should eliminate policies that impair access.

Instead, we should be introducing policies that control prices. The market has certainly failed us. The recommended solution of higher quality and lower prices through integration of health care services has only led to market concentration of health care providers and higher prices, and private insurers have proven that they cannot control health care prices through the marketplace.

So how can we ensure access while controlling prices? Medicare is already doing that. Medicare has some problems that can be easily fixed as long as we have the political will to do so. With an improved Medicare we would have better access to care that would be priced appropriately for our publicly-funded universal risk pool. It’s time to get past lamenting over the dark-shaded areas in the Dartmouth Atlas.

Waivers for State Innovation

Department of Health and Human Services
Department of the Treasury
To be published in the Federal Register 12/16/2015

Summary

This guidance relates to Section 1332 of the Patient Protection and Affordable Care Act (ACA) and its implementing regulations. Section 1332 provides the Secretary of Health and Human Services and the Secretary of the Treasury with the discretion to approve a state’s proposal to waive specific provisions of the ACA (a State Innovation Waiver), provided the proposal meets certain requirements. In particular, the Secretaries can only exercise their discretion to approve a waiver if they find that the waiver would provide coverage to a comparable number of residents of the state as would be provided coverage absent the waiver, would provide coverage that is at least as comprehensive and affordable as would be provided absent the waiver, and would not increase the Federal deficit. If the waiver is approved, the state may receive funding equal to the amount of forgone Federal financial assistance that would have been provided to its residents pursuant to specified ACA programs, known as pass-through funding. State Innovation Waivers are available for effective dates beginning on or after January 1, 2017. They may be approved for periods up to 5 years and can be renewed. The Departments promulgated implementing regulations in 2012. This document provides additional information about the requirements that must be met, the Secretaries’ application review procedures, the amount of pass-through funding, certain analytical requirements, and operational considerations.

Excerpts:

I. Statutory Requirements

A. Coverage

To meet the coverage requirement, a comparable number of state residents must be forecast to have coverage under the waiver as would have coverage absent the waiver.

The impact on all state residents is considered, regardless of the type of coverage they would have absent the waiver.

Assessment of whether the proposal covers a comparable number of individuals also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. Reducing coverage for these types of vulnerable groups would cause a waiver application to fail this requirement, even if the waiver would provide coverage to a comparable number of residents overall.

B. Affordability

To meet the affordability requirement, health care coverage under the waiver must be forecast to be as affordable overall for state residents as coverage absent the waiver.

Affordability refers to state residents’ ability to pay for health care and may generally be measured by comparing residents’ net out-of-pocket spending for health coverage and services to their incomes. Out-of-pocket expenses include both premium contributions (or equivalent costs for enrolling in coverage), and any cost sharing, such as deductibles, co-pays, and co-insurance, associated with the coverage.

Waivers are evaluated not only based on how they affect affordability on average, but also on how they affect the number of individuals with large health care spending burdens relative to their incomes. Increasing the number of state residents with large health care spending burdens would cause a waiver to fail the affordability requirement, even if the waiver would increase affordability for many other state residents. Assessment of whether the proposal meets the affordability requirement also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. Reducing affordability for these types of vulnerable groups would cause a waiver to fail this requirement, even if the waiver maintained affordability in the aggregate.

In addition, a waiver would fail the affordability requirement if it would reduce the number of individuals with coverage that provides a minimal level of protection against excessive cost sharing.

C. Comprehensiveness

To meet the comprehensiveness requirement, health care coverage under the waiver must
be forecast to be at least as comprehensive overall for residents of the state as coverage absent the waiver.

Comprehensiveness refers to the scope of benefits provided by the coverage as measured by the extent to which coverage meets the requirements for essential health benefits (EHBs) as defined in section 1302(b) of the ACA, or, as appropriate, Medicaid and/or CHIP standards. The impact on all state residents is considered, regardless of the type of coverage they would have absent the waiver.

A waiver cannot satisfy the comprehensiveness requirement if the waiver decreases: 1) the number of residents with coverage that is at least as comprehensive as the benchmark in all ten EHB categories; 2) for any of the ten EHB categories, the number of residents with coverage that is at least as comprehensive as the benchmark in that category; or 3) the number of residents whose coverage includes the full set of services that would be covered under the state’s Medicaid and/or CHIP programs, holding the state’s Medicaid and CHIP policies constant. That is, the waiver must not decrease the number of individuals with coverage that satisfies EHB requirements, the number of individuals with coverage of any particular category of EHB, or the number of individuals with coverage that includes the services covered under the state’s Medicaid and/or CHIP programs.

Assessment of whether the proposal meets the comprehensiveness requirement also takes into account the effects across different groups of state residents, and, in particular, vulnerable residents, including low-income individuals, elderly individuals, and those with serious health issues or who have a greater risk of developing serious health issues. A waiver would fail the comprehensiveness requirement if it would reduce the comprehensiveness of coverage provided to these types of vulnerable groups, even if the waiver maintained comprehensiveness in the aggregate.

