Predictable Unpredictability: The Problem with Basing Medicare Policy on Long-Term Financial Forecasting

By Sherry A. Glied, and Abigail Zaylor
The Commonwealth Fund, July 13, 2015

Conclusion: Uncertainty Is Inherent in Medicare Policymaking

Predicting health care costs 20 or 30 — let alone 50 or 75 — years into the future is an inexact science, at best. The costs of providing care depend on future innovations in technology, the value of such innovations to beneficiaries and to taxpayers, and the supply of and demand for health care services. As the Part D experience and the recent cost slowdown suggest, projections of the rate of future technological change are hard to make even in the short run.

The aging of the baby boomers and rising health care costs will plausibly increase the share of GDP devoted to Medicare, but nothing is certain. As we have shown, changes made in the program over the past decade meant that despite substantial expansions of benefits, the financial outlook for the program remained quite stable. The experience of the past 15 years suggests that there is room for considerable optimism about the ability of our nation to afford the Medicare program into the future.

Long-term forecasting uncertainty should make policymakers and beneficiaries cautious about dramatic changes to the program in the near term. The range of error around forecasts of Medicare costs rises as the forecast window lengthens. This suggests that policymakers should focus on the immediate policy window, taking steps to reduce the current burden of Medicare costs by containing spending today. Medicare expenditure policy changes, such as changes in payment rates or methods, can and have taken effect very quickly. Similarly, revenue changes to pay these expenditures occur in real time. Future policymakers are likely to have as much opportunity and much more information than current policymakers to make optimal decisions about Medicare’s future costs.

The challenges of forecasting Medicare costs provide an additional rationale for paying retiree costs through social insurance rather than a defined-contribution system. Individuals simply cannot anticipate what health care is likely to cost after they retire, and they cannot know how much to save against the prospect of these costs. If talented professional actuaries have difficulty making forecasts, then individuals will surely struggle to project what services they will need in the future. As a society, we can decide through the political process to alter policy or payment practices—and we have done so in the past—but such alterations are well beyond the power of any beneficiary.

http://www.commonwealthfund.org/publications/issue-briefs/2015/jul/predictable-unpredictability-medicare-financing

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Comment:

By Don McCanne, MD

For decades we have been hearing from politicians that Medicare is going broke, especially when looking at long-term predictions. Yet as the years roll by, the predictions are continually revised downward in the short term, demonstrating that the doom and gloom of past predictions were not warranted. Yet since long-term forecasting is uncertain, should we be considering major policy changes in Medicare financing? Specifically, should we consider converting Medicare from a social insurance program to a defined-contribution program as politicians are now suggesting?

Well, no. What we want is is for people to be able to access health care without impairing their personal financial security. The defined-contribution, premium support (voucher) model being proposed is designed to slow federal contributions to the Medicare program by shifting more costs to the beneficiaries. That may help politicians balance the federal budget, but it would increase the risk of financial insecurity for the beneficiaries – the opposite of our goal. Also it would add to the administrative waste that already characterizes our system since it would shift us from the administratively-efficient traditional Medicare program to a system of a market of private plans with all of their wasteful administrative excesses and inequities.

The uncertainty of long-term predictions does not mean that we should ignore the future. In fact, this uncertainty should provide us with greater motivation to establish a more stable infrastructure for health care financing. The obvious would be to establish our own public monopsony – a single payer national health program, an improved Medicare that covers everyone. Although unpredictability is predictable, at least a single payer infrastructure  would ensure all of us access and affordability as future needs and resources are confronted.

Head of Obama’s Health Care Rollout to Lobby for Insurers

By Robert Pear
The New York Times, July 15, 2015

Marilyn B. Tavenner, the former Obama administration official in charge of the rollout of HealthCare.gov, was chosen on Wednesday to be the top lobbyist for the nation’s health insurance industry.

Ms. Tavenner, who stepped down from her federal job in February, will become president and chief executive of America’s Health Insurance Plans, the trade group whose members include Aetna, Anthem, Humana, Kaiser Permanente and many Blue Cross and Blue Shield companies.

