By Peter V. Lee, Elliott S. Fisher, Kelly Green
Health Affairs Blog, April 20-21, 2020

One of the underlying principles of the Affordable Care Act of 2010 (ACA) is that public health is a public good. The landmark legislation dramatically changed how we view health care in the United States and brought meaningful health insurance coverage within reach of millions of Americans.

The nation made historic progress in reducing the number of uninsured Americans through sweeping reforms to Medicare, dramatic expansion of Medicaid, establishment of Marketplaces and subsidies in the individual market, and landmark health insurance market reforms. These were important achievements representing the biggest changes to coverage since the launch of Medicare and Medicaid more than 50 years ago. Serious challenges, however, remain. Concerns about health care affordability and access to needed services and health insurance coverage in the face of the COVID-19 pandemic are top of mind to consumers and voters across the nation. In addition, recent federal actions threaten to unravel some of the progress made, and there has been a resurgence of uninsurance in many states.

The experience of Covered California—California’s state-based Marketplace—shows that when the tools of the ACA are used effectively, progress is possible in coverage, affordability, quality, and delivery system improvement.

In a two-part blog post, we are highlighting the achievements, challenges, and lessons learned from California’s coverage expansion efforts and its Marketplace, Covered California. We believe these lessons are particularly relevant not only to the federal government and states, but to employers who are not effectively meeting the needs of many of the nearly 160 million Americans with employer-based coverage.

Lessons For Employer-Based Coverage

• Premium contributions and cost sharing should be adjusted based on employee income.
• Employers should promote benefit designs that are standardized and patient-centered.
• Employers should enable employees to shop for value.
• Employers should push for changes in underlying care delivery that will lower costs over the long term.

Looking Ahead

The Affordable Care Act enabled the nation to make great progress in expanding coverage. But, we cannot accept the progress made in California and other states as an end point. There is much more work to be done to enable millions more Americans to see their health care lives improve in the future. There are still 1.1 million uninsured Californians who are eligible to enroll through the Marketplace, Medi-Cal, or their employer—but are not now insured, whether by choice or due to lack of knowledge of what is available. Rising health care costs are a serious threat, and the affordability of health coverage and care remains a problem to many with and without coverage. Widespread racial and ethnic disparities remain largely unaddressed, as do marked variations in quality performance across plans and providers. On the delivery reform front, far too many enrollees continue to receive care in fragmented delivery models, subjecting them to lower quality and higher costs. These challenges are not unique to California and demonstrate intrinsic issues that states, the federal government, and employers need to work to resolve.

The current coronavirus epidemic poses perhaps the greatest threat to US health care in modern times, making predictions about future policy directions more challenging than ever. However, when policy makers consider the next round of health care reforms, we could well face a choice between a single-payer system that radically transforms the financing, coverage, organization, and delivery of care or more modest reforms that build on the current employer-based system. For the latter path to succeed, it will be important to take the lessons from the ACA and apply them to the employer sector. Otherwise, the next 10 years are likely to be marked by continued erosion in coverage and availability of care for the vast majority of Americans. In any future, however, dramatic changes will be necessary, so that all Americans can receive more financial help, have good benefits that bring value and quality, and experience a high-quality, cost-efficient care delivery system.

Part 1:
https://www.healthaffairs.org…

Part 2:
https://www.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

California’s implementation of the Affordable Care Act was spectacularly successful, considering what they had to work with. Yet, because of the limitations of ACA, it has been a dismal failure when measured by the numbers who remain uninsured, by the lack of affordability of care for many of those who are insured, and by the perpetuation of the dysfunctions of the traditional American health care financing system.

As it turns out, the sector of health care coverage that supposedly was working so well – employer-sponsored health plans – frequently has not provided the protection that employees need. The authors do provide some suggestions for change, but they would have little impact since they are mere tweaks in a system that has fundamental design defects.

Buried in this two part analysis of California’s five year experiment with ACA is one sentence that says it all: “However, when policy makers consider the next round of health care reforms, we could well face a choice between a single-payer system that radically transforms the financing, coverage, organization, and delivery of care or more modest reforms that build on the current employer-based system.”

Modest reforms of the highly flawed employer-based system does not cut it, whereas enactment of a single payer improved Medicare for All is precisely what we need. Just read that one sentence and you can skip the rest. See, it really is simple.

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By Rachel Fehr and Cynthia Cox
KFF, April 17, 2020

The Medical Loss Ratio (or MLR) requirement of the Affordable Care Act (ACA) limits the portion of premium dollars health insurers may use for administration, marketing, and profits. Under the ACA, health insurers must publicly report the portion of premium dollars spent on health care and quality improvement and other activities in each state in which they operate.

