PNHP

The bureaucratic waste of ACA quantified

The bureaucratic waste of ACA quantified

The Post-Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs

By David Himmelstein and Steffie Woolhandler
Health Affairs Blog, May 27, 2015

Last year we, and many others, drew attention to the chaotic and costly roll out of the Affordable Care Act’s (ACA) exchanges. The chaos is mostly over (unless King prevails over Burwell), but the costs will linger on. The roughly $6 billion in exchange start-up costs pale in comparison to the ongoing insurance overhead that the ACA has added to our health care system — more than a quarter of a trillion dollars though 2022.

Bloated Administrative Costs

Between 2014 and 2022, CMS projects $2.757 trillion in spending for private insurance overhead and administering government health programs (mostly Medicare and Medicaid), including $273.6 billion in new administrative costs attributable to the ACA. Nearly two-thirds of this new overhead — $172.2 billion — will go for increased private insurance overhead.

Most of this soaring private insurance overhead is attributable to rising enrollment in private plans which carry high costs for administration and profits. The rest reflects the costs of running the exchanges, which serve as brokers for the new private coverage and will be funded (after initial startup costs) by surcharges on exchange plans’ premiums.

Government programs — primarily Medicaid — account for the remaining $101.4 billion increase in overhead. But even the added dollars to administer Medicaid will flow mostly to private Medicaid HMOs, which will account for 59 percent of total Medicaid administrative costs in 2022. (The subcontracting of Medicaid coverage to private HMOs has nearly doubled Medicaid’s administrative overhead, which has risen from 5.1 percent of total Medicaid expenditure in 1980 to 9.2 percent this year).

The $273.6 billion in added insurance overhead under the ACA averages out to $1,375 per newly insured person per year, or 22.5 percent of the total federal government expenditures for the program.

Better Options

Insuring 25 million additional Americans, as the CBO projects the ACA will do, is surely worthwhile. But the administrative cost of doing so seem awfully steep, particularly when much cheaper alternatives are available.

Traditional Medicare runs for 2 percent overhead, somewhat higher than insurance overhead in universal single payer systems like Taiwan’s or Canada’s. Yet traditional Medicare is a bargain compared to the ACA strategy of filtering most of the new dollars through private insurers and private HMOs that subcontract for much of the new Medicaid coverage. Indeed, dropping the overhead figure from 22.5 percent to traditional Medicare’s 2 percent would save $249.3 billion by 2022.

The ACA isn’t the first time we’ve seen bloated administrative costs from a federal program that subcontracts for coverage through private insurers.  Medicare Advantage plans’ overhead averaged 13.7 percent in 2011, about $1,355 per enrollee. But rather than learn from that mistake, both Democrats and Republicans seem intent on tossing more federal dollars to private insurers. Indeed, the House Republicans’ initial budget would have voucherized Medicare, eventually diverting almost the entire Medicare budget to private insurers (the measure passed by the House on April 30 dropped the “premium support” voucher scheme).

In contrast, a universal single payer system would pare down both insurers’ and providers’ overhead, yielding huge administrative savings — $375 billion in 2012 according to one recent estimate.

In health care, public insurance gives much more bang for each buck.

http://healthaffairs.org/blog/2015/05/27/the-post-launch-problem-the-affordable-care-acts-persistently-high-administrative-costs

****

Comment:

By Don McCanne, MD

Although there are innumerable major problems with having used the Affordable Care Act to reform health care, one of the more significant deficiencies that we pointed out well in advance was that the design would add significantly to the excessive administrative burden that already characterized the U.S. health care system. This study quantifies that additional burden.

These additional administrative costs amount to $1,375 per newly insured person per year, an astonishing 22.5 percent of the total federal government expenditures for the program. Between 2014 and 2022, $273.6 billion in new administrative costs will be attributable to ACA.

The two primary goals of those involved in reforming health care were to expand coverage to everyone (well, almost everyone) and to control health care spending. Because of design defects, tens of millions will be left uninsured, and tens of millions more will be have inadequate coverage, leaving them vulnerable to health care costs — certainly falling short of what should have been our goals in expanding coverage.