D. Deficit Neutrality

Under the deficit neutrality requirement, the projected Federal spending net of Federal revenues under the State Innovation Waiver must be equal to or lower than projected Federal spending net of Federal revenues in the absence of the waiver.

The estimated effect on Federal revenue includes all changes in income, payroll, or excise tax revenue, as well as any other forms of revenue (including user fees), that would result from the proposed waiver. Estimated effects would include, for example, changes in: the premium tax credit and health coverage tax credit, individual shared responsibility payments, employer shared responsibility payments, the excise tax on high-cost employer-sponsored plans, the credit for small businesses offering health insurance, and changes in income and payroll taxes resulting from changes in tax exclusions for employer-sponsored insurance and in deductions for medical expenses.

The effect on Federal spending includes all changes in Exchange financial assistance and other direct spending, such as changes in Medicaid spending (while holding the state’s Medicaid policies constant) that result from the changes made through the State Innovation Waiver. Projected Federal spending under the waiver proposal also includes all administrative costs to the Federal government, including any changes in Internal Revenue Service administrative costs, Federal Exchange administrative costs, or other administrative costs associated with the waiver.

V. Operational Considerations

A. Federally-Facilitated Exchanges

The Centers for Medicare & Medicaid Services (CMS) operates the Federally-facilitated Exchange (FFE) platform. Certain changes that affect FFE processes may make a waiver proposal not feasible to implement at this time. Until further guidance is issued, the Federal platform cannot accommodate different rules for different states.

B. Internal Revenue Service

Certain changes that affect Internal Revenue Service (IRS) administrative processes may make a waiver proposal not feasible to implement. At this time, the IRS is not generally able to administer different sets of rules in different states.

https://www.federalregister.gov/articles/2015/12/16/2015-31563/guidance-waivers-for-state-innovation

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Comment:

By Don McCanne, M.D.

Section 1332 of the Affordable Care Act allows states to apply for waivers to exempt them from some of the requirements of the legislation so that they can introduce their own innovations that they believe would better serve their respective states. This final federal rule on the waivers provides guidance on how much flexibility will be allowed.

The good news is that those states that would use waivers to cut back on benefits provided under the program will not have much flexibility to do so under these rules. Particularly important is the fact that, not only must overall average coverage, comprehensiveness and affordability be maintained, the states are prohibited from adopting innovations that would leave more vulnerable individuals worse off. As we have seen from state responses to the Medicaid expansion, some governors are quite willing to reduce or eliminate benefits for those most in need.

The bad news is that those who have held up hopes that Section 1332 would open the doors for a state-based single payer system will find that these rules significantly limit flexibility. Also required by these rules is extensive documentation that would confirm that the state is fully compliant with the specific stipulations of the waivers. That could be very difficult with a state reform model that attempts to place everyone in one program with a single risk pool funded by multiple sources, including ACA premium credits and cost-sharing subsidies.

Regardless, these rules should not deter state activists from moving full steam ahead in supporting every measure possible that would improve health care access for the residents of their states. Until we have a political climate that would support the requisite federal legislation, we need to accomplish whatever we can on the state level.

That said, since isolated state efforts will inevitably fall short of achieving health care nirvana, at the same time we must intensify our efforts to change the political climate so that we can finally achieve our goal of enacting a single payer national health program. That still has to be our number one priority.

Correction

The Quote of the Day for December 14, 2015 was on HHS and Treasury guidance for ACA Section 1332 state waivers. It was titled, “Final rule on requirements for Section 1332 state waivers,” but it was not a rule.

Timothy Jost provides an excellent discussion of the Section 1332 guidance, which is well worth reading for single payer activists. In it he explains the difference between guidance and rule, as follows:

HHS And Treasury Release Substantive Guidance On ACA State Innovation Waivers

By Timothy Jost
Health Affairs Blog, December 11, 2015

Flexibility Limited To Waivers That Meet The Goals Of The ACA — For Now

Anyone who thought that the 1332 waiver program would allow states to design health care programs that deviated radically from the program found in the ACA will be disappointed by the guidance. But that should come as no surprise: section 1332 on its face authorizes programs that meet all of the affordability and comprehensiveness aspiration of the ACA, just through a different approach. States that have innovative ideas that will promote the goals of the ACA, however, should be able to get approval under this guidance.

It should be noted in conclusion, though, that this is only guidance, not a rule. Guidance can be changed easily; rules can only be changed through rulemaking, which takes time and requires a reasoned explanation. Section 1332 innovation waivers cannot take effect until 2017, and in 2017 we will have a different administration.