The Medical Loss Ratio provision requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing, and profit. The MLR threshold is higher for large group insured plans, which must spend at least 85% of premium dollars on health care and quality improvement. Insurers failing to meet the applicable MLR standard have been required to pay rebates to consumers since 2012 (based on their 2011 experience). Currently, MLR rebates are based on a 3-year average, meaning that 2020 rebates are calculated using insurers’ financial data in 2017, 2018, and 2019. Insurers may either issue rebates in the form of a premium credit or a check payment and, in the case of people with employer coverage, the rebate may be shared between the employer and the employee. Insurers will begin issuing rebates later this fall.

Using preliminary data reported by insurers to state regulators and compiled by Market Farrah Associates, we estimate insurers will be issuing a total of about $2.7 billion across all markets – nearly doubling the previous record high of $1.4 billion last year. The amount varies by market, with insurers reporting about $2 billion in the individual market, $348 million in the small group market, and $341 million in the large group market. These amounts are preliminary estimates, and final rebate data will be available later this year.

Insurers in the individual market in 2018 and 2019 are driving this record-high year of MLR rebates in 2020. Rebates issued in 2020 are based on 2017, 2018, and 2019 financial performance. As our previous analysis of insurer financial performance found, in 2017 financial performance in the market had begun to stabilize as premiums rose. Insurers in 2018 were highly profitable and arguably overpriced. In 2019, despite the absence of the individual mandate penalty and premiums dropping a bit on average, insurers continued to perform strongly. On average, insurer loss ratios (the share of premium income paid out as claims) in the individual market in 2019 were 79%. (This is a simple loss ratio; the ACA allows insurers to make some adjustments to this ratio when calculating rebates).

Rebates in the small and large group markets are more similar to past years.

As more people are expected to move into the individual market this year after losing job-based coverage, it is worth considering the possibility of future rebates based on the 2020 calendar year. The cost to insurers for covering coronavirus treatment are still unknown, but could be tens if not hundreds of billions of dollars. That said, hospitals and outpatient offices are canceling elective procedures and individuals are delaying or forgoing other care due to lessened access from social distancing measures and concerns over contracting the virus. Even if individual market insurers experience losses in 2020, it is entirely possible they will owe rebates in 2021 because those rebates will be based on 2018 and 2019 experience as well.

These high rebate estimates come at a time when insurers are working on submissions to regulators for proposed premiums for 2021, in the midst of significant uncertainty about how the coronavirus pandemic will affect health care costs. For 2021 premiums, key factors will include how many people are expected to become infected and severely ill next year, as well as how much pent up demand there may be for care delayed this year. Enrollment in individual market plans is expected to increase as millions of people lose their jobs and health insurance and qualify for a special enrollment period, but these new enrollees will not qualify for rebates when they are paid out in 2020 unless they were also enrolled at some point in 2019.

https://www.kff.org…

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Comment:

By Don McCanne, M.D.

At the time that the Affordable Care Act was crafted, it was realized that, since private insurance coverage would be mandated for a large sector of the population, the private insurers would have essentially a blank check to gouge as much as the traffic would bear. Thus it was decided that a minimum medical loss ratio would need to be established; that is, the insurers would be required to pay out at least 80 percent of their premium revenues in the form of medical benefits for those enrolled in their individual or small group plans and 85 percent for their large group plans. (They were also allowed to count “quality improvement” programs as a medical loss, though some of us feel that they should really be considered administrative and advertising expenses, but we won’t cover that here.)

The point is that private insurers are allowed to keep 15 to 20 percent of premium revenues to be used to cover administrative services (the actual product that they are selling us) and profits. This has made the private for-profit insurers the darlings of Wall Street considering their high profit margins plus the increased market value of their stocks.

If the insurers end up paying out less in benefits than the required amount, then they have to refund the difference. But that is not such a bad deal for them. That way they can be sure that they received the maximum profit allowable, whereas if they paid out more in benefits than required, they would draw down their profit margins. Also, with extra funds under their control, they have more which they can use to work the float (invest the excess funds in order to increase their profits). Granting premium refunds with extra funds is certainly better for them than absorbing greater losses.

Under the ACA medical loss ratios of 80 to 85 percent, the private insurers can spend 15 to 20 percent on overhead and profits. Under Medicare, administrative costs are about 2 percent and profits are not a category in the Medicare budget. That means that Medicare has what would be a medical loss ratio of about 98 percent. That is desirable since that means the funds are being spent on patient care.