Regarding controlling spending, the experimental innovations to date have had little impact in reducing wasteful spending but rather seem to have slowed health care costs by erecting financial barriers to beneficial health care services. Not only did the designers fail to use this opportunity to reduce the profound administrative waste unique to the U.S. health care financing system, they added significantly to this waste, as this study demonstrates.

Single payer would fix these problems. Administrative waste would be dramatically reduced and the savings would be used to expand coverage to absolutely everyone while eliminating financial barriers to care. We simply need the political resolve to do it.

ACA adding billions to health care bureaucratic waste: study

Initial $6 billion in start-up costs of exchanges pale beside $273.6 billion in extra insurance overhead from 2014 through 2022, researchers say

FOR IMMEDIATE RELEASE
May 27, 2015

Contact:
Mark Almberg, PNHP communications director, mark@pnhp.org

The Affordable Care Act will add more than a quarter of a trillion dollars to the already very high administrative costs of U.S. health care through 2022, according to a study published Wednesday at the Health Affairs Blog.

Drawing on the “National Health Expenditure Projections for 2012-2022,” released in July 2014 by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), the authors – Drs. David U. Himmelstein and Steffie Woolhandler – calculated yearly estimates for private insurance overhead and government program administration costs both with, and without, the effects of the ACA.

Using estimates from the Congressional Budget Office, they also calculated the ACA’s coverage and cost.

“Between 2014 and 2022, the ACA will add $273.6 billion in new administrative costs over and above what would have been expected had the law not been enacted,” said Himmelstein. “That’s equivalent to $1,375 per newly insured person per year, or 22.5 percent of total federal expenditures for the program.”

Himmelstein and Woolhandler write: “Nearly two-thirds of this new overhead – $172.2 billion – will go for increased private insurers’ administrative costs and profits,” while the rest of the added overhead “is attributable to expanded government programs, i.e. Medicaid. But even the added dollars to administer Medicaid will flow mostly to private Medicaid HMOs, which will account for 59 percent of total Medicaid administrative costs in 2022.”

They observe that while insuring 25 million additional Americans, as the CBO projects the ACA will do, “is surely worthwhile,” the administrative costs of doing so “seem awfully steep, particularly when much cheaper alternatives are available.”

By way of alternatives, they point to traditional Medicare, which runs for about 2 percent overhead. Were the 22.5 percent overhead figure associated with the ACA to drop to traditional Medicare’s level, the U.S. would save $249.3 billion by 2022, they say.

The overhead rates of universal, single-payer systems such as Taiwan’s or Canada’s are even lower, closer to 1 percent, they write, adding that if the U.S. were to adopt a single-payer system, the savings on bureaucracy and paperwork would amount to about $375 billion annually, enough to provide high-quality, first-dollar coverage to all Americans.

“In health care, public insurance gives much more bang for each buck,” they write.

Himmelstein and Woolhandler are professors at the City University of New York School of Public Health at Hunter College and lecturers in medicine at Harvard Medical School. Their long-term research interests include the administrative costs of U.S. health care. They co-founded Physicians for a National Health Program.

****

“The Post-Launch Problem: The Affordable Care Act’s Persistently High Administrative Costs,” by David U. Himmelstein, M.D., and Steffie Woolhandler, M.D., M.P.H. Health Affairs Blog, May 27, 2015.

****

Physicians for a National Health Program (www.pnhp.org) is a nonprofit research and education organization of more than 19,000 doctors who support single-payer national health insurance. PNHP had no role in funding or otherwise supporting the study described above.

Health care advocates here seek single-payer plan

Legislation could provide alternative under the ACA

By Kendall Heintzelman
Spokane (Wash.) Journal of Business, May 7, 2015

The contested issue of health care coverage and how insurance options will be dictated by employers has a possible solution found in legislation written by Health Care for All-Washington that could go into effect in 2017. 

HCFA-WA is an organization that advocates for the reform of comprehensive health care coverage for Washington residents. It’s campaigning for legislation that would create the Washington Health Security Trust, which would be a single public trust fund dedicated to paying for a defined set of health services for residents. 

Dr. Daniel Schaffer is a primary care physician in Spokane who has worked at Sacred Heart and Holy Family Hospital. He and Lynnette Vehrs, a registered nurse who has taught as a clinical instructor at Washington State University, are organizers and advocates for the local chapter of HCFA-WA. 