On Aug. 24, she will succeed Karen M. Ignagni, a former health policy specialist at the A.F.L.-C.I.O., who has led the industry’s lobbying arm for 22 years.

Most recently, Ms. Tavenner was the administrator of the Centers for Medicare and Medicaid Services, the federal agency that insures one in three Americans and has an annual budget of more than $800 billion. As administrator, she was in charge of HealthCare.gov.

Her selection as chief lobbyist for the industry highlights how federal health programs have become a priority for insurers, which increasingly depend on revenues from Medicare and Medicaid and the new public insurance marketplaces.

Asked about her priorities, Ms. Tavenner said she wanted to protect Medicare Advantage, the program under which private insurers manage care for more than 30 percent of the 55 million beneficiaries of Medicare.

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Obamacare Chief Nominee Pounded On Conflicts Of Interest

By Richard Pollock
The Daily Caller, July 12, 2015

Liberals and conservative have grave ethical concerns about Andy Slavitt, a former health care executive President Barack Obama nominated as his top administrator at the U.S. Centers for Medicare and Medicaid Services.

Of greatest concern to Congress is the apparent conflict of interest Slavitt poses as a top administrator at an agency that will set the rules for his old boss and the nation’s largest insurance company, United Health Group.

Slavitt has been acting CMS administrator since his former boss, Marilyn Tavenner, resigned earlier this year over repeated Obamacare failures.

CMS also is the largest single purchaser of health care in the United States, paying for almost one-third of the country’s health expenditures.

On the other hand, United Health Group is the largest health insurance company in revenues. It reported $122 million in operating revenues in 2013, about one-third which came from government coffers.

Then there are the profits United Health enjoys from CMS. The company sold insurance on many Obamacare’s state exchanges last year. United Health Group’s major profit centers also are based with Medicare and Medicaid. About 40 percent of the company’s operating revenue comes from administering Medicare and Medicaid.

http://dailycaller.com/2015/07/12/obamacare-chief-nominee-pounded-on-conflicts-of-interest/

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Comment:

By Don McCanne, MD

Although the Affordable Care Act included provisions to reduce the overpayment of private Medicare Advantage plans, each year HHS/CMS has used innovative measures to offset these reductions to ensure the viability of these plans. Now former CMS administrator Marilyn Tavenner has been selected to be president and CEO of the insurance lobbying organization, AHIP, the most influential outside organization during the health reform process. When asked about her priorities would be as head of AHIP, Ms. Tavenner said she “wanted to protect Medicare Advantage.”

Selected to replace her at CMS is Andy Slavitt, a former executive of United Health Group, the largest insurer in the nation, a dominant player in the market of private Medicare Advantage plans, not to mention being the provider of AARP Medigap plans and a major provider of administrative services for Medicare and Medicaid.

Karen Ignagni, AHIP’s previous president and CEO, essentially had carte blanche in the White House as ACA was being crafted. She also was very influential in obtaining the concessions that protected the excess payments to the Medicare Advantage plans, measures which greatly benefit United Health Group and others. It seems more than a coincidence that United Health Group dropped out of AHIP shortly after the resignation of Karen Ignagni.

So what is happening? Without insider information, it is very difficult to determine the degree of control held by each of the players, but there is no question that HHS/CMS, AHIP, and UnitedHealth and the other insurers are all participating in advancing the privatization of Medicare by enhancing the private Medicare Advantage plans with our taxpayer dollars. It is particularly disconcerting that this agenda is supported by Congress and the Obama administration.

Imagine what those excess funds could do for our traditional Medicare program, especially in reducing out-of-pocket expenses for premiums, deductibles, coinsurance and catastrophic losses. That would be far better than wasting them on the administrative excesses of the private insurers and on the dishonest activities they engage in to increase their profits by measures such as upcoding or gaming risk adjustment.

