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ACOs are likely to leave the Medicare Shared Savings Program

ACOs are likely to leave the Medicare Shared Savings Program

National Association of ACOs, Press Release, May 2, 2018

Today, the National Association of ACOs (NAACOS) released results from a survey about assuming risk and future participation plans for Medicare Shared Savings Program (MSSP) Track 1 ACOs. The web-based survey was conducted in April 2018 and survey links were emailed to Track 1 ACOs entering their third agreement periods in 2019. NAACOS specifically reached out to the 82 ACOs that began the MSSP in 2012 or 2013 and remain in Track 1 in 2018, thus they are required to move to a two-sided ACO model in their third agreement period beginning in 2019. The goal of the survey was to better understand what ACOs are planning in the face of these requirements and how they feel about risk. While we are pleased that 43 percent of these Track 1 ACOs responded to the survey, we are troubled by the results which illustrate NAACOS’s long-standing concerns about forcing ACOs into risk-based contracts.

Results from a key survey question show that 71 percent of ACO respondents indicated they are likely to leave the MSSP as a result of having to assume risk.

NAACOS encourages ACOs to prepare to move to risk and strongly supports ACOs that are ready to do so, but we do not support forcing ACOs to assume risk if they are not ready. Clif Gaus, President and CEO of NAACOS, comments on the survey results, “These results paint a bleak future of what will happen if the government keeps its mandate to push ACOs into risk. It’s naïve to think ACOs that aren’t ready will be forced into risk in what is ultimately a voluntary program. The more likely outcome will be that many ACOs quit the program, divest their care coordination resources and return to payment models that emphasize volume over value. This would be a real setback for Medicare payment reform efforts.”

https://www.naacos.com…

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Comment:

By Don McCanne, M.D.

Accountable care organizations (ACOs) are the mainstay of CMS’s strategy to move health care financing away from paying for volume to paying for value instead. ACOs enter the Medicare Shared Savings Program (MSSP) through Track 1 in which they have the upside of being rewarded with a portion of any savings they can generate. But ACOs are required to move into a two-sided model in which they must also bear the downside risk of losses. In this survey, 71 percent of the ACO respondents indicated that they are likely to leave the MSSP if they are required to assume that downside risk.

Although the concept is that ACOs must demonstrate accountability for improving quality and reducing costs, the actual application of the concept demonstrates that it is really primarily about the latter – reducing costs. That is why CMS requires transition to the two-sided model with downside risk. They want to reduce federal spending. Yet the ACOs recognize that the model is so flawed because of their potential exposure to losses that they would rather abandon the program than to risk those losses.

This really should make the policy community and bureaucrats think about whether the ACO experiment should even be continued. If policy changes are made to give greater assurance to the ACOs that they will be profitable, then the whole idea of cost accountability tanks.

In fact, the concept that you can assign value to care while ignoring volume is fundamentally flawed. The delivery of health care requires a certain volume of services that have overhead costs. Paying based on a paucity of quality measurements and on patient satisfaction surveys ignores the cost of the resources that are required to deliver care.

It would be far better to design a system that improves allocation of those resources. Of course, that is what a well designed single payer national health program does. Let’s quit wasting our efforts and funds on the failed ACO model and move on with providing what we really need – an improved Medicare for all. That’s where the real value is.

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Making Medicare prices universal as an isolated policy for reform

The Case for Single-Price Health Care

By Paul S. Hewitt and Phillip Longman
Washington Monthly, April/May/June 2018

Excerpts

Obamacare has taken a licking but keeps on ticking. But while progress has been made on expanding access, another problem keeps getting worse: the soaring cost of health care for those who get their insurance through their employers. For these folks—who make up the majority of middle-class, working-age Americans—the ever-rising costs of premiums, deductibles, and co-pays has turned into a full-blown crisis.

Take a median-income family of four whose members are covered by a standard employer-sponsored plan. Last year, the amount that hospitals, doctors, and other providers charged to treat such a family reached an average of $26,944, according to the Milliman Medical Index—nearly $9,000 higher than in 2010, when the ACA was enacted. Families typically paid about a fifth of that difference directly in the form of increased premiums, deductibles, and co-pays. Who exactly paid how much of the rest is not certain, but it’s axiomatic among economists that employees bear most if not all of the cost of employer-sponsored health care. To employers, health insurance is just a form of employee compensation. When the cost goes up, they typically respond by cutting back on raises and other benefits.

Fortunately, there’s a straightforward way to attack this middle-class affordability problem. The Affordable Care Act dramatically tightened existing price controls on health care purchased by the federal government. It did so by setting fee schedules for how much doctors and hospitals can charge Medicare, Medicaid, and other federal health care programs for performing specific services or, in some cases, treating specific conditions. Similar price controls apply to Medicare Advantage Plans, under which private insurers are allowed to contract with providers at Medicare prices.

The answer to the most pressing aspect of our health care crisis is simply to apply these cost controls to commercial plans as well. For a typical middle-class family, such a move, if enacted today, would drop the total price of health care by about a third in the first year, without having to pass any new taxes and without forcing anyone to change their health care plan. Proof of concept comes from the fact that we already do this for everyone covered by Medicare and Medicaid. You’ve heard of single-payer. This is the case for single-price.

For people with commercial insurance, it keeps getting worse.

How did this happen?

A major, underappreciated reason is that in most markets, medical providers have merged with each other to the point that they effectively operate as local monopolies.

Where health care consolidation is strongest, hospital prices run roughly 20 percent higher than in markets where some real competition remains. Since we first wrote about the phenomenon in these pages (“After Obamacare,” January/February 2014), a vast literature has grown up confirming that monopoly in health care is a major factor pushing up prices for Americans not covered by Medicare or Medicaid.

What would happen if we just took the single measure of applying Medicare prices to all commercial health insurance—and did nothing else? According to a study by the Congressional Budget Office, the price for a one-day hospital stay is 89 percent higher when charged to commercial insurance plans and their customers than when a Medicare patient stays in the same bed for the same amount of time. Overall, the discounts Medicare and Medicaid receive are in the 20 to 40 percent range. Thus, if done at a stroke, the first-order effect of imposing Medicare prices universally would be to reduce the price of the health care received by a typical family by about one-third. That would translate into annual savings of about $9,000 today, and much more over time. The savings would still be substantial even if we implemented the plan in phases to ease the transition.

Wouldn’t “Medicare prices for all” cause massive disruption across the health care sector? Yes, but in a good way. Importantly, hospitals that disproportionately serve low-income and elderly patients—typically found in rural or poor, urban locations—would be the least affected. That’s because they already know how to break even or even earn a surplus at Medicare and Medicaid prices. Unable to pass inflated costs along to patients with commercial insurance, they’ve had to learn to be more efficient.

The same is true more generally of hospitals that lack monopoly power. Studies show that hospitals with real competition in their local markets have found ways to lower costs to the point that they can get by on Medicare prices. These hospitals might even welcome a move to universal Medicare prices because it would help level the playing field with monopolistic competitors when it comes to recruiting and retaining doctors.

It would be a different story, though, for hospital systems that have been living high off their ability to extract monopoly prices from commercially insured patients. These hospitals will scream that they are already losing money on every Medicare and Medicaid patient, and that unless they are able to inflate the prices they charge commercial payers, they will go broke. But the reason they lose money on Medicare and Medicaid patients is that their costs are too high. And the reason their costs are too high is that they don’t need to cut them so long as they can gouge commercial payers—which, as monopolies or near monopolies, they can. The majority of these hospitals are classified as nonprofits, so the revenue from their high prices doesn’t even have to go back to shareholders. Instead, it turns into inflated salaries for administrators, lucrative contracts for specialists, and, often, giant building projects. In order to survive on Medicare prices, they would have to become much more efficient and cost conscious.