Vehrs says the goal with HCFA is “educating the public and the business community” about alternatives to health care financing. 

She and Schaffer say HCFA evolved into an association in Washington as a way to pass the health security trust legislation, which was written years ago. They both assert that the trust would be beneficial to employers who struggle with shortcomings in the present health care system, such as rising insurance prices and inadequate coverage leading some people to go without.  

Schaffer says health care in the United States has become something of a burden for employers. He says he wants to see health care as more of an infrastructure, so it is fundamental to all citizens. 

“Consider health care as an infrastructure and it’ll work better,” he says. 

Schaffer describes the current form of health care in this country as “insurance-controlled health care.” He says many people have inadequate health coverage because insurance makes it too costly. Insurance companies lack transparency as well, says Schaffer, and he says the WHST bill seeks to improve transparency. 

Schaffer says health care coverage wasn’t intended to be carried on the back of employers, but that is how it has evolved. 

Vehrs says employers have to spend a significant amount of time finding a health plan for employees, and says the WHST looks to improve this issue. 

The Affordable Care Act allows states to opt out of the federal health care system by 2017 if they come up with their own equal or better method of paying for health care. HCFA-WA is trying to do that with the WHST. Under the WHST, the money spent on health insurance and health care would be put into a trust. The trust would cover health care for all Washington residents without additional revenue, asserts Schaffer, because it would put a cap on the overhead costs of private insurance agencies. 

Currently, private insurers have a built in overhead of 20 percent to 25 percent, says Schaffer. The WHST would limit that overhead to less than 10 percent. 

This would take away high deductibles and copays, says Schaffer, and without these added expenses, employees would be more likely to visit the doctor rather than waiting to see if health symptoms worsen or subside. 

The WHST seeks to provide a defined set of benefits regardless of health or employment status, providing something of a uniform health plan for employees, and therefore Schaffer says an employer “could opt to just not deal with health care at all,” as it already would be covered. 

Employers could still provide supplemental insurance for their employees if they wished, he says, but it wouldn’t be necessary. 

Under the WHST, the amount of money being allocated to health care would be reduced because what would be needed in the public fund would cost less than paying for private insurance agencies, proponents say. 

Schaffer says Massachusetts, Vermont, Colorado, Oregon, and California have similar legislation written or are looking to do the same. He says he hopes this form of health care to will reach a federal level in the future. 

http://www.spokanejournal.com/special-report/health-care-advocates-here-seek-single-payer-plan/

Joshua Freeman’s “Health, Medicine and Justice”

Health, Medicine and Justice: Designing a Fair and Equitable Healthcare System

By Joshua Freeman, M.D.

I hope that this book complements the others (by Donohoe, Geyman, Young, and others), offering a perspective that combines a physician’s knowledge of medical care and how it is delivered, a scholar’s understanding of the organization of the health system, social determinants of of health and health disparities, a caring person’s commitment to justice and equity, and an activists’s desire to change the world. I hope it is of some value.

Contents

Chapter 1:  Why Do We Have a Healthcare System?
Chapter 2:  The U.S. Healthcare System: Best in the World?
Chapter 3:  The Social Determinants of Health and Health Inequities
Chapter 4:  Impact of the U.S. Health System on the Health of the Public
Chapter 5:  Primary Care: The Essential Basis for an Effective Healthcare System
Chapter 6:  The Role of Medical Education in Perpetuating the Health System
Chapter 7:  Graduate Medical Education
Chapter 8:  Assessing Appropriate Healthcare: Sometimes the Best Thing to Do Is Nothing
Chapter 9:  The Role of Profit in U.S. Health Care
Chapter 10:  Solutions and Projected Outcomes

Health, Medicine and Justice, by Joshua Freeman: http://www.amazon.com/Medicine-Justice-Designing-Equitable-Healthcare/dp/0988799685

Josh Freeman’s Blog: Medicine and Social Justice: http://www.medicinesocialjustice.blogspot.com

****

Comment:

By Don McCanne, MD

Many books have been written about the problems and potential solutions for our health care system. This one stands out because it represents the informed views of a noted physician educator who is also a health and social justice activist. He hopes the book is “of some value,” and it assuredly is.