Why is there no public outcry? It is simply because the Medicare Advantage plans are able to use about one-third of the extra funds to reduce deductibles and coinsurance, making them appear to be superior products, plus there is no need to purchase supplemental Medigap plans. Most of the beneficiaries who are satisfied with their private plans would not be inclined to support increased taxpayer funding of the traditional Medicare program since it doesn’t concern them anymore. And efforts to reduce Medicare Advantage funding to the same levels as traditional Medicare are met with loud protests orchestrated by AHIP. Those in the traditional Medicare program usually have supplemental retiree or Medigap plans with which they are satisfied, and thus they are not advocates for change either.

It is really difficult to explain to people that what is a good deal for them is a bad deal for all of us together since it perpetuates high costs and extraordinary administrative waste. If their programs seem to be working for them, they don’t want change.

We need to improve the traditional Medicare program so that it is more comprehensive and provides greater value, and then use it to cover everyone. Our task is made much more difficult by the powerful forces that support corporate control of our health care system. After all, they are the ones with the money. And Tavenner and Slavitt will be there as their agents, working inside and outside of the government. And most people won’t care.

The Consumer Finance of Health Savings Accounts

By Jake Spiegel
HelloWallet, July 2015

Health Savings Accounts are a rapidly growing savings vehicle that accompanies High-Deductible Health Plans and allows the account holder to pay for qualified medical expenses tax free. Today, little is understood about how HSA account holders use their accounts. For our study, we used data collected from more than 400,000 accounts by UMB Bank, one of the largest HSA recordkeepers in the country.

From the Findings

On average, older and higher-income employees contribute over 200 percent more than younger and lower-income employees. We observed that the median account holder in the highest income quartile contributed about three times as much to their HSA as the median account holder in the lowest income quartile.

Among account holders who made a contribution to their HSA, the median contribution was almost $700, while the mean contribution was more than twice as large at $1,550. The skewed mean is largely driven by contributions from wealthier and older account holders. The mean contribution from an account holder in the top income quartile was three times the mean contribution from an account holder in the lowest income quartile.

This is a disconcerting trend, as it indicates that the tax advantages offered by HSAs are disproportionately used by older and wealthier employees.

No matter the underlying reasons for the differences in contribution behavior, tax benefits arising from HSA use are flowing disproportionately to higher-income households.

No matter the cause, one thing is clear; lower deferrals to HSAs leaves less-well-off employees with lower HSA balances, and therefore less prepared to deal with future medical expenses.

Low-income employees are at risk of having insufficient funds to cover large medical expenses. In this case, low-income employees may be forced to pay for medical expenditures out of pocket, thereby forfeiting the tax advantages associated with HSAs. Or worse, they may pay for medical expenditures with revolving credit or money withdrawn from their 401(k)s… or payday loans.

About 5 percent of account holders contributed the maximum amount allowed by the IRS to their HSAs, which was $3,250 for single coverage and $6,500 for family coverage in 2013. Many employees may be deferring insufficient amounts to their HSAs to cover medical expenses. This behavior is suboptimal from a tax-efficiency standpoint, reduces buying power for health care, and is potentially dangerous if the account holder faces large medical bills.

The sample that contributes the maximum skews wealthier and older than the portion of the sample that does not. Almost 67 percent of the households that contribute the maximum earn more than $100,000.

Only 4 percent of account holders eligible to invest their HSA balances actually chose to invest.

The small proportion of account holders who contribute the IRS maximum could be a reflection of several factors, both mathematical and behavioral. Any addition of an account for an employee to contribute to and maintain adds a level of complexity to that individual’s personal finances. HSAs compete for employees’ limited pretax dollars with defined – contribution retirement plans and, to a lesser extent, FSAs and transit benefits. Many employees simply do not have the extra money or will not commensurately cut back on discretionary spending to fully fund their HSA.

On the behavioral side, saving for health care lacks saliency. It is difficult enough to project health-care expenditures, and especially so if one has not previously incurred a large medical bill. HSAs are still a relatively new instrument, and the task of projecting one’s out- of-pocket health-care expenditures is an unfamiliar one for many employees. Without guidance for how much money an employee ought to set aside, it can be difficult to effect change and encourage individuals to save more.

http://www.hellowallet.com/research/health-savings

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Comment:

By Don McCanne, MD

With the rapid increase in the prevalence of high-deductible health plans (HDHPs), many patients are finding that their out-of-pocket expenses when they need to access health are excessively burdensome, resulting in financial hardship, and often resulting in forgoing beneficial health care. Supporters of HDHPs say that health savings accounts (HSAs) are the answer – simply use your own HSA to pay for the care you need before the deductible kicks in. How well is that working?