In normal markets, price controls are seldom a good idea. But health care is not a normal market. Purchasers, whether consumers, insurers, or employers, have a hard time evaluating the quality of medical services, for example. There are also all kinds of agency problems involved with so much care being purchased with other people’s money, and a moral problem involved with the fact that a large and increasing share of the population can’t afford to pay the price of their own health care. And that’s all before you get to the problem of industry consolidation. In highly concentrated, opaque health care markets, administered prices are the only real alternative to prices dictated by the fiat of monopolists.

These are the reasons why literally every other developed country in the world uses administered prices in health care, including countries that rely on privately owned hospitals and entrepreneurial doctors. And it’s why their use in the Medicare and Medicaid programs has been successful in containing cost inflation while predatory pricing prevails everywhere else in the increasingly cartelized U.S. health care sector.

The idea of applying Medicare and Medicaid prices across the board is so compelling that it has started getting serious attention from influential policy wonks. On the conservative side, the Council for Affordable Health Coverage recently issued a white paper that calls for the expansion of Medicare prices to commercial plans. On the liberal side, Princeton’s Paul Starr broached the idea in an article in the American Prospect in January. More recently, the Center of American Progress has included the idea in a policy paper.

But there are very strong reasons to believe that starting with price controls alone is a better idea than trying to achieve them and universal coverage in one shot.

Medicare for All advocates make the case that, despite the sticker price, the plan will actually bring down overall health care spending by imposing lower prices on providers and saving on administration. But here’s the problem: almost all of those savings will come from money that voters don’t know they’re currently spending. More than 150 million Americans have employer-sponsored group health care plans. They can see what they are forking out directly for premiums, deductibles, and co-pays, and they don’t like it. But they are largely innocent of the far greater amounts they pay in lost wages. In a typical employer-sponsored family plan, two-thirds of the premiums are nominally paid by the employer, who in turn shifts much if not all of that cost to employees by reducing other forms of compensation. Yet few employees are aware of this reality. So selling a single-payer system involves promising to save people money on costs they don’t know they pay, while at the same time telling them that they’ll have to share more of their paycheck with Uncle Sam. Not easy.

So why not just keep it simple, at least to start? A “Medicare prices for all” plan doesn’t require tax increases or involve transfers paid for by the middle class. It doesn’t require Americans to give up their current health care plans. And it doesn’t repeal or replace the popular features of the Affordable Care Act. But it does directly attack the middle-class affordability crisis using a proven approach that the great majority of Americans might actually support.

Paul Hewitt is an economic adviser to the Council for Affordable Health Coverage. Phillip Longman is senior editor at the Washington Monthly and policy director at the Open Markets Institute and author of “Best Care Anywhere – Why VA Health Care Is Better Than Yours.”

https://washingtonmonthly.com…

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California Legislative Information; AB-3087 California Health Care Cost, Quality, and Equity Commission

This bill would create the California Health Care Cost, Quality, and Equity Commission, an independent state agency, to control in-state health care costs and set the amounts accepted as payment by health plans, hospitals, physicians, physician groups, and other health care providers, among other things.

The bill would require the commission, beginning July 1, 2019, to annually determine the base amounts that health care entities, as defined, are required to accept as full payment for health care services, and would specify that the base amount for a health care provider shall be a percentage of Medicare rates not lower than 100% of Medicare rates.

The bill would require the commission to obtain the information necessary to determine total health care expenditures and to set a global growth cap for total health care expenditures, as specified.

https://leginfo.legislature.ca.gov…

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Physicians converge on Sacramento to oppose dangerous rate setting proposal

California Medical Association, April 30, 2018

Over 500 physicians, medical students and stakeholders gathered in Sacramento on April 18 to bring the voice of medicine to legislators for the 44th annual California Medical Association (CMA) Legislative Advocacy Day.

Wearing white coats, physicians converged on the Capitol to educate legislators about critical health care issues, including a radical physician rate setting proposal (AB 3087) that would increase patient out-of-pocket costs, create state-sanctioned rationing of health care for all Californians and force physicians out of state or into early retirement. Informing legislators about the negative effect this dangerous rate setting proposal would have on access to care in California was the top priority for attendees.

http://www.cmanet.org…

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Comment:

By Don McCanne, M.D.

There is broad agreement that the two most important factors that lead to our egregiously high health care costs are our high prices and the profound administrative waste in our fragmented health care financing system. Paul Hewitt and Phillip Longman, in their long Washington Monthly article (long, but worth the read), make the case for rigid price regulation.

Although they and others contend that price simplification would address the administrative waste as well, the impact would be very small since the highly inefficient, dysfunctional financing infrastructure would remain in place.

Since affordability is the number one health care concern according to many polls, would establishing a unified pricing scheme (all-payer or single-price health care) be welcome as an incremental step since it would be much less disruptive than converting to a single-payer improved Medicare for all? Hewitt and Longman seem to think so.

But we should look at California’s current effort to enact a universal pricing system: AB-3087 California Health Care Cost, Quality, and Equity Commission. Use the link above to access the bill, and then click on the “Bill Analysis” tab. Though you likely don’t have time now to read the 28-page analysis, just glance at the last three pages for support and opposition. Support includes the cosponsors: California Labor Federation, Health Access California, SEIU California, and UNITE HERE along with about two dozen other organizations. Opposition fills most of the three pages and includes much of the medical-industrial complex in California. The release from the California Medical Association (above) gives you an idea of the fervor of the opposition. These organizations are not convinced, to say the least, that this legislation would not be disruptive. AB-3087 is doomed.

So why don’t we move forward with reform that would address both our high prices and the administrative waste, not to mention all of the other measures of a well designed single payer system – an improved Medicare for all – that would correct the deficiencies in our financing system while improving the allocation of resources within the health care delivery system?

Hewitt and Longman present an interesting twist on the argument that it is not politically feasible. Read the paragraph near the end of their excerpts above that begins, “Medicare for All advocates make the case that…”  They make the case that most individuals do not realize how much they are already spending on health care since much of it is hidden from them, whether it’s the employer’s contribution to their health plan or the massive amount we are already paying through the tax system – almost two-thirds of all health care spending if the purchase of plans for government employees and the huge amount of tax expenditures for employer-sponsored plans are included. Hewitt and Longman say, “So selling a single-payer system involves promising to save people money on costs they don’t know they pay, while at the same time telling them that they’ll have to share more of their paycheck with Uncle Sam. Not easy.”

Now would it be that difficult to let people know about the hidden costs of health care that they are already paying? Do people really prefer being kept in the dark by an opaque financing system rather than being enlightened by the transparency of financing through an equitable tax system, especially if the amount being spent is somewhat less for all but the wealthiest of us?

Can you imagine the typical American saying, “Okay, so we’re spending more now and getting less than we would be with an improved Medicare that covered everyone, but just don’t tell me about it. Let me suffer in silence.” Are we a bunch of masochists?

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Solution to health care is Medicare for all

By Jack Bernard
Las Cruces (N.M.) News, May 2, 2018

In 2017 op-eds, I described the mess that Congress made of health reform. They were taking a flawed program, Obamacare, and modifying it to be much worse via Trumpcare…which I believe Donald Trump still has never given up on enacting; he is just waiting until the opportunity arises.

In the meantime, he and Alex Azar, his new DHHS secretary, will do everything that they can administratively to undermine the ACA. In 2017 there were fewer people covered by insurance than in 2016 due to Trump’s policies.

Many conservative politicians state incorrectly that we have the “best” health care in the world. But, our mortality-morbidity rates are higher than other developed nations. Reports by the respected Commonwealth Fund consistently rate us last or next to last on health-care quality, access and cost criteria.

Plus, our costs are escalating, via higher premiums and deductibles. In 1980, healthcare was 9 percent of GNP. It is more than double that now, taking money that could be used for other vital areas.

So, where should we go with Medicare, Medicaid and the ACA (Obamacare)?

The GOP House of Representatives has a radical health-care agenda, devised by and expressed repeatedly by departing Speaker Ryan and Tom Price, former House member and x-secretary of DHHS. Both Price and Ryan are motivated solely by federal budget concerns versus quality or financial access.