Joshua Freeman is a leader in primary care, both as a practitioner and as an academic, being the Chair of the Department of Family Medicine at the University of Kansas Medical Center. He has an excellent understanding of our disorganized health care system and of the social determinants of health and health inequities. He has studied extensively medicine and social justice, and shares his views through his blog. This book brings to print the basis of his passionate activism in support of equitable health care for all.

As the nation meanders on with implementation of the well-meaning but intolerably deficient policies of the Affordable Care Act, this book can give us renewal in our efforts to educate the nation on the policies that actually would work to bring affordable and equitable health care to all.

Atul Gawande and the overutilization narrative

Overkill: An avalanche of unnecessary medical care is harming patients physically and financially. What can we do about it?

By Atul Gawande
The New Yorker, May 11, 2015

Could pointless medical care really be that widespread? Six years ago, I wrote an article for this magazine, titled “The Cost Conundrum,” which explored the problem of unnecessary care in McAllen, Texas, a community with some of the highest per-capita costs for Medicare in the nation. But was McAllen an anomaly or did it represent an emerging norm? In 2010, the Institute of Medicine issued a report stating that waste accounted for thirty per cent of health-care spending, or some seven hundred and fifty billion dollars a year, which was more than our nation’s entire budget for K-12 education. The report found that higher prices, administrative expenses, and fraud accounted for almost half of this waste. Bigger than any of those, however, was the amount spent on unnecessary health-care services. Now a far more detailed study confirmed that such waste was pervasive.

I decided to do a crude check. I am a general surgeon with a specialty in tumors of the thyroid and other endocrine organs. In my clinic that afternoon, I saw eight new patients with records complete enough that I could review their past medical history in detail. One saw me about a hernia, one about a fatty lump growing in her arm, one about a hormone-secreting mass in her chest, and five about thyroid cancer. To my surprise, it appeared that seven of those eight had received unnecessary care.

Virtually every family in the country, the research indicates, has been subject to overtesting and overtreatment in one form or another. 

Another powerful force toward unnecessary care…: the phenomenon of overtesting, which is a by-product of all the new technologies we have for peering into the human body.

Overtesting has also created a new, unanticipated problem: overdiagnosis. This isn’t misdiagnosis—the erroneous diagnosis of a disease. This is the correct diagnosis of a disease that is never going to bother you in your lifetime.

My last patient in clinic that day, Mrs. E., a woman in her fifties, had been found to have a thyroid lump. A surgeon removed it, and a biopsy was done. The lump was benign. But, under the microscope, the pathologist found a pinpoint “microcarcinoma” next to it, just five millimetres in size. Anything with the term “carcinoma” in it is bound to be alarming—“carcinoma” means cancer, however “micro” it might be. So when the surgeon told Mrs. E. that a cancer had been found in her thyroid, which was not exactly wrong, she believed he’d saved her life, which was not exactly right. More than a third of the population turns out to have these tiny cancers in their thyroid, but fewer than one in a hundred thousand people die from thyroid cancer a year. Only the rare microcarcinoma develops the capacity to behave like a dangerous, invasive cancer. (Indeed, some experts argue that we should stop calling them “cancers” at all.) That’s why expert guidelines recommend no further treatment when microcarcinomas are found.

Nonetheless, it’s difficult to do nothing. The patient’s surgeon ordered a series of ultrasounds, every few months, to monitor the remainder of her thyroid. When the imaging revealed another five-millimetre nodule, he recommended removing the rest of her thyroid, out of an abundance of caution. The patient was seeing me only because the surgeon had to cancel her operation, owing to his own medical issues. She simply wanted me to fill in for the job—but it was a job, I advised her, that didn’t need doing in the first place. The surgery posed a greater risk of causing harm than any microcarcinoma we might find, I explained. There was a risk of vocal-cord paralysis and life-threatening bleeding. Removing the thyroid would require that she take a daily hormone-replacement pill for the rest of her life. We were better off just checking her nodules in a year and acting only if there was significant enlargement.