Another point. Insurers usually report their profits as a percentage of their entire premium revenues. If you consider that most of their premium revenues are our funds that they are merely holding in trust to pay out future health benefits, then the real product they are selling us is their administrative services. If you count the profits they retain as a percentage of their administrative services, then they have an egregiously outrageous profit margin. (Bank investors are much more concerned about their return on equity than their return on assets – other peoples’ money that they hold in trust.)

The medical loss ratio game is simply one more reason that we should reject private insurers and replace our current dysfunctional health care financing system with a single payer program of Medicare for All. We would each be paying in our equitable contribution based on what we could afford, and the funds would be going where they should be going – taking care of our health. What gall it takes to keep in place an industry that thinks it is a loss to invest in our health.

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The insidious root of the problem is that healthcare as a market commodity simply does not work, and we’ve known this for decades.

By Rani Marx, James G. Kahn
Common Dreams, April 19, 2020

Choice. It’s what we all want in America, right? We rail against being told how to run our lives, especially by the government. But when it comes to health insurance, choice is an illusion—you don’t really know what you’re getting.

Now, with the COVID-19 pandemic straining our healthcare system beyond its capacity, this mirage of choice is coming back to bite us. Many Americans with COVID-19 won’t get their testing and treatment covered because the plan they chose doesn’t fully cover this kind of care.

If you are fortunate enough to be insured by one of the few companies that promises to cover COVID-19 treatment (Aetna, Cigna, and Humana), you chose well, or perhaps you just got lucky. But even many insured patients will receive bills for out-of-network services and will be ineligible to have these fees waived. Many will be unable to demonstrate special COVID-19 insurance provisions because they can’t procure tests or have false negative results (estimated from 1 in 10 to 1 in 3 of truly infected) and thus will not qualify.

The empty White House promises of paying for COVID-19 services gloss over the messy and painful reality. While $100 billion designated for doctors and hospitals to provide care for patients with COVID-19 includes treating the uninsured, it is unclear how to disentangle who and what is covered and which conditions can be attributed to the virus. It’s crazy: you may get help for medical costs, but only if you can prove that COVID-19 caused your illness. No other wealthy country does this; they have universal standard medical coverage.

To make matters worse, many of the 6.6 million newly jobless who filed unemployment claims near the end of March will now join the ranks of the uninsured and under-insured whose COVID-19 treatment will not be covered. All of these problems are exacerbated in states that opted out of Medicaid expansion under Obamacare. To add insult to injury, an outsized chunk of the $100 billion will go to hospital administration instead of critically needed care and resources. Insurers stand to realize a big profit from the pandemic due to indefinite cancellation of non-urgent procedures, a high prevalence of deaths among patients with costly co-morbidities, and a projected increase in premiums next year.

How did we get here? As Wendell Potter (a former public relations executive in the health insurance industry) explained in a New York Times op-ed in January, American choice in healthcare is a “P.R. concoction” that obscures the lack of real choice—of doctors and hospitals. This choice is an unpleasant ill-informed selection among highly restrictive plans. Not to mention having few options, and loss of coverage due to changes made by employers or job loss. Industry lobbying and advertising have so successfully promulgated the myth that Americans have choice it was advanced even by many Democratic presidential candidates.

The insidious root of the problem is that healthcare as a market commodity simply does not work, and we’ve known this for decades. Pioneering economist Kenneth Arrow’s groundbreaking 1963 article clearly established that medical resources can’t be efficiently allocated by the usual free market processes. There is too much uncertainty about disease incidence and treatment efficacy. Further, patients are terrible healthcare “consumers” or shoppers. They lack the knowledge to make such selections. Patients forego care when facing financial barriers, without distinguishing properly between necessary and optional care. Even when provided tools for comparison-shopping, patients can’t use them effectively.

Because healthcare isn’t a viable market commodity, the efficiencies realized in properly functioning markets (like cars, phones, and agricultural products) are unobtainable. Our decades-long experiment in market-based healthcare has failed miserably, yielding worse health outcomes and up to twice the costs of other countries.

With the COVID-19 pandemic reaching epic proportions, the problem of “choice” is seen in stark relief. Our response to the epidemic is unethical and harmful to health, just like our health system is during normal times. Fundamentally, “choice” of health insurance creates a dizzyingly complex and inefficient morass that reaps profits for insurance executives and shareholders—while creating huge financial barriers to care.