Former Rep. Mick Mulvaney, now the head of OMB, shares this lack of concern over the impact of policy changes on real people. Mulvaney, a Tea Party darling, founded the right-wing House Freedom Caucus which advocated a shutdown of our government rather than budgetary compromise.

The Ryan-Price strategy of Medicare and Medicaid abandonment is not supported by the majority of Americans in either party, as various surveys show. It is abandonment when you privatize Medicare via vouchers, destroying senior finances, and cut funding for Medicaid via state block grants, thus denying care to our poorest citizens.

The bill that Price originally proposed as a replacement for the ACA cut financial support for millions (85 percent of Health Exchange enrollees) who are now receiving a high level of governmental assistance in order to purchase insurance. The average cost of a family’s health-care insurance policy is over $18,000 annually. How many lower-income families can afford to purchase health-care insurance with a stipend of only $3,000 as detailed in the original Price legislation?

So, if the radical privatization schemes and confusing, elusive block grants won’t work, what will?

The situation becomes clearer when we look at the health-care costs in other developed nations. At a per capita cost of over $9,000 in the USA, we run nearly three timesthe per capita cost in Italy, whose health system is rated second best in the world by WHO.

How do these other developed countries do it? The answer may surprise you: single payer (Medicare for All) or something like it (utility models) with more government involvement, not less.

Through cutting out marketing and overhead expenses, savings are achieved. Medicare has only a 2 percent overhead versus 12 percent for private insurance. And, centralized budgeting combined with leveraging of governmental purchasing power makes sure that costs are contained.

The primary impediment to Medicare for All, which has been proposed in bill form by Senator Bernie Sanders and co-sponsored by 16 senators, is clear: big business lobbying. Why?

Price escalation by Big Pharma would be severely limited under Medicare for all, as it is in other nations. Instead of spending money on health insurance corporate marketing and overhead expenses, money would go to direct patient care. Insurance and pharmaceutical companies would lose business. Their executives would not be getting those seven figure salaries. So, they buy influence.

This situation can only be corrected by you, the American taxpayer, by knowing the issues and voting.

Jack Bernard, the first director of health planning for Georgia, has been a senior executive with several national health care firms, working with New Mexico hospitals on cost containment.

https://www.lcsun-news.com…

Four million working-age people have lost insurance coverage since 2016

First Look at Health Insurance Coverage in 2018 Finds ACA Gains Beginning to Reverse

By Sara R. Collins, Munira Z. Gunja, Michelle M. Doty and Herman K. Bhupal
The Commonwealth Fund, May 1, 2018

The marked gains in health insurance coverage made since the passage of the Affordable Care Act (ACA) in 2010 are beginning to reverse, according to new findings from the latest Commonwealth Fund ACA Tracking Survey. The coverage declines are likely the result of two major factors: 1) lack of federal legislative actions to improve specific weaknesses in the ACA and 2) actions by the current administration that have exacerbated those weaknesses. These include the administration’s deep cuts in advertising and outreach during the marketplace open-enrollment periods, a shorter open enrollment period, and other actions that collectively may have left people with a general sense of confusion about the status of the law. Signs point to further erosion of insurance coverage in 2019: the repeal of the individual mandate penalty included in the 2017 tax law, recent actions to increase the availability of insurance policies that don’t comply with ACA minimum benefit standards, and support for Medicaid work requirements.

Findings

* About 4 million working-age people have lost insurance coverage since 2016

* The uninsured rates among lower-income adults rose from 20.9 percent in 2016 to 25.7 percent in March 2018

* The uninsured rate among working-age adults increased to 15.5 percent

* The uninsured rate among adults in states that did not expand Medicaid rose to 21.9 percent

* The uninsured rate increased among adults age 35 and older

* The uninsured rate among adults who identify as Republicans is higher compared to 2016

* The uninsured rate remains highest in southern states

* Five percent of insured adults plan to drop insurance because of the individual mandate repeal

From the Policy Implications

In the absence of bipartisan support for federal action, legislative activity has shifted to the states.

More broadly, leaving policy innovation to states will ultimately lead to a patchwork quilt of coverage and access to health care across the country, a dynamic that will fuel inequity in overall health, productivity, and well-being. At some point, Congress will likely face pressure to step in to level the playing field.

http://www.commonwealthfund.org…

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Comment:

By Don McCanne, M.D.

Although building on our current fragmented health care financing system is the most expensive model of reform, it was understood from the beginning that the Affordable Care Act would fall far short of our goals of universality, comprehensiveness, and affordability. If there is any surprise here, it is how quickly some of the gains could be reversed without the formality of enacting repeal and replace legislation. Not only is ACA a fundamentally flawed model, it is subject to damage through the political whims of ideologues.

Some of the proposed policy options to improve coverage include more advertising of exchange plans, reinsurance to reduce risk of insurer losses, more premium and cost sharing subsidies, and even a public option such as a Medicare buy-in. The problem is that these leave in place the high costs and administrative waste and other deficiencies that characterize our system while failing to protect against political chicanery.

If we had in place a well designed single payer national health program – an improved Medicare for all – everyone would have access to their choice of health care professionals and institutions, and care would be prepaid automatically  through progressive taxes and thus affordable for everyone. It would be the privilege once granted that became an irrevocable right, if there were any doubts before.

The Commonwealth Fund would have plenty of other features of our health care system to study, but no longer would they have to keep count of how many go without any health care coverage at all, or how many face financial hardship because they are underinsured. Everyone would be included and nobody would be deprived of care because it was not affordable. So the question is, why do we continue to tolerate the injustices of our highly dysfunctional financing system when we don’t have to?

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It Is Time to Liberate Hospitals from Profit-Centered Care

By Sidney M. Wolfe, M.D.1, Steffie Woolhandler, M.D., M.P.H.2,3, and David U. Himmelstein, M.D.2,3
Journal of General Internal Medicine, April 30, 2018

The way we pay hospitals is toxic. It rewards, indeed requires, bad behavior from hospital leaders and stifles the better angels of their nature.

In our market-driven payment system, hospitals’ success, and even survival, depends on generating profits. Even non-profit hospitals live or die based on profit margins (often labeled “surpluses” in non-profit facilities). Hospitals that lack profits (or the prospect of future profits that can entice lenders or investors) face a grim future. Unable to renovate or expand their original facilities, purchase new equipment, acquire other hospitals, or grow their provider networks, unprofitable hospitals often spiral downward. As one public hospital CEO admonished two of us, “no margin, no mission.”

In this issue of JGIM, Ly and Cutler1 demonstrate one noxious side effect of making profitability the arbiter of hospital success. Their analysis of changes in hospital profit margins between 2003 and 2013 indicates that hospitals won the profit game by boosting prices, not by improving efficiency, or through exemplary community service (e.g., by increasing their care for Medicaid patients). The losers cared for a disproportionate share of publicly insured patients (and presumably the uninsured, although Ly could not assess that) or had the bad luck to be located in rural America. Public hospitals lagged, while not-for-profits grew their profits even faster than for-profits. (Although not discernible from Ly’s analysis, MedPAC data indicates that investor-owned hospitals had much higher profit margins at baseline and retain a big profit lead.2) Chaining up was a winning strategy, presumably because it increased hospitals’  leverage in negotiations with insurers, allowing them to command higher prices.

Ly’s conclusion that upcoding did not drive profitability gains will surprise many clinicians whose hospital managers obsess about capturing every billable diagnosis. While the study found a positive relationship between growth in a hospital’s casemix index (CMI) and growth in its profit margin, this finding was not statistically significant. Unfortunately, this analysis was underpowered because it used all-payer CMI data, which was available for only a subsample of 587 hospitals in eight states. Nationwide, increases in the Medicare CMI (available for almost all hospitals) strongly predict total margin growth (Dickman S, Woolhandler S, Himmelstein DU. Unpublished analysis of Medicare Cost Report and Medicare casemix data, 1998–2016). It seems likely that upcoding is an important profit-driver.

Hospitals did not always have to turn a profit in order to survive. In our past (and today in Canada, much of Europe, and our VA system), funds for capital investments came from government grants or charitable donations.