H. Gilbert Welch, a Dartmouth Medical School professor, is an expert on overdiagnosis, and in his excellent new book, “Less Medicine, More Health,” he explains the phenomenon this way: we’ve assumed, he says, that cancers are all like rabbits that you want to catch before they escape the barnyard pen. But some are more like birds—the most aggressive cancers have already taken flight before you can discover them, which is why some people still die from cancer, despite early detection. And lots are more like turtles. They aren’t going anywhere. Removing them won’t make any difference.

We’ve learned these lessons the hard way. Over the past two decades, we’ve tripled the number of thyroid cancers we detect and remove in the United States, but we haven’t reduced the death rate at all. In South Korea, widespread ultrasound screening has led to a fifteen-fold increase in detection of small thyroid cancers. Thyroid cancer is now the No. 1 cancer diagnosed and treated in that country. But, as Welch points out, the death rate hasn’t dropped one iota there, either. (Meanwhile, the number of people with permanent complications from thyroid surgery has skyrocketed.) It’s all over-diagnosis. We’re just catching turtles.

What if I recommend not operating on a tiny tumor, saying that it is just a turtle, and it turns out to be a rabbit that bounds out of control?

Mrs. E., my patient with a five-millimetre thyroid nodule that I recommended leaving alone, feared doing too little. So one morning I took her to the operating room, opened her neck, and, in the course of an hour, removed her thyroid gland from its delicate nest of arteries and veins and critical nerves. Given that the surgery posed a greater likelihood of harm than of benefit, some people would argue that I shouldn’t have done it. I took her thyroid out because the idea of tracking a cancer over time filled her with dread, as it does many people. A decade from now, that may change. The idea that we are overdiagnosing and overtreating many diseases, including cancer, will surely become less contentious. That will make it easier to calm people’s worries. But the worries cannot be dismissed. Right now, even doctors are still coming to terms with the evidence.

Two hours after the surgery, Mrs. E.’s nurse called me urgently to see her in the recovery room. Her neck was swelling rapidly; she was bleeding. We rushed her back to the operating room and reopened her neck before accumulating blood cut off her airway. A small pumping artery had opened up in a thin band of muscle I’d cauterized. I tied the vessel off, washed the blood away, and took her back to the recovery room.

I saw her in my office a few weeks later, and was relieved to see she’d suffered no permanent harm. The black and blue of her neck was fading. Her voice was normal. And she hadn’t needed the pain medication I’d prescribed. I arranged for a blood test to check the level of her thyroid hormone, which she now had to take by pill for the rest of her life. Then I showed her the pathology report. She did have a thyroid cancer, a microcarcinoma about the size of this “O,” with no signs of unusual invasion or spread. I wished we had a better word for this than “cancer”—because what she had was not a danger to her life, and would almost certainly never have bothered her if it had not been caught on a scan.

http://www.newyorker.com/magazine/2015/05/11/overkill-atul-gawande

****

Comment:

By Don McCanne, MD

Yesterday’s Quote of the Day discussed the harm done by our health care reform agenda that overemphasizes attacking overutilization while neglecting more compelling goals of reform. Atul Gawande has been one of the more credible and outspoken voices in raising the alarm on overutilization, especially with his widely referenced 2009 New Yorker article on the excessive use of health care services in McAllen, Texas. But where does Dr. Gawande stand when he is faced with health care utilization questions regarding his own patients?

In his current New Yorker article, “Overkill,” he describes the overtesting and overdiagnosis of thyroid carcinoma, which, in turn, results in overtreatment – all manifestations of overutilization of health care. For his own patient with a very small thyroid nodule, he recommended leaving it alone – a recommendation that is well supported in the medical literature.

Yet, apparently because the patient wanted something done, he elected to remove her thyroid gland. She did turn out to have a microcarcinoma, but he reports that it “was not a danger to her life, and would almost certainly never have bothered her.” She manifested two common problems of overutilization: 1) a post-operative complication (hemorrhage requiring a second operation), and 2) significant costs that were unnecessary but added to the very high costs of health care paid by all of us through taxes or insurance premiums.

Thus Dr. Gawande is himself an overutilizer while preaching the evils of overutilization. Our current policy priorities are to