The solution is straightforward: universal single-payer health insurance, or Medicare for All, would cover everyone with the same high-quality care, progressively financed. You choose your doctor, what you need is paid with no or minimal co-payments, paperwork is greatly streamlined and simplified, and we save enormous sums of money in the process. Especially now with the extreme shortages and exploding needs of COVID-19, we need Medicare-for-All so that everyone has access to testing and treatment regardless of economic status.

Rani Marx, PhD, MPH is an epidemiologist and health services researcher who currently directs the Initiative for Slow Medicine.

James G. Kahn, MD, MPH is an emeritus professor of health policy, University of California, San Francisco.

https://www.commondreams.org…

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Comment:

By Don McCanne, M.D.

The COVID-19 pandemic has certainly captured the attention of the media, and everyone else. How could it not, considering the dramatic adverse impact it has had on each of us?

So what do the media say we should do about it? For the short and intermediate term, there is broad consensus that the government must be involved logistically and fiscally. You can’t read all of the vast volume of material that is already being written about that, so there is no sense repeating it here. But too many pundits are missing the crucial long term lesson, and that is, instead of supporting an expansion of our current health care financing system heavily dependent on the highly dysfunctional private health insurance plans, we should enact and implement single payer Medicare for All, and that process should begin immediately, along with important transitional measures designed to expedite recovery (those measures that we won’t cover here).

Certainly, considering all of the suffering and grief taking place now, short term measures are important, but just think of all of the cumulative suffering and grief that could be ameliorated if we had a health care financing system that would serve the nation well for centuries to come (as if we really could always elect beneficent public stewards who would support social solidarity in perpetuity).

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By Jonathan Salk
The Hill, April 13, 2020

There’s a lot of speculation about a COVID-19 vaccine, from false memes that need debunking, to physicians writing about renewed appreciation and longing for medical victories like the development of the first effective polio vaccine. Hailed as medical miracle, the vaccine was announced 65 years ago yesterday [April 12, 1955].

Dr. Jonas Salk, who led the team that developed it, was my father. Today, people often ask me, what he would have thought or done about our current pandemic. My full answer may not be the one they expect.

Yes, he certainly would have supported and participated in developing a COVID-19 vaccine. He would have understood the urgency of seeking a vaccine and the grave responsibility to make it safe and effective. And he would have decried the tragic, sometimes preventable loss of life we are witnessing around the world.

But here’s the surprising part: Even though he’s the historical figure identified with the triumph of medical science, he would have emphasized that there is more to eradicating disease than science alone. It also involves human-to-human social, political and economic relationships.

If he were here now, he would implore us to remember what made it possible to defeat polio: a national effort to develop and test the vaccine and a world-wide effort to make vaccination available to everyone without profit. Millions donated money and volunteered their children for the largest field trial in public health history. International organizations and governments worked to ensure the entire world could get vaccinated.

My father would insist on also making COVID-19 screening, treatment and vaccination available to all of us, regardless of where we live or our social or economic standing. He would argue that doing so is not only morally right, but profoundly in our national and global interest. When it comes to infectious disease, health — unlike wealth — can’t be hoarded by the few. As long as a virus is circulating in an unimmunized population, it’s a threat to all, and it’s in all our interests to contain, prevent and eradicate it.

But he wouldn’t have stopped there. He would have noted what implications the pandemic holds for our long-term future, and he would have connected it to the transformation we need at this juncture in human history if we are to survive.

From the 1970s until his death in 1995, he thought deeply about this transformation and how we as a species might adapt successfully to population pressures and the approach of planetary limits. He examined the evidence and concluded we must evolve socially. In nature, evolutionary pressures and natural selection bear on competing individuals, but in the case of humans, we became evolutionarily successful through cooperation. My father believed that our future survival would depend on the values of collective human and planetary well-being becoming the drivers of our social, economic and political lives.

In his book A New Reality he showed that population growth is slowing and starting to plateau, a unique inflection point in human history that could also prompt a turn in our value system away from competition and independence and towards cooperation and interdependence. In an earlier book, The Survival of the Wisest, he argued that wisdom is the quality that will allow us to adapt and survive in conditions we have never encountered before.

He would have recognized the COVID-19 pandemic not only as something to be feared and fought, but also as a moment to embrace wisdom. He would have seen this crisis as an opportunity to shift from individualism to interdependence. He would have told us that fighting the pandemic demands replacing the “us first,” win/lose mindset with a “we together,” win/win mindset, and he would have advised that, paradoxically, self-interest in this case is best served by generosity. He would have applauded cooperation and knowledge sharing among scientists and the altruism of medical workers and volunteers. He would have seconded New York’s plea for mutual aid: “Help us now and we’ll help you later.” And he would argue we need to implement that mutuality at every level, from individual relationships to global society.