This study confirms what we have said all along – HSAs work just fine for the healthy and wealthy, but the accounts are not adequately funded and may not even exist for individuals with lower incomes and greater health care needs.

The other feature of HSAs is that, for those who remain healthy, the account can be used as a supplementary, tax-advantaged retirement account. Apparently this concept is not driving the increase in enrollment in HSAs since 96 percent of those with accounts large enough to qualify for investing are not bothering to use the investment vehicles designed for HSAs. Besides, retirement savings should not be based on a game of chance – being lucky enough to have not faced significant illnesses.

We already have more than enough studies to show that consumer-directed health care – HDHPs with or without HSAs – impair access and affordability precisely for those with the greatest health care needs. That’s the opposite of what we need. It’s time for a single payer national health program – an improved Medicare, with first dollar coverage, that covers everyone.

WHO validates elimination of mother-to-child transmission of HIV and syphilis in Cuba

World Health Organization, June 30, 2015

Cuba today became the first country in the world to receive validation from WHO that it has eliminated mother-to-child transmission of HIV and syphilis.

“Eliminating transmission of a virus is one of the greatest public health achievements possible,” said Dr Margaret Chan, WHO Director-General. “This is a major victory in our long fight against HIV and sexually transmitted infections, and an important step towards having an AIDS-free generation” she added.

Cuba’s achievement

WHO/PAHO (World Health Organization/Pan American Health Organization) has been working with partners in Cuba and other countries in the Americas since 2010 to implement a regional initiative to eliminate mother-to-child transmission of HIV and syphilis.

As part of the initiative, the country has worked to ensure early access to prenatal care, HIV and syphilis testing for both pregnant women and their partners, treatment for women who test positive and their babies, caesarean deliveries and substitution of breastfeeding. These services are provided as part of an equitable, accessible and universal health system in which maternal and child health programs are integrated with programs for HIV and sexually transmitted infections.

“Cuba’s success demonstrates that universal access and universal health coverage are feasible and indeed are the key to success, even against challenges as daunting as HIV,” said PAHO Director, Dr Carissa F. Etienne.

(As treatment for prevention of mother-to-child-transmission is not 100% effective, elimination of transmission is defined as a reduction of transmission to such a low level that it no longer constitutes a public health problem. In 2013, only two babies were born with HIV in Cuba, and only 3 babies were born with congenital syphilis.)

http://www.who.int/mediacentre/news/releases/2015/mtct-hiv-cuba/en/

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HIV Among Pregnant Women, Infants, and Children

Centers for Disease Control and Prevention, June 23, 2015

At the end of 2009, an estimated 10,834 persons who were diagnosed with HIV when they were younger than 13 years were living in the 46 states with long-term, confidential name-based HIV reporting. Of the total, 9,522 (88%) of these persons acquired HIV perinatally.

In 2010, an estimated 217 children younger than the age of 13 years were diagnosed with HIV in the 46 states with long-term, confidential name-based HIV infection reporting since at least 2007; 162 (75%) of those children were perinatally infected.

http://www.cdc.gov/hiv/group/gender/pregnantwomen/index.html

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Comment:

By Don McCanne, MD

Cuba is the first nation to be validated by the World Health Organization as having reduced maternal-fetal transmission of HIV to such a low level that it no longer constitutes a public health problem. Their success is attributed in part to “an equitable, accessible and universal health system in which maternal and child health programs are integrated with programs for HIV and sexually transmitted infections.”

Do you suppose that if the United States adopted an equitable, accessible and universal health system that it would help further reduce our rate of maternal-fetal HIV transmission? Can we try?