During the first three decades of the twentieth century, private donors funded almost all US hospital construction.3 The federal government stepped in to provide capital funds to non-profit hospitals during the Great Depression, and its Hill-Burton program was the major funder of hospital construction in the post-war period. The seed of profit-based capital funding was planted by the hospital industry-controlled Blue Cross plans of that era, which paid hospitals a per diem rate that covered operating costs (including interest on loans, i.e., payment for existing capital investments), plus depreciation and a capital add-on to provide hospitals with reserves for future capital investment.4 But even as late as 1965 (when Congress passed Medicare and Medicaid), hospitals’ reserves together with their long-term borrowing accounted for only 31.9% of hospital construction funds.5

Two developments in the mid-1960s accelerated the shift from grant-based to profit margin-based funding for not-for-profit hospital capital. First, a 1963 IRS ruling triggered states to start offering tax-exempt bond funding for hospital construction, allowing hospitals to obtain loans with minimal down payments, and pay them off with future profits. Second, Medicare adopted Blue Cross’ capital payment model (with an extra profit allowance for investor-owned facilities). For hospitals with a good payer mix, this assured a flow of public dollars to build up reserves for future investments, and to pay off bondholders and investors. By the 1970s, 70% of construction was debt-funded, with much of the rest covered by hospitals’ reserves.6

Before the mid 1960s, explicit (if often flawed) public decision-making guided the allocation of government funding for hospital construction. Thereafter, the flow of taxpayer dollars surged but public control of decision-making shriveled. Profitability determined which hospitals could afford new projects, and private boards and executives decided how to deploy those funds.
 
Medicare’s (and private insurers’) capital payment policies have undergone many twists and turns over the past half century. But the link between profitability and ability to expand and modernize has been a constant. In effect, all non-federal hospitals have been forced to become quasi-commercial enterprises, and to think of themselves in business rather than social terms.4 As profitability became mandatory for hospital survival, the distinction between for-profit and non-profit hospitals began to erode—although even decades later, for-profits continued to deliver inferior quality care at higher prices.7,8

The price-boosting that Ly identifies as a key profit-driver (among non-profit as well as investor-owned hospitals) is just one of the ill-effects of making profit margin the mission. Hospitals’ manipulations of their payer and service mixes, the efforts squandered on financial gaming, and the ethical compromises that have become commonplace in the healthcare milieu are also, like price gauging, antithetical to the public’s interests.

Hospitals’ efforts to avoid money-losing patients, effectively excluding many of those most in need, have become so routine that many of us have become inured to this disgrace. New York City’s private academic medical centers exclude almost all uninsured persons and maintain separate clinic systems for patients with Medicaid, leading to the de facto racial as well as socioeconomic segregation of care,9 a situation that is not unique to New York. The CEO of the Mayo Clinic—which generated an operating surplus of $707 million last year, while investing $714 million in new capital projects—instructed employees to “prioritize” patients with private insurance over those with Medicaid, and even Medicare.10,11

The profit imperative, even among non-profit hospitals, similarly distorts the mix of services that hospitals choose to offer or promote. Money-losing services like mental health and primary care are accorded second-class status, in contrast to the opulent resources devoted to elective cardiac and orthopedic interventions, even those of dubious value.

Selectively recruiting profitable patients and excluding the unprofitably ill require considerable bureaucratic effort and expense. But that is just the beginning. Much more is spent to maximize billings and collect payment. At one non-profit Utah hospital system, 2,300 employees, 6% of all employees, work on claims processing and bill collections.12 Meanwhile, the patient chart has morphed from a clinical diary for facilitating care into a billing document driven by commercial imperatives, padded with redundant (and even misleading) material. Physicians now spend half their time on electronic documentation and other clerical/administrative tasks.13 Overall, the average US hospital now devotes more than one quarter of its budget to administration, a share that is continuing to increase, and is already twice that in Canada (or Scotland).14

Why is hospital administration so much leaner in Canada? Although physician payment in Canada’s single-payer system looks a lot like US Medicare’s, its hospital payment strategy is dramatically different, more akin to the way we fund the VA. Canadian provinces (and Scotland) pay hospitals’ global operating budgets, with separate government grants for capital costs. Even countries like France, Switzerland, and Germany which have more complex universal social insurance schemes, fund much of new hospital investments through government grants rather than hospitals’ profits. This dampens US-style entrepreneurial incentives, leading to lower bureaucratic costs, less price-inflating gaming, and greater healthcare equity.

Profit-seeking does not just undermine efficiency and equity, it also fosters corruption. For-profit hospital firms have been most frequently implicated in the most egregious incidents, paying billions to settle fraud and abuse claims. But the faltering moral compass of non-profit and even public hospital leaders has an even greater impact because they control 80% of community hospitals, and almost all academic medical centers. Massachusetts General Hospital received $123 million in royalties and licenses over a four-year period,15 mostly from orthopedic device-makers whose high prices are borne largely by Medicare. In 2013, 73 leaders of academic medical centers also sat on the boards of 85 publicly traded healthcare firms, receiving median compensation of $209,000 per directorship, and, in addition, held 5,493,946 shares of stock in those firms.16 It takes extraordinary ethical gymnastics to justify such dual commitments.

Ly implies that a crackdown on hospital prices would lead to salutary change, goading hospitals to seek profit through efficiency. But controlling prices without eliminating profits could amplify current profit-inflating misbehaviors, e.g., prioritizing the care of privately insured patients. As long as profit-centered care remains the key to hospital survival, patient-centered and community-centered care will suffer.

No law of nature requires that hospitals make profits in order to thrive. What is needed is a single-payer reform that:

  • Pays hospital lump-sum operating budgets, like those for schools, fire houses, or VA hospitals;
  • Claws back any money they do not spend on care; and
  • Allocates truly needed capital funding through a region-wide accountable government grant program that directs investments to the highest priority, community responsive projects.

https://link.springer.com…

References

1. Ly DP, Cutler DM. Factors of U.S. hospitals associated with improved profit margins: An observational study. JGIM 2018; DOI: https://doi.org…

2. MedPAC. Report to the Congress: Medicare payment policy. Medicare Payment Advisory Commission, Washington: March 15, 2017. Available at: http://www.medpac.gov… (access 2/17/2018).

3. Stevens R. In sickness and in wealth: American hospitals in the twentieth century. New York: Basic Books, 1989.

4. Brown JB with Thomas SR and members of the Harvard University Health Capital Project. Health capital financing. Ann Arbor, MI: Health Administration Press, 1988.

5. Stambaugh JL. A study of the sources of capital funds for hospital construction in the United States. Inquiry June, 1967;14:3–22.

6. Wilson G, Sheps CG, Oliver TR. Effects of hospital revenue bonds on hospital planning and operations. N Engl J Med 1982;307:1426–1430.

7. Devereaux, PJ, Choi PTL, Lacchetti C, et al. A systematic review and meta-analysis of studies comparing mortality rates of private for-profit and private not-for-profit hospitals. Can Med Assoc J 2002;166:1399–1406.

8. Devereaux PJ, Heels-Ansdell D, Lacchetti C, et al. Payments for care at private for-profit and private not-for-profit hospitals: a systematic review and meta-analysis. CMAJ. 2004;170(12):1817–1824.

9. Tikkanen RS, Woolhandler S, Himmelstein DU, Kressin NR, Hanchate A, Lin MY, McCormick D, Lasser KE. Hospital payer and racial/ethnic mix at private academic medical centers in Boston and New York City. International Journal of Health Services. 2017; 47(3):460–476.

10. Kacik A. Mayo Clinic CEO Noseworthy to retire. Modern Healthcare February 26, 2018:6.

11. Olson J. Mayo to give preference to privately insured patients over Medicaid patients: Pushback on Medicaid, Medicare part of a trend. Star Tribune March 15, 2017. Available at: http://www.startribune.com… (accessed March 4, 2018)

12. Kacik A. Intermountain joins outsourcing trend for revenue-cycle management. Modern Healthcare January 29, 2018:8.

13. Sinsky C, Colligan L, Li L, Prgomet M, Reynolds S, Goeders L, Westbrook J, Tutty M, Blike G. Allocation of physician time in ambulatory practice: a time and motion study in 4 specialties. Annals of internal medicine. 2016;165(11):753–60.