He might point out the folly of placing material and economic value ahead of human life, as many of us are doing amid the pandemic. With an eyebrow arched, he might warn of the consequences of ignoring the workings of nature and continuing to pursue boundless growth, competition and selfishness. He would let us know that if we persist in that way, we will be sowing the seeds of more suffering and, ultimately, our extinction.

But my father was a scientist and an evidence-based thinker. Based on what he knew of evolution, he believed evolutionary pressures would nudge us in the right direction. He would have seen the pandemic as just such a nudge and would have appreciated the irony that a deadly virus, the same thing that prompted the advancement of medical science 65 years ago, might lead us now to advance social evolution toward a healthier, more cooperative, interdependent world where we can not only survive but thrive — if we only listen.

Dr. Jonathan Salk is a practicing psychiatrist and teaches at the UCLA David Geffen School of Medicine. “A New Reality,” the book he co-authored with his father Dr. Jonas Salk, was recently updated and republished.

https://thehill.com…

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A New Reality: Human Evolution for a Sustainable Future

By Jonas Salk and Jonathan Salk

The sigmoid growth curve consists of two sections of different shape: the upturned portion describes a phase of progressive acceleration of growth (Epoch A – past human life); the second portion is downturned and describes a phase of progressive deceleration (Epoch B – moving into the future from the current point of inflection). The difference in shape between the two portions of the curve suggests both quantitative and qualitative differences in human life between the two periods of time. It not only indicates differences in population growth patterns but also suggests differences in the characteristics of prevailing conditions and the nature of human life in the two periods.

Perhaps the clearest example of the shift from A to B is that of resource use. During the period of exploration and expansion by European colonial powers and the United States, resources seemed limitless. They could be exploited without regard for the effects either of consumption or of the disposal of waste. This would correspond to Epoch A, in which positive value was placed on growth, consumption, and unlimited use of resources.

In the last 50 to 75 years, however, there has been increasing awareness that resources are limited and that unfettered consumption, along with disregard for the effects of waste products, endangers our survival. Our adaptive response has been to place increasing value on awareness of limits, on conservation, and on sustainability.

Thus, the conditions of Epoch A support and are consistent with values of unlimited growth and consumption, while the different conditions of Epoch B will lead to the different values of sustainability and conservation.

In Epoch A, competition and the demands of persistent, accelerating growth were inherently associated with either/or attitudes and philosophies and the prevalence of win-lose strategies in the resolution of conflict. People or nations saw the world as a place on which any benefit to the other is a loss or detriment to the self. In Epoch B, however, the tendency toward balance, collaboration, and interdependence will be based upon and evoke a philosophy of both/and and the development of win-win strategies.

https://www.anewrealitybook.com

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Comment:

By Don McCanne, M.D.

Understandably, much is being written about the lessons of the COVID-19 pandemic, particularly on how important it would be to have had in place an efficient and effective universal health program such as single payer Medicare for All. That would not have prevented the pandemic, but, very importantly, it would have removed financial barriers to health care – a very serious defect in the U.S. health care financing system, now made even worse by the loss of employment and, for many, the consequent loss of employer-sponsored health insurance.

Jonathan Salk writes about how his father, Jonas Salk, the developer of the first effective polio vaccine, would have certainly supported and participated in expediting the development of a vaccine against the coronavirus that causes COVID-19. Further, he would also have insisted on making COVID-19 screening, treatment and vaccination available to all of us regardless of our social or economic standing, just as if we did have a Medicare for All program in place.

But Jonas and Jonathan Salk have a greater message for us. In their book, “A New Reality,” they describe how we seem to be at an inflection point moving from an epoch of accelerated growth of mankind in which self interest prevailed (us first or win-lose mindset) to an epoch of decelerated growth in which social solidarity prevails (we together win/win mindset). It is not as if we are moving away from self interest and on to solidarity, rather we are discovering that the epoch of deceleration is best served by solidarity since it automatically serves the interests of the self in addition to the interests of society as a whole.

The political polarization in Congress is really unfortunate. It’s too bad they haven’t sat down and discussed how everyone wins with single payer Medicare for All. It is true that wealthier individuals would pay more into the system, but their incomes would still be much greater than the rest of us, and their taxes would not be enough to change their lifestyle in the least. They would have other benefits such as the satisfaction that their employees would always have health care, as would their relatives and friends who may be in a financial bind; they would have less exposure to infectious diseases in the community, such as TB, since those illnesses would be cared for; the homeless would no longer distress them since they would receive needed mental health care and appropriate social services; but, most importantly, they would have the satisfaction of knowing that, in the epoch we are entering, we’re all in this together and we can do it without them having to give up their privileges of wealth (only a little bit in taxes that they’ll never notice unless their accountant points it out).