Distributive Injustice(s) in American Health Care

By Clark C. Havighurst and Barak D. Richman
Duke Law School, January 2007, Research Paper No. 140

Abstract

This article explores the hypothesis that the U.S. health care system operates more like a robber baron than like Robin Hood, burdening ordinary payers of health insurance premiums disproportionately for the benefit of industry interests and higher-income consumer-taxpayers. Thus, lower- and middle-income Americans with health coverage pay not only for their own families’ health care but also to support a vast health care enterprise that primarily benefits others, including many far more affluent than themselves. The system is able to finance itself in part because U.S.-style health insurance greatly amplifies price-gouging opportunities for health care firms with market power, creating a cost burden that falls ultimately on all premium payers equally, like a severely regressive head tax. Moreover, these same consumers also bear excessive costs for their own health care because, not seeing the costs they bear with any clarity (since the tax system makes those costs appear to fall on their employers rather than themselves), they demand unnecessarily costly coverage and resist efforts to economize – all to the benefit of the health care industry and others with reasons to value high-cost medicine. Lower-income insureds also appear, for several reasons, to get less out of their employers’ health plans than their higher-income coworkers, despite paying the same premiums. Finally, insured individuals’ lack of cost-consciousness also affects their attitudes and behavior as citizens and as voters, enabling politicians as well as industry interests to make choices on their behalf that systematically raise costs and foreclose economizing possibilities. The burden of excess health care costs and how it is distributed is rarely recognized as the fundamental issue of social justice it is. The purpose of this article is to make the question who pays and who benefits a principal concern of health policymakers.

From the text

Criticism of health care in the United States usually focuses first and foremost on the millions of Americans who lack health insurance of any kind. But the uninsured are not the only Americans whose welfare should concern policymakers. Because of the way private health services are financed on the one hand and dispensed on the other, the U.S. health care system burdens lower- and middle-income premium payers for the benefit of providers and high-income consumers. In this article, we seek to show the nature — and to suggest the cumulative magnitude — of the many regressive tendencies of the financing, regulatory, and legal regime governing the private side of U.S. health care. Parts II and III chart some of the numerous pathways through which too much money flows or appears to flow from the pockets of the less-than-affluent to the benefit of elite interests. Part IV observes how the legal and regulatory environment of U.S. health care has been structured according to the perceptions and preferences of these same elites, thus raising costs for everyone who seeks health coverage; because the marginal benefits of more and better health care are, of necessity, valued less by people with lower incomes and other unmet needs, significant social-justice issues are raised by the American legal system’s many ways of making families of modest means, if they want health coverage, pay for especially costly versions of it.

Our explicit concern in writing this article is that, for whatever reasons, the health care system’s systematic exploitation of the many for the benefit of the privileged few has been either overlooked, underestimated, or conveniently ignored by analysts and policymakers. We will also suggest, however, that the regressive tendencies we observe are no accident, but result from a combination of ideology and the political economy of health care. Specifically, we see a seemingly well-meant but essentially destructive policy bias — assiduously cultivated by the health care industry and shared by many commentators and policy analysts — in favor of more and better health care for all with only nominal regard for how much it costs or who bears the burden. Because unwillingness to view health care as an economic good accords so well with illusions about health care in the public mind, it has been easy for industry and other interests to manipulate people’s thinking about health care issues, both as consumers and as voters.

From the Conclusions

There should be little disagreement, philosophical or otherwise, with the two main premises of this article: (1) that the burden of paying for public goods such as health care for the uninsured, medical education, and pharmaceutical research should not fall disproportionately on those with less ability to pay and (2) that persons with lower incomes should not be compelled to pay, as part of the price of having any health insurance at all, either for coverage designed by and for elite interests or for health care that is consumed disproportionately by the well-to-do. This article has observed many ways in which, under these premises, the U.S. health care system unfairly exploits ordinary payers of health insurance premiums.

The day of reckoning in U.S. health policy could be hastened if populist politicians (liberal or conservative, as the case may be) would tell consumer-voters the truth about the extortion-like protection scheme being practiced on them by the health care system — which essentially forces them to choose between paying what the system demands and putting their families’ health in danger. This unpleasant truth has heretofore been kept from consumer-voters for complex reasons.