14. Himmelstein DU, Jun M, Busse R, Chevreul K, Geissler A, Jeurissen P, Thomson S, Vinet M-A, Woolhandler S. A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far. Health Aff. September 2014;33:1586–1594.

15. https://openpaymentsdata.cms.gov… (accessed March 6, 2018).

16. Anderson TS, Good CB, Gellad WF. Prevalence and compensation of academic leaders, professors, and trustees on publicly traded US healthcare company boards of directors: cross sectional study. BMJ 2015:351:h4826.

Author credentials: 1. Public Citizen Health Research Group, Washington, DC, USA; 2. City University of New York at Hunter College, New York, NY, USA; 3. Cambridge Health Alliance/Harvard Medical School, Cambridge, MA, USA

Corresponding Author: David U. Himmelstein, M.D.; City University of New York at Hunter College, New York, NY, USA (e-mail: dhimmels@hunter.cuny.edu).

Compliance with Ethical Standards:

Conflict of Interest: No conflicts of interest to report.

We all need health care for royalty, though not necessarily with the posh suite

The Royal Baby Is Lucky He Wasn’t Born in America

By Laurie Garrett
FP, April 24, 2018

On April 23, the Duchess of Cambridge gave birth to her third child in a posh London maternity center called the Lindo Wing inside St. Mary’s Hospital, where a small army of attendants looked after her and Prince William for 24 hours in a secluded, luxurious room at a cost of $8,900, according to the Economist.

Most Western Europeans and Canadians, of course, don’t deliver babies in the Lindo Wing. Otherwise, however, their treatment and outcomes are pretty much consistent with the royal couple’s. Parents pay nothing for their maternity care and delivery, with low risks of maternal and infant mortality.

The average American woman gives birth in a noisy hospital with few frills or amenities and for an average cost of $12,290. Everything is quite average, in terms of quality and aesthetics in the birthing environment, except, on a worldwide scale, the costs. Should she require a cesarean section (an average of $16,907) or any emergency services, her bill could swiftly soar above $30,000. Have premature triplets and costs top $870,000.

According to the National Academy of Medicine, the United States lags far behind the rest of the OECD for a long list of health problems, including maternal and infant mortality. In the OECD, only Turkey and Mexico had higher infant mortality rates than Mississippi, and the state with the best infant mortality in the United States — New Hampshire — would still rank way down at 28 in OECD stature.

One study found that Americans used health care services at about the same rate as Europeans — perhaps even less — yet paid nearly twice as much for just about everything.

Today, tens of thousands of Americans are crowdfunding their health care, searching for help to offset the costs that their insurance companies refuse to cover. It has come to this. America is a nation of beggars, forced to seek the pity of strangers who may, in turn, choose who shall live based on charity and who shall die for lack of financial support. A blonde 2-year-old girl in a ballerina tutu may garner more such kindness than a black 10-year-old boy in a Black Panther suit, who in turn gleans greater compassion from the online masses than a 50-year-old gunshot victim or an elderly Latina dying from diabetes. It’s like a macabre version of the 1950s TV show Queen for a Day, in which needy women pleaded for a fridge, dishwasher, new flatware, or a smart set of work clothes and an “applause-o-meter” was used to measure studio audience choices.

In a sensible health care system, there are no applause-o-meters; insurance actually covers patients’ costs; drugs and medicines are purchased in volume to bring down those prices; and life expectancy is independent of personal income.

https://foreignpolicy.com…

***

Comment:

By Don McCanne, M.D.

Fortunately most Americans are not dependent on crowdfunding or on Queen for a Day applause-o-meters to pay for health care, but in some ways these are symbolic of the humiliating dysfunctions inherent in our health care financing system. We should be ashamed that we spend twice the average of other nations on health care and yet leave tens of millions to suffer from financial hardship when they need health care, while not getting the results that we should be.

We already are spending enough money to provide health care for everyone, but we need to spend it more wisely. Through a well designed single-payer, improved Medicare for all, cost-sharing financial barriers could be essentially eliminated for everyone as they are in many other nations that spend much less.

Should we reprise the applause-o-meter to award that cute 2-year-old blond in a ballerina tutu the title of Princess for a Day in order to help pay at least some of the costs of her cancer care? Then what about the elderly Latina with late stage diabetes whose applause meter score did not qualify her as Queen for a Day, and who also failed to gain sympathy on a crowdfunding webpage?

This is America. We can do far better than that.

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

Improved and expanded Medicare for all: The single-payer option we need

Improved and expanded Medicare for all: The single-payer option we need

By Judith L. Albert, M.D. and Ana Malinow, M.D.
Allegheny County Medical Society Bulletin, April 2018

Dr. Fredric Jarrett’s article in the February Bulletin, “Single-payer health care: Not an option,” offers an opportunity to correct many misperceptions about what the “single-payer option” is and to present instead, the case in favor of “expanded and improved Medicare for all.” 1 Dr. Jarrett initially suggests that proponents of single payer extol the virtues of the Canadian and British systems, a statement that is misleading since these two systems are quite different. While Canada does have coverage for all residents, it is administered at the provincial and federal levels. Health care providers are largely private. In the United Kingdom, a national health service exists, such that providers and hospitals are run by the government, and the government also pays for health care for most residents. There is, however, another option in the United Kingdom that allows wealthier individuals to obtain care outside the national health system, a factor that complicates and dilutes the potential for cost containment and equal access, and disqualifies the U.K. system as a model for a national health program in the United States.

Supporters of expanded and improved Medicare for all favor the following: “Universal coverage for all medically necessary care – health care that is publicly financed but largely privately delivered. Patients no longer face burdensome premiums, copays or deductibles, even as they gain free choice of physician and hospital. Doctors gain clinical autonomy and dramatically reduced paperwork.” 2 Any discussion of the “single-payer option” must use rigorous definitions to avoid confusion.

Dr. Jarrett voiced concerns about allowing the single payer to “make the rules” regarding medical necessity. We would argue that placing the decision-making for medical coverage with a public, single-payer option with public accountability will remove the profit motive for decision-making that exists in our current private insurance system. Do we really want health care decisions to be made by corporate insurance executives whose primary interest is their bottom line? Two current single-payer bills in the House (H.R. 676) 3 and Senate (S. 1804) 4 have explicit provisions that address accountability and transparency in the management of the health care program.

Dr. Jarrett goes on to acknowledge that the health care system in Canada enjoys near universal popularity among Canadians, due to the elimination of “medical bankruptcy,” a condition that is all too common here in the United States when lack of insurance coverage or under-insurance allows huge medical debt to accrue for individuals. 5 One of the advantages of the Canadian system is the ability of the health care program to negotiate with pharmaceutical companies on drug prices. Tremendous savings in health care expenditures would result from the ability of a U.S. national health program to negotiate drug prices and would eliminate at least one cause of medical bankruptcy. 6

Dr. Jarrett alludes to critical differences between the U.S. and Canadian health care infrastructure that make comparisons difficult, and clearly mandate that a single-payer system in the United States must be specific to the needs of our much larger population and complex medical systems. It is true that the United States is far better equipped to handle the need for necessary imaging when compared to Canada (we have three and a half times as many MRI and CT scanners). However, emergency imaging is always available in Canada without delay. While in the United States, we have the capacity, uninsured and underinsured individuals cannot afford CT or MRI scans. Millions of Americans are not even afforded the luxury of a place in line. 7

Dr. Jarrett cites the anecdotal increased mortality from abdominal aortic aneurysm due to patients waiting for approval in the United Kingdom. Compare that to the projected excess annual mortality of 36,000 Americans as a result of the 28 million people who are uninsured. 8 Lack of health insurance is bad for our health and results in increased mortality. The United States spends nearly twice as much for health care than other economically developed countries in the world, yet ranks last among 11 industrialized countries when it comes to quality, efficiency, access, equity and healthy lives. 9 Surely, with our massive healthcare resources, we can do better than this.