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By Sherry A. Glied and Benjamin Zhu
The Commonwealth Fund, April 17, 2020

Abstract

Issue: Many studies report that high out-of-pocket health spending is an increasing problem, despite expanded insurance coverage under the Affordable Care Act (ACA). Little is known about how Americans’ out-of-pocket spending has changed over time.

Goals: To observe trends in high out-of-pocket spending and describe the distribution and composition of out-of-pocket spending over time, focusing on the top 5 percent and 1 percent of spenders.

Methods: Analysis of Medical Expenditure Panel Survey (MEPS) data.

Key Findings and Conclusions: Expansions in insurance coverage and in the quality of coverage through the ACA have protected most Americans from high out-of-pocket costs. Recently, however, out-of-pocket costs for the highest out-of-pocket spenders (the 99th percentile) have been increasing. In 2017, one in 100 Americans under age 64 spent $5,000 or more out of pocket for medical services, and about one in 20 spent more than $1,700. High out-of-pocket spending mostly affects those with employer coverage and those with incomes above 400 percent (and, in particular, above 600 percent) of the federal poverty level. The plurality of this spending is for physician services. High deductibles and out-of-pocket maximums in private insurance, combined with exposure to out-of-network bills for physician services, leave many Americans facing very high out-of-pocket costs.

From the Introduction

Americans are increasingly concerned about the high cost-sharing requirements in their health insurance coverage. According to federal data, average deductibles in employer plans more than doubled between 2008 and 2017, from $869 to $1,808. Although most Americans have insurance coverage, only 62 percent of adults in a recent Commonwealth Fund survey reported they were very or somewhat confident in their ability to afford health care, while those earning less than 250 percent of the federal poverty level (FPL) — $12,490 for a single person and $21,330 for a family of three in 2019 — were even less confident.

Health care spending is highly concentrated among the highest spenders. In 2016, the top 5 percent of spenders accounted for half of health care spending, spending about $50,000 annually. Out-of-pocket spending was similarly concentrated: the highest 5 percent accounted for 46 percent of overall out-of-pocket spending.

Very high out-of-pocket expenses may have dangerous consequences: high costs have been linked to poor medication adherence and treatment delays in patients with rheumatoid arthritis, kidney disease, diabetes, oral cancer, and breast cancer. We find that, in 2017, one in 100 Americans under age 65 spent $5,000 or more out of pocket for medical services, and about 1 in 20 spent more than $1,700. Protecting people from such catastrophic spending is among the most important roles of health insurance.

In 2019, ACA-compliant coverage could not have an out-of-pocket maximum above $7,900 for individuals and $15,800 for families. While these out-of-pocket requirements are lower than those seen in the individual market before the ACA, these deductibles and out-of-pocket maximums remain very high relative to household incomes.

Other developments in health care markets have increased the risks of high out-of-pocket spending, especially among those with employer-sponsored insurance. Since 2003, tax policy has encouraged employers to offer high-deductible insurance plans with tax-favored health savings accounts. Today, 19 percent of employees are enrolled in such plans, but few — only 5 percent of taxpayers in 2014 — contributed to their health savings accounts.

From the Policy Implications

As prior analysts have observed, rising cost-sharing requirements and concerns about out-of-pocket exposure do not correspond to rising out-of-pocket spending levels on average. We find, however, that out-of-pocket spending has been increasing since 2014 among Americans with the highest out-of-pocket spending levels. Those with private insurance and those with incomes above 400 percent of FPL (and especially above 600 percent of FPL) have been most affected by rising out-of-pocket costs.

The proliferation of high-deductible plans with health savings accounts among people in these higher income groups may lead to higher out-of-pocket spending in this group.

We find that a small percentage of Americans increasingly bears the brunt of high out-of-pocket costs. High deductibles and out-of-pocket maximums shift the burden of health care costs away from premiums paid by the average insured person to those with serious illnesses and substantial health service use. This pattern undermines a principle purpose of health insurance: to protect people against catastrophic expenses.

https://www.commonwealthfund.org…

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Comment:

By Don McCanne, M.D.

We pay for our health care system through taxes, premiums, forgone wages, and out-of-pocket spending – an inefficient and somewhat inequitable method of financing. Ideally, we would each pay in a fair amount, based on our ability to pay, and then the system would pay for the health care needs of each of us. That’s the fundamental principle of insurance.