In our view, however, a responsible reform movement might gain political traction if middle-class consumers were given some sense of how much they are paying to support a health care industry essentially unaccountable for its cost-increasing actions.

Although this article has made our general policy preferences reasonably clear, it takes no firm position on the particular health policy that should replace the one we criticize for giving ordinary premium payers a horrendously bad deal while also serving inadequately those without any insurance protection. Indeed, we would not object if our observation of the major burdens imposed on consumers by private health insurance were cited as a reason to adopt a monolithic national health program, scrapping private health insurance altogether (except insofar as it might supplement the national system’s coverage). We hope, however, that populists and progressives invoking our concerns in such a cause will not simply claim that that market-oriented policies have proved unworkable and that big government is therefore needed to do the job. We have, after all, stressed that it is not private insurance as such but “U.S.-style” health insurance and government policy itself that generate the problems that concern us. Moreover, we have some confidence that, with altered subsidies and incentives for consumers, some deregulation of insurers and providers, substantial redesign of insurance products, and some tweaking at a few other points, the market would soon evolve so as generally to give consumers, in actuarial terms, both no more and no less than they choose, with limited public subsidies, to pay for.

The potential benefits of a policy based on principles of managed competition seem to us to be great and uncontroversial enough that responsible policymakers of different ideological persuasions should be able to find common ground on which to build bipartisan reform. Although highly threatening to special interests, such a policy would not be radical in itself but would instead, we think, be entirely in keeping with American values.

We hope that our observation of the serious unfairness of the burdens that the current system imposes on the majority of consumer-voters will help both to inflame and to enlighten a political debate leading to a more responsible national health policy — whatever that policy may turn out to be. The crucial thing is to find a fairer way to distribute the costs of health care.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=959643

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Comment:

By Don McCanne, MD

This paper was published in 2007, before the formal process leading to the Affordable Care Act was underway. Today, Austin Frakt, in his blog, “The Incidental Economist,” published excerpts from it, quite appropriately, because the reform process has not effectively addressed this important topic: Distributive injustices in U.S. health care.

If you read the full 77-page article, you will see that Clark Havighurst and Barak Richman provide convincing evidence in support of their thesis: “Lower- and middle-income Americans with health coverage pay not only for their own families’ health care but also to support a vast health care enterprise that primarily benefits others, including many far more affluent than themselves.” Others have suggested that the burden of direct and indirect health care cost increases borne by low- and moderate-income workers is a major reason for the flat incomes of the workers in recent decades, as income and wealth inequality continue to compound.

Much of their discussion of distributive injustices concerns employer-sponsored plans. Very little in ACA addressed this problem. In fact, the excise tax (Cadillac tax) on employer-sponsored health plans will only increase the injustices for workers and their families. The expansion of Medicaid and the introduction of subsidies for exchange plans move in the right direction, but the subsidies are inadequate for those with moderate incomes, and they won’t even apply to workers with employer-sponsored plans.

Not particularly helpful in this article is the element of victim-blaming such as the allegation that workers demand unnecessarily costly coverage and that they resist efforts to economize. Although the authors claim to take no firm position on health policy changes, they do support greater consumer involvement through cost sensitivity, managed competition, and reducing health benefits to only those needed, at the same time that they caution against overregulation of health plans – concepts that generally are favored by conservatives.

However, they do state, “Indeed, we would not object if our observation of the major burdens imposed on consumers by private health insurance were cited as a reason to adopt a monolithic national health program, scrapping private health insurance altogether.” Considering their other ideological stances, it is not clear how sincere they are that they would not object, but it is clear that they do recognize that these injustices are a legitimate reason to adopt a single payer national health program.

By informing the public of the distributive injustices that exist in U.S. health care, we share the hope of the authors that their observations of the “serious unfairness… will help both to inflame and to enlighten a political debate leading to a more responsible national health policy.”