Finally, we would disagree that the nearest current prototype to single payer we have is Medicaid, because Medicaid is a means-tested program that varies by state. The current prototype for single payer is Medicare, which insures all adults 65 and older. While Medicaid does provide for the medical care of many non-elderly individuals, it is not universal coverage for that population in the way that Medicare is for the elderly. Dr. Jarrett neglected to mention House Bill H.R. 676, which currently has the support of 122 members of Congress. 10 The bill is 30 pages long and would create a publicly financed, privately delivered health care system that builds on the existing Medicare program. It would improve and expand Medicare to cover all U.S. residents. By replacing our nation’s fragmented patchwork of competing private insurance companies (with their wasteful administrative costs, profits and high executive salaries) with a nonprofit single-payer program, the nation would save more than $500 billion per year, 6 enough to guarantee comprehensive health care to all, with no co-pays or deductibles. Numerous surveys of physicians and health care consumers indicate a majority support the idea of expanding Medicare to provide health insurance to every American, including 59 percent of all physicians 11 and 60 percent of Americans. 12 There is even support for expanding Medicare from 40 percent of Trump voters! 12

As physicians, we have an obligation to advocate for all Americans and their health. As members of our professional organizations, we have a duty to seek evidence and report the facts. There is strong evidence that having health insurance fosters improved health and reduced mortality for all individuals. Our current system is giving us exactly what it was designed to do: increased profits for private insurance companies and the rationing of care based on the ability to pay. Improved and expanded Medicare for all: the single-payer option we need.
 
Dr. Albert is an obstetrician/gynecologist and reproductive endocrinologist who has been in practice in Pittsburgh since 1992. She and Dr. Malinow founded the Pittsburgh chapter of Physicians for a National Health Program with several other physicians in fall 2017.

Dr. Malinow is a general pediatrician in Pittsburgh. She is past president of Physicians for a National Health Program, an organization of more than 20,000 health care providers that support a single-payer, national health program.

The authors can be reached at bulletin@acms.org.

References

1. Jarrett F. Single-payer health care: Not an option. Allegheny County Medical Society, February 2018 Bulletin.

2. Physicians for a National Health Program, Single Payer FAQ, https://pnhp.org…

3. H.R. 676 Expanded and Improved Medicare for All Act, 115th Congress (2017-2018) https://www.congress.gov…

4. S. 1804 Medicare for All Act of 2017, 115th Congress (2017-2018) https://www.congress.gov…

5. Himmelstein DU, Thorne D, Warren E. Medical Bankruptcy in the US, 2007: Results of a National Study. The American Journal of Medicine. Vol 122, Issue 8, August 2009: 741-746. https://pnhp.org…

6. Woolhandler S, Himmelstein DU. Savings of $500 B/year. Woolhandler S and Himmelstein D. Single-Payer Reform: The Only Way to Fulfill the President’s Pledge of More Coverage, Better Benefits, and Lower Costs. Annals of Internal Medicine, April 18, 2017. http://annals.org…

7. Papanicolas I, Woskie LR, Jha AK. Health Care Spending in the United States and Other High-Income Countries. JAMA. 2018;319(10):1024-1039. https://jamanetwork.com…

8. Wilper, AP, et al. Health Insurance and Mortality in US Adults. American Journal of Public Health. 2009;99:2289-2295. https://pnhp.org…

9. The Commonwealth Fund. US Health System Ranks Last Among Eleven Countries on Measures of Access, Equity, Quality, Efficiency, and Healthy Lives. June 16, 2014. http://www.commonwealthfund.org…

10. H.R. 676 Expanded and Improved Medicare For All Act 115th Congress (2017-2018) Cosponsors https://www.congress.gov…

11. Carroll A, Ackerman R, Support for National Health Insurance Among American Physicians: Five Years Later. Annals of Internal Medicine April 1 2008. http://annals.org…

12. The Economist/YouGov Poll. April 2-4, 2017. https://d25d2506sfb94s.cloudfront.net…

https://www.acms.org…

Single-payer health insurance advocates launch chapter in Greenville

By Liv Osby
Greenville (S.C.) News, April 29, 2018

There was the uninsured truck driver in his 50s who skimped on his blood pressure medication because of the cost and wound up having a stroke.

And the housekeeper in her early 60s who couldn’t afford health insurance on her meager wages and had no way to pay for breast cancer treatment.

Over the years, there have been thousands of other patients like these, said Dr. David Keely, a family physician who spent his career caring for people who had trouble affording health care.

“I’ve seen it over and over,” he told The Greenville News. “Either their illness got worse because they were unable to afford their medication or they presented uninsured with hardly any money and had a medical condition that had to be treated.”

Now semi-retired from a community health clinic in rural Rock Hill, Keely is trying to make healthcare something that all Americans — poor, uninsured and underinsured included — can access by establishing a chapter of Physicians for a National Health Program in Greenville.

“The goal is to mount an awareness campaign about the inequities (of) our current system,” he said, “and try to get a grass roots movement to … make our health care system better with the ultimate goal of single-payer financed, privately delivered universal care.”

PNHP is a nationwide nonprofit made up of 20,000 physicians, medical students and health professionals who support single-payer national health insurance.

Also known as Medicare for All, it would operate the way Medicare insurance does now, paying for care by private providers. It would cover doctors, hospitals, mental health, dental and vision care, prescription drugs and more, according to the group, and be funded by the savings from replacing the current system.

Surveys show most Americans favor the idea of Medicare for All, including 75 percent of Democrats and 46 percent of Republicans, according to PNHP.

Affording health care

As the first physician in his family, Keely started a practice in Chester County to repay his obligation to the National Health Service Corps, which helped pay his tuition to medical school in return for practicing in a high-need area.

Seeing the hardships his patients endured, Keely attended a PNHP presentation where a speaker said that 45,000 people in the United States die every year because they lack access to affordable health care.

“It was the equivalent of a jetliner crashing every other day and nobody surviving,” he said. “I thought ‘That’s immoral.’ ”

So Keely helped launch a chapter of PNHP in the Palmetto State. Called Healthcare for All – South Carolina, it has branches in Charleston, Columbia and Florence.

And now a regional group is getting started in Greenville.

“There are many reasons why a single-payer system would be better for us,” said Greenville psychiatrist Dr. Patrick Mullen, who is among the supporters.

For example, he said, dealing with only one insurer instead of many would be less complicated and save money.

Desperate need

“One simpler system to deal with — and I don’t see how it could be any more complicated than it is,” he said. “And I can’t think of anything bad from the standpoint of the health of the population.”

One of the group’s first events in Greenville is a May 2 presentation by Dr. Ed Weisbart, assistant professor of clinical medicine at Washington University in St. Louis, Missouri, and chair of the Missouri chapter of PNHP.

A family physician who volunteers at safety net clinics, he’s also seen his share of patients in desperate need.

One 63-year-old woman supporting three grandchildren stopped taking her blood pressure medicine to make the rent so the family wouldn’t be homeless, he said.

Another patient with warning signs of a massive stroke couldn’t afford an expensive test and surgery, so she rolled the dice and waited until she was eligible for Medicare about six months later.

“That’s not what should happen,” Weisbart said. “If she had had this stroke, and then been disabled, it would have been even more expensive to take care of. It’s not even a good business strategy to have people make these trade-offs.”

Yet all over the country, Weisbart said, people are going bankrupt and losing their homes because of medical bills.

Four in 10 Americans are fearful of having to pay for a serious illness, according to PNHP. Even the insured have difficulties, said Weisbart, noting that he and his wife pay $2,000 a month in insurance premiums and have a deductible of $12,000.

‘Opened my eyes’

Michelle Hunt and her husband have three young daughters, and the 6-year-old has been battling severe asthma most of her life.

The doctor just prescribed a medicine that costs $245 a month in addition to her $115 rescue inhaler, Michelle Hunt said. But with insurance premiums of $550 a month, that was going to be hard for the Rock Hill couple.