Health Affairs Blog, Timothy Jost:

http://healthaffairs.org/blog/2015/12/11/hhs-and-treasury-release-substantive-guidance-on-aca-state-innovation-waivers/

Federal Register, “Waivers for  state Innovation”:

https://www.federalregister.gov/articles/2015/12/16/2015-31563/waivers-for-state-innovation

Improving Health And Health Care: An Agenda For Reform

By Joseph Antos, James Capretta, Lanhee Chen, Scott Gottlieb, Yuval Levin, Thomas Miller, Ramesh Ponnuru, Avik Roy, Gail R. Wilensky, and David Wilson
Health Affairs Blog, December 9, 2015

We are among those who opposed the ACA because of its heavy emphasis on federal control.

The plan we present is not confined to replacing the ACA. We propose major reforms to the tax treatment of employer-sponsored health care, Medicaid, Medicare, Health Savings Accounts, and other areas of existing policy. The cumulative effect of this comprehensive plan would be to decisively reorient health care policy away from bureaucratic regulation and toward the preferences of patients and consumers.

Overall Principles:

*  Government Subsidies Should Come In The Form Of Defined Contribution Payments

*  Reform Should Move Power And Control From The Federal Government To The States And The Empowered Patient-Consumer

*  Suppliers Of Medical Services Must Have Greater Freedom To Innovate And Provide Better Services To Empowered Patient-Consumers

*  Reform Must Improve The Federal Fiscal Outlook By Reducing Long-Term Health Obligations (reduce federal spending)

Replacing The ACA:

*  Retain The Tax Preference For Employer-Paid Premiums, With An Upper Limit

*  Provide Refundable Tax Credits To Households Without Access To Employer Coverage

*  Allow States To Regulate Insurance Offerings And To Establish Mechanisms For Consumer Choice Of Plans

*  Provide ‘Continuous Coverage Protection’ For Persons With Preexisting Conditions (lose guarantee after three months without coverage)

*  Allow States To Adopt A Default Enrollment Program

*  Allow For A Gradual Transition From ACA Subsidies (no new enrollees for ACA subsidies or Medicaid)

Reforming Medicaid To Allow More State Control And Consumer Choice:

*  Pursue Separate Reform Strategies For Medicaid’s Two Distinct Parts (healthy families vs. disabled and elderly)

*  Finance Medicaid With Fixed Federal Funding (block grants)

*  Empower The Disabled And Frail Elderly (let the states do it)

A Market-Based Reform Of The Medicare Program:

*  Adopt The Premium Support Reform Model (vouchers for private plans)

*  Promote Consumer Decision-Making

*  Modernize Medicare’s Benefits

*  Reform Medigap And Other Supplemental Coverage (more cost sharing and use limited networks)

*  Reform Medicare’s Payment Policies And Eliminate Unnecessary Bureaucratic Controls (abolish IPAB and CMMI)

*  Gradually Raise The Eligibility Age To 67

Lifelong Use Of Health Savings Accounts (HSAs):

*  Provide A One-Time Federal Tax Credit Matching Enrollee Contributions To HSAs (up to $1000 once in a lifetime)

*  Eliminate The Minimum Deductible Requirement (no HDHP required)

*  Allow Nontraditional Payment Methods (allow direct-pay, etc.)

*  Include HSAs In Medicaid Reform (high-deductible plans for Medicaid)

*  Integrate HSAs Into Medicare (high-deductible Medicare Advantage)

*  Allow Withdrawals Tax-Free After Age 75 Above A Minimum Balance (reward savers)

*  Allow Tax-Free HSA Rollovers To Designated HSAs At Death

Additional Reforms:

*  Reform Federal Funding Of Graduate Medical Education (cutting the funding substantially)

*  Reform The Federal Employees Health Benefits Program (defined contribution)

*  Integrate Veterans Into Mainstream Coverage, And Refocus VA Health Care

*  Improve The Transparency Of Useful Cost And Quality Data (stimulate better decision-making by consumers)

http://healthaffairs.org/blog/2015/12/09/improving-health-and-health-care-an-agenda-for-reform/

Full report from American Enterprise Institute, AEI (70 pages):

http://www.aei.org/wp-content/uploads/2015/12/Improving-Health-and-Health-Care-online.pdf

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Comment:

By Don McCanne, M.D.

Why should we be interested in a comprehensive health reform proposal from representatives of AEI and other conservative/libertarian organizations? Simply because the authors are prominent in the health policy arena and have considerable influence in crafting reform proposals for Republican politicians.

Speaker of the House Paul Ryan has promised this next year a comprehensive Republican plan to replace the Affordable Care Act. Although President Obama would not approve legislation containing many of the features listed in this proposal, nevertheless, the Republicans do intend to gain greater control of the political arena, and would hope to move forward with a Republican administration. It is important to understand what they would do with our health care system. By having this knowledge, we can more effectively inform the process.