But this study shows that a small percentage of Americans who have serious illnesses and substantial health service use increasingly bears the brunt of high out-of-pocket costs. These individuals not only have the misfortune of illness or injury, but they also face financial penalties in the form of high out-of-pocket expenses.

We hear repeatedly that people should not be forced into a Medicare for All program; they should have the option of keeping the insurance they have – predominantly employer-sponsored private health plans. Yet the majority of individuals who are exposed to these out-of-pocket penalties are primarily insured through these private plans. Thus our current system tends to undermine the fundamental principle of insurance.

As far as paying into the system, it would be far more equitable to use progressive taxes, making the system affordable for everyone. As far as paying out, the system should pay based on medical need. There is no reason to require additional payments merely because a medical need developed. The funding of health care would have already been made equitable through the progressive taxes that fund the universal risk pool.

A single payer Medicare for All program would not only bring rationality to our health care financing, it would also correct many of the other inequities, dysfunctions and profound inefficiencies in our health care system. We could have this health care nirvana without increasing our national health expenditures. We just have to get rid of the private insurers.

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By Callum J. Jones, Thomas Philippon, Venky Venkateswaran
National Bureau of Economic Research, April 2020

We study the response of an economy to an unexpected epidemic. Households mitigate the spread of the disease by reducing consumption, reducing hours worked, and working from home. Working from home is subject to learning-by-doing and the capacity of the health care system is limited. A social planner worries about two externalities, an infection externality and a healthcare congestion externality. Private agents’ mitigation incentives are weak and biased. We show that private safety incentives can even decline at the onset of the epidemic. The planner, on the other hand, implements front-loaded mitigation policies and encourages working from home immediately. In our calibration, assuming a CFR of 1% and an initial infection rate of 0.1%, private mitigation reduces the cumulative death rate from 2.5% of the initially susceptible population to about 1.75%. The planner optimally imposes a drastic suppression policy and reduces the death rate to 0.15% at the cost of an initial drop in consumption of around 25%.

https://www.nber.org…

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Polarization and Public Health: Partisan Differences in Social Distancing during the Coronavirus Pandemic; NBER Working Paper No. 26946

By Hunt Allcott, Levi Boxell, Jacob C. Conway, Matthew Gentzkow, Michael Thaler, David Y. Yang
National Bureau of Economic Research, April 2020

We study partisan differences in Americans’ response to the COVID-19 pandemic. Political leaders and media outlets on the right and left have sent divergent messages about the severity of the crisis, which could impact the extent to which Republicans and Democrats engage in social distancing and other efforts to reduce disease transmission. We develop a simple model of a pandemic response with heterogeneous agents that clarifies the causes and consequences of heterogeneous responses. We use location data from a large sample of smartphones to show that areas with more Republicans engage in less social distancing, controlling for other factors including state policies, population density, and local COVID cases and deaths. We then present new survey evidence of significant gaps between Republicans and Democrats in beliefs about personal risk and the future path of the pandemic.

https://www.nber.org…

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Comment:

By Don McCanne, M.D.

These two timely papers on the coronavirus pandemic should be of interest to single payer supporters.

One paper shows the different results in mitigation efforts by a private agent (the private sector) and a social planner (the government). The impact on infection rates and health care congestion are such that the reduction in mortality is much greater under the social planner than it is under the private agent. The private agents’ mitigation incentives are weak and biased.

The other paper presents the interesting observation that political polarization makes a difference. Republicans engage in less social distancing than do Democrats, which increases both personal risk and population risk.

These papers seem to confirm that social solidarity is more effective than simply applying individual responsibility to problems that affect not only individuals but society at large. Single payer Medicare for All is an excellent example of the benefits of solidarity when contrasted with individual purchase of private health insurance.

What is ironic is that social solidarity is not only more effective for the population as a whole, but it is also more effective for the individual. Yet our political polarization perpetuates this illogical divide.

PNHP does not support any political parties, but we do support policies that are designed to protect and improve the health of all. We wish all political parties did as well.

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By William K. Bleser, Elizabeth Singletary, Hannah L. Crook, Jonathan Gonzalez-Smith, Robert S. Saunders, Mark B. McClellan
Health Affairs Blog, April 14, 2020

The purpose of this two-part Health Affairs Blog post is to summarize impacts, issues, and policy implications due to the coronavirus pandemic for the largest payment reform program in the country: accountable care organizations (ACOs). Clinician organizations participating in, and payers running, payment reform programs face significant uncertainty. ACOs, in particular, face substantial risk of financial loss related to their cost-performance requirements, and decisions to stay in the program or leave are rapidly approaching.