“I reached out … to see if there were any other cheaper medications, but there weren’t,” she said. “We have found a coupon that will bring it down to about $200. So I guess we will have to cut back on other things.”

Among them is her own allergy medication, which costs about $50 a month, she said. They may also cut out cable TV and other things they can live without. Her mother has also offered to help with the costs of Emily’s medicine.

“This is something she has to have to breathe better,” said Hunt, 38, a risk management administrator for a telecommunications company.

“We’ve never had anything like this happen before,” she said. “But even with insurance, this really opened my eyes. We need something to help out with these costs.”

Covering everyone

Weisbart said insurance overhead makes up 15 to 20 percent of health care costs. In addition, he said, the average independent physician has $85,000 worth of staff that does nothing but deal with insurance.

“I see this as a problem that’s affecting Americans and I believe the most prudent way to solve it is to take Medicare, improve a few things, and provide it to everybody,” he said.

Most research shows that a single-payer option  – which is not socialized medicine but an insurance plan – would result in a dramatic savings or at least break even with everyone covered, including the 28.8 million Americans who are uninsured now, he said.

“Other countries with single-payer systems spend half of what we do,” he said, “and they live longer.”

Keely, who still spends about 20 hours a week as a volunteer physician, said he isn’t unrealistic about the headwinds the group faces, but adds that the current system is unsustainable.

“We don’t think we have our heads in the wrong place, but it’s certainly a marathon and not a sprint,” he said. “It’s heartening to be able to reach people and get them be able to say, ‘I just hadn’t thought about this and what you say makes sense.’

“That’s what keeps me going.”

https://www.greenvilleonline.com…

Angus Deaton: Self-assessment of well-being and policy ethics

NBER Working Paper No. 24369; What do Self-Reports of Wellbeing Say about Life-Cycle Theory and Policy?

By Angus Deaton
National Bureau of Economic Research, March 2018

Abstract

I respond to Atkinson’s plea to revive welfare economics, and to considering alternative ethical frameworks when making policy recommendations. I examine a measure of self-reported evaluative wellbeing, the Cantril Ladder (a tool for self-assessment of wellbeing with ladder steps numbered 0 to 10), and use data from Gallup to examine wellbeing over the life-cycle. I assess the validity of the measure, and show that it is hard to reconcile with familiar theories of intertemporal choice. I find a worldwide optimism about the future; in spite of repeated evidence to the contrary, people consistently but irrationally predict they will be better off five years from now. The gap between future and current wellbeing diminishes with age, and in rich countries, is negative among the elderly. I also use the measure to think about income transfers by age and sex. Policies that give priority those with low incomes favor the young and the old, while utilitarian policies favor the middle aged, and men over women.

Conclusions

This paper takes up Atkinson’s challenge to bring back welfare into economics, and to do so in a way that does not have to deny the findings of modern behavioral economics. It also thinks about how policy varies with different ethical assumptions. It uses Gallup’s data on the Cantril Ladder measure of life evaluation as a measure of (period) utility, and examines the implications for welfare variations by age. I find a midlife dip in wellbeing in rich countries, but less or no evidence of it elsewhere.

Overall, only some features of the ladder are consistent with life cycle theory if it is interpreted as a period, or age-specific wellbeing measure; it is much harder to interpret it as a lifetime measure. People’s expectations of the ladder five years ahead are grossly inconsistent with those reports being the mathematical expectations of future period utility; throughout the world, people are generally over-optimistic about the future, except for the elderly in rich countries, who are generally over-pessimistic about the future. These findings are of considerable interest, but cast doubt on the idea that people arrange their consumption and labor supply to maximize the expected integral of age-specific utilities, at least if utilities are well measured by the Cantril Ladder as recorded in Gallup’s surveys. This does not, by itself, invalidate the ladder itself as a measure of period age-specific wellbeing.

Finally, I illustrate what the ladder measure would imply for distributing income by age, and how the choice of the ladder versus income interacts with different ethical frameworks. In the United States, income prioritarians will tend to favor redistribution towards elderly or young adults, whose incomes or per capita incomes are lowest. By contrast, utilitarians will favor those for whom marginal utility is highest, which turns out to be those in midlife, and especially men over women, a prescription that would be enhanced by giving additional priority to those whose wellbeing is lowest, also those in midlife. Both approaches would favor men over women. I make no prescriptions here, but am concerned only to show the possibilities that arise from having a direct measure of wellbeing. I also am responding to Atkinson’s challenge by emphasizing and illustrating that policy prescriptions depend, not just on measurement, but on ethics, a point that is not always given the weight that it should be when economists discuss policy.

As in the happiness literature in general, my findings are mixed; the Cantril Ladder is clearly useful, is not obviously inconsistent with standard notions of period utility, and allows us to say things about welfare and distribution that we could not say using standard revealed preference methods. It does not assume that people do not make mistakes. Reported expectations of future wellbeing are consistent with the widespread finding of optimism bias in psychology, but inconsistent with the rational expectations formulation that is standard in much of economics. Whether this is an advantage or a disadvantage will surely differ according to preference and disciplinary background.

http://www.nber.org…

***

Comment:

By Don McCanne, M.D.

Although this NBER working paper by Nobel laureate Angus Deaton is quite wonkish it is an interesting analysis of self-assessment of current and anticipated future well-being under variables of age, sex, wealth, and nationality. For a blog on single payer reform, this paper does have some application since perception of well-being might be an important attribute related to a nation’s health care system.

But that is not why this paper was selected for a Quote of the Day, rather one sentence extracted from the paper expresses a truth that is too often neglected in the policy community:

“I also am responding to Atkinson’s challenge by emphasizing and illustrating that policy prescriptions depend, not just on measurement, but on ethics, a point that is not always given the weight that it should be when economists discuss policy.”

We hear a lot of policy recommendations, but all too often it is difficult if not impossible to identify the ethical imperative. In contrast, the ethical imperative permeates the single payer model of reform.

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

The deficiencies of Trump’s short-term health insurance plans

Understanding Short-Term Limited Duration Health Insurance

By Karen Pollitz, Michelle Long, Ashley Semanskee, and Rabah Kamal
Kaiser Family Foundation, April 23, 2018

Late last year, Congress repealed the Affordable Care Act’s individual mandate penalty, the requirement that individuals have minimum essential health coverage or face a tax penalty.  Starting in 2019, the tax penalty will be reduced to $0.  It is possible this change could lead more consumers to consider purchasing short-term policies.  In addition, late last year, President Trump issued an executive order directing the Secretary of Health and Human Services to take steps to expand the availability of short-term health insurance policies, and a proposed regulation to increase the maximum coverage term under such policies was published in February.  This brief provides background information on short-term policies and how they differ from ACA-compliant health plans.

Background

As the name suggests, short-term health insurance policies are not renewable.  Whereas federal law since 1996 has required all other individual health insurance to be guaranteed renewable at the policyholder’s option, coverage under a short-term policy terminates at the end of the contract term.  To continue coverage beyond that date requires applying for a new policy.  As a result, an individual who buys a short-term policy and then becomes seriously ill will not be able to renew coverage when the policy ends.

The Affordable Care Act (ACA) exempted short-term policies from market rules that apply to most major medical health insurance policies sold to individuals in the non-group market: rules that prohibit medical underwriting, pre-existing condition exclusions, and lifetime and annual limits, and that require minimum coverage standards.  By contrast, short-term policies:

* are often medically underwritten – applicants with health conditions can be turned down or charged higher premiums, without limit, based on health status, gender, age, and other factors;

* exclude coverage for pre-existing conditions – policyholders who get sick may be investigated by the insurer to determine whether the newly-diagnosed condition could be considered pre-existing and so excluded from coverage;

* do not have to cover essential health benefits – typical short-term policies do not cover maternity care, prescription drugs, mental health care, preventive care, and other essential benefits, and may limit coverage in other ways;

* can impose lifetime and annual limits –  for example, many policies cap covered benefits at $2 million or less;

* are not subject to cost sharing limits – some short term policies, for example, may require cost sharing in excess of $20,000 per person per policy period, compared to the ACA-required annual cap on cost sharing of $7,350 in 2018; and

* are not subject to other ACA market requirements – such as rate review or minimum medical loss ratios; for example, while ACA-compliant non-group policies are required to pay out at least 80% of premium revenue for claims and related expenses, the average loss ratio for individual market short-term medical policies in 2016 was 67%; while for the top two insurers, who together sold 80% of all short-term policies in this market, the average loss ratio was 50%.