New Evidence on the Persistence of Health Spending

By Richard A. Hirth, Teresa B. Gibson, Helen G. Levy, Jeffrey A. Smith, Sebastian Calónico, Anup Das
Medical Care Research and Review, June 2015

Abstract

Surprisingly little is known about long-term spending patterns in the under-65 population. Such information could inform efforts to improve coverage and control costs. Using the MarketScan claims database, we characterize the persistence of health care spending in the privately insured, under-65 population. Over a 6-year period, 69.8% of enrollees never had annual spending in the top 10% of the distribution and the bottom 50% of spenders accounted for less than 10% of spending. Those in the top 10% in 2003 were almost as likely (34.4%) to be in the top 10% five years later as one year later (43.4%). Many comorbid conditions retained much of their predictive power even 5 years later. The persistence at both ends of the spending distribution indicates the potential for adverse selection and cream skimming and supports the use of disease management, particularly for those with the conditions that remained strong predictors of high spending throughout the follow-up period.

http://mcr.sagepub.com/content/72/3/277.abstract?etoc

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High health spending is more persistent than you might think

By Austin B. Frakt, PhD
AcademyHealth Blog, July 9, 2015

You get hit with a major health condition and your health care needs and spending spikes. A lot. Welcome to the 10% club, whose members spend at least $30,000 on health care in a year. Yeah, most of it is covered by insurance, but selecting the plan with the $2,500 deductible you blew through (not to mention the thousands more in copayments) looks like a bad idea in hindsight.

It could be worse. It could happen to you next year, and the year after, and the year after that, and so on. Will it?

This is a question of health spending persistence. And, as surprising as it may sound, we don’t know a lot about it, at least for the working age population.

Richard Hirth and colleagues recently were able to take an analysis of persistence for workers and their dependents a lot further, and using recent data. They looked at six years of health spending data (2003-2008) for a sample of millions of individuals with coverage from over 100 medium and large employers. One of their findings is that at least one in every three high spenders in a given year will be a high spender in any of the next five years. (Here, high spender is defined as in the top 10% of the annual spending distribution.) I don’t know what your prior is, but this is a much higher level of persistence than I expected.

If you’re unlucky enough to get hit with a very costly health condition, consider yourself relatively lucky if it’s not highly persistent. The new work by Hirth and colleagues shows that such persistence is surprisingly common and remarkably long. This is how sickness saps savings, for those with coverage that comes with high enough deductibles and copayments. Today, we call that “insurance.” Is it?

http://blog.academyhealth.org/high-health-spending-is-more-persistent-than-you-might-think/

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Comment:

By Don McCanne, M.D.

We already know that high deductibles and other cost sharing can result in financial hardships for individuals who develop major medical problems. But how many face the additional burden of having to pay the high deductibles in the years following? This study provides an answer.

Of health plan members or their family members who were in the top 10 percent of spending in a given year, 43 percent were still in the top 10 percent the following year, and an astonishing 34 percent were still in the top 10 percent five years later.

These are workers and their family members – largely middle-income Americans – who had employer-sponsored health plans. These are the plans that the Affordable Care Act was designed to protect. Now that employers are are switching to “consumer-directed” high-deductible health plans, these plans are devastating to the personal finances of these families that must meet the high-deductibles and other cost sharing year after year. Forget retirement funds, college funds, vacations, and the like and plan to spend time with bill collectors and bankruptcy referees.

When you think about the financial protection that you should be receiving from your health plan, it is deplorable that one-third of those who have the greatest needs for health care are exposed to years of recurrent, persisting financial burdens simply because of the fundamentally flawed design of our private health plans. Austin Frakt is right to question if this is even “insurance.”

The authors of the study suggest that the solution is found in disease management. What? Disease management only tweaks spending on major medical problems and would have no impact on the high-deductibles that patients would have to pay before their coverage kicks in. Let’s get real.

A single payer system with first dollar coverage would eliminate the burden of high medical bills that these unfortunate individuals face under our current, dysfunctional health care financing system. Yes, they need qualified health professionals to help them manage their diseases, but that’s a function of the health care delivery system. Intrusive, private, third-party money managers need to get out of the way.