In Part 1 of this post, we estimate coronavirus-related changes in use and financial impact on ACOs based on existing data.

The Bottom Line

All in all, any given ACO’s shared savings and losses for performance year 2020 will depend on how much the utilization increase from COVID-19 is offset by the decrease in procedures and primary care visits. Our estimated ranges indicate a likely scenario of net increased costs, which will vary for any given ACO based on policies in local geographies, the prior health status and COVID-19 prevalence for the attributed population, and the ACO’s own surge policies. The main message is that COVID-19 can have potentially large financial impacts on ACOs and more strongly affect physician-led ACOs. The uncertainty for any given ACO will challenge them in their current pandemic response and, without action, may limit their willingness to remain in ACO programs.

ACOs across the country vary tremendously in size, structure, geography, and patient characteristics, and many ACOs are unlikely to have sufficient liquid cash reserves needed to weather the crisis and tremendous uncertainty without significant supports and flexibilities.

https://www.healthaffairs.org…

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Maintaining Progress Toward Accountable Care And Payment Reform During A Pandemic, Part 2: Immediate Issues And Short-Term Actions

Health Affairs Blog, April 15, 2020

In Part 2, this post, we identify immediate issues and short-term actions that private payers, Medicare, and Medicaid can take immediately to adjust their ACO programs to adapt to this crisis in the coming weeks and months.

Conclusions And Summary Of Recommendations

The coronavirus pandemic is perhaps a once-in-a-lifetime health and economic crisis. In addition to broader health outcomes and care delivery impacts, it threatens the progress of payment reform writ-large. The spread of payment reform is quite large to date, with nearly 1,600 ACO contracts across all payers covering almost 44 million lives (about 13 percent of the US population). The MSSP ACO program covers more than 11 million beneficiaries alone. In addition, these payment reforms have provided health care organizations with infrastructure and competencies that they have been able to shift toward community-based population health surveillance and management to limit the impact of the epidemic.

Based on current data, we have found that the COVID-19 pandemic will have significant negative financial impacts on ACOs based on: increased use and expenditures from COVID-19 cases that can lead to smaller shared savings or new shared losses, non-reimbursable infrastructure costs, and reduced revenue in primary care and elective procedures that can cause cash flow problems for smaller and less resourced ACOs. Uncertainty is substantial in all of these cases and can vary tremendously depending on an ACO’s geography, structure, beneficiary health, and size, which can cause anxiety for ACOs considering their future in these payment reform programs. These anxieties could result in ACOs dropping out of the program entirely or consolidating together (which is associated with less competition and decreased value).

We offer suggestions for payers such as CMS and commercial insurers in the short term to help continue progress, including providing reassurance to ACOs and other health care delivery organizations participating in alternative payment models, clarifying telehealth flexibilities and fixes, and harmonizing 1135 waivers with payment reform specifications. In many cases, these reassurances and flexibilities will need to be paired with support for infrastructure development related to new telehealth technology and public health surveillance activities, at least.

We plan to follow this blog post with a subsequent one in the coming weeks on longer-term program considerations and potential solutions such as infrastructure support.

https://www.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

Earlier this week the National Association of ACOs released the results of a survey indicating that “a large portion of risk-based ACOs are likely to quit over concerns about COVID-19.” Today Mark McClellan and his colleagues at Duke University, proponents of the ACO model of health care financing, explain the impact that the COVID-19 pandemic has had on ACOs, concluding, “The uncertainty for any given ACO will challenge them in their current pandemic response and, without action, may limit their willingness to remain in ACO programs.”

In the past they have released reports indicating that the results of ACOs in achieving higher quality at lower costs have been less than stellar, but they have continued to support the model suggesting that more experience with it may improve the results. If there was ever any doubt that the model is irreparably flawed, the experience under the stress of the pandemic should have laid that doubt to rest.

Yet they do not want to give up. They are suggesting modifications that will surely result in considerable infusion of public funds, but they are doing it to salvage the highly defective ACO model as opposed to improving the lot of patients and their health care professionals when compared with what would be happening under the traditional fee-for-serve Medicare model. Under traditional Medicare, absent the ACOs, essential health care services would be rendered, and Medicare would pay the bills. That’s as it should be.

We all know that Medicare is not perfect, but, instead of playing around with illogical constructs advanced by advocates of the “art” of policy rather than the science of policy (as if process is what is important and the product doesn’t matter), we should enact and implement those changes that will improve Medicare, and then, of course, expand it to cover everyone. Yes, it’s time for single payer Medicare for All. Let’s take care of the patients, not the wonks.

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