From the Discussion

Short-term health insurance policies offer lower monthly premiums compared to ACA-compliant plans because short-term policies offer less insurance protection.  Medically underwritten policies can only be purchased by people when they are healthy.  Individuals who buy short-term policies and then develop health conditions will lose coverage when the contract ends.  Short-term policies typically do not cover essential benefits, such as prescription drugs, and often apply dollar caps and higher deductibles on coverage that are no longer allowed under ACA-compliant individual market and group health plans.  As a result, people who buy short-term policies today in order to reduce their monthly premiums take a risk that, if they do need medical care, they could be left with uncovered bills and/or find themselves “uninsurable” under such plans in the future (though they would be able to buy ACA-compliant policies at the next open enrollment period).

To the extent that healthy individuals opt for cheaper short-term policies instead of ACA-compliant plans, such adverse selection contributes to instability in the reformed non-group market and raises the cost of coverage for people who have health conditions.  Income-related premium subsidies in the non-group market offset the cost differential, and so help correct for adverse selection to a significant extent.  Lower-income people would be protected by the premium subsidies, but middle-income people not eligible for subsidies who buy ACA-compliant plans would likely see premium increases.  So far, the individual mandate penalty also has helped offset the cost differential between short-term plans and ACA-compliant plans, though this will disappear starting in 2019.  The combined effect of repealing the individual mandate penalty and the administration’s efforts to promote the sale of short-term plans could result in fewer people signing up for ACA-compliant plans and higher premiums in the ACA-compliant individual market, potentially adversely affecting the stability of the ACA-compliant individual market.

https://www.kff.org…

***

Comment:

By Don McCanne, M.D.

President Trump has issued an executive order directing that steps be taken to expand the availability of short-term health insurance plans. Although there is a general recognition that these short-term plans are more limited than plans regulated by the Affordable Care Act, this policy brief from Kaiser Family Foundation explains just how severe the deficiencies in coverage are and the negative impact that they will likely have on more comprehensive plans that are compliant with the Affordable Care Act.

People will buy these plans because the premiums will be less, but most will suffer significant financial hardship should they be faced with severe acute or chronic conditions.

Why are President Trump, HHS Secretary Azar and CMS Administrator Verma not only supporting but actually encouraging these plans? Is there a rational reason, or do they share some form of psychopathology? Whatever it is, we need to fix the problem by enacting and implementing a single payer national health program – an improved Medicare for all – and do it as soon as possible.

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

Top Medical Schools Get Poor Marks for Racial Justice

A new report finds that ten leading medical schools come up short on promoting diversity, serving patients of color, and ensuring fair treatment of workers

FOR IMMEDIATE RELEASE, April 25, 2018

Contact: White Coats for Black Lives National Working Group
national@whitecoats4blacklives.org

White Coats for Black Lives, a national medical student and physician organization, has published its inaugural Racial Justice Report Card. The Report Card evaluates 10 leading U.S. medical schools on 15 metrics, assessing each school’s racial justice performance on curriculum and climate; student and faculty diversity; policing; racial integration of clinical care sites; treatment of workers; and research protocols. The 10 schools and affiliated teaching hospitals were chosen based on student interest and national prominence of the school as measured by NIH funding:

  • Harvard Medical School (Boston, Mass.)
  • Icahn School of Medicine at Mount Sinai (New York, NY)
  • Johns Hopkins University School of Medicine (Baltimore, Md.)
  • Perelman School of Medicine at the University of Pennsylvania (Philadelphia, Pa.)
  • Sidney Kimmel Medical College at Thomas Jefferson University (Philadelphia, Pa.)
  • University of California, San Francisco School of Medicine (San Francisco, Calif.)
  • University of Michigan Medical School (Ann Arbor, Mich.)
  • University of Pittsburgh School of Medicine (Pittsburgh, Pa.)
  • Washington University School of Medicine in St. Louis (St. Louis, Mo.)
  • Yale School of Medicine (New Haven, Conn.)

Racism is a powerful force in American medicine, with consequences in population-level health outcomes (white Americans live, on average, 3.5 years longer than black Americans); health care delivery metrics (black patients with symptoms of heart attacks are less likely than white patients to undergo ECGs, chest X-rays, or oxygen saturation monitoring); and physician workforce statistics (black, Latinx, and Native American people represent 32% of the U.S. population, but only 8.9% of physicians).

Medical schools and affiliated hospitals are powerful institutions that receive massive amounts of public funding, provide care to millions of patients, and are often the largest employers in their regions. The Racial Justice Report Card encourages them to fight racism by directing their power and resources towards the needs of patients and health care workers of color through three principal goals:

  1. Articulate a vision of specific actions that medical schools and academic medical centers should take to promote racial justice.
  2. Increase transparency around current policies and practices of medical schools and academic medical centers.
  3. Support community-based organizing efforts that hold medical schools and academic medical centers accountable for promoting racial justice.

The Racial Justice Report Card was created by the medical student members of White Coats for Black Lives, with the collaboration of medical students at the graded schools. Schools received an advance copy of their report cards last week and were given the opportunity to correct any inaccuracies.

White Coats for Black Lives is a medical student-run organization working to safeguard the lives and well-being of patients through the elimination of racism.

Ipsos survey shows concern over paying for health care

Consumers for Quality Care, Ipsos Survey, March 13-25, 2018

From the executive summary

* Americans are acutely worried about paying for health care – even more than they worry about costs associated with retirement, college, housing, or child care.

* What people pay is the main pain point: Americans are more concerned about premiums, deductibles, and co-pays than they are about access to care or quality of care.

* When asked who is responsible for their out-of-pocket costs, Americans mostly blame insurance companies, pharmaceutical companies, and the federal government.

Q20: I am going to read you a series of statements. For each one, please tell me if it makes you more or less likely to support a candidate for Congress.

Would vote for candidates who support…

Health care companies disclosing costs
84% – Democrats
84% – Republicans
83% – Independents

Lowering out-of-pocket costs for Rx drugs
83% – Democrats
85% – Republicans
80% – Independents

Passing pharma discounts to customers
80% – Democrats
83% – Republicans
84% – Independents

Improving and funding Obamacare
77% – Democrats
15% – Republicans
52% – Independents

Repealing Obamacare
28% – Democrats
68% – Republicans
48% – Independents

Single-payer health care
59% – Democrats
44% – Republicans
53% – Independents

https://consumers4qualitycare.org…

***

Comment:

By Don McCanne, M.D.

This Ipsos survey confirms that Americans are still very much concerned about health care costs. What is perhaps of more interest here is what people think we should do about it.

There is still a sharp political divide on Obamacare with Republicans favoring repeal, Democrats favoring improving it, and Independents evenly divided. The divide seems to be based more on politics rather than policy.

The support for single payer seems to be about the same as other surveys have reported, though usually more Democrats than the 59% reported here are in support. Of note is that 44% of Republicans support single payer indicating that the single payer message should be targeted more broadly than just to progressives since there also is some significant support amongst conservatives for the concept.

What deserves special attention in this survey is the very strong support across the political spectrum for health care companies disclosing costs, lowering out-of-pocket costs for prescription drugs, and passing drug discounts on to patients. Although some might suggest that this indicates that Americans prefer incremental change, it more likely reflects the fact that it is easier to express support for one single beneficial policy issue at a time.

The nation needs to hear repeatedly just a couple of the specific policy issues that make single payer the moral imperative. We should work on that message, especially regarding affordability. For those whose attention we gain, we can elaborate on the full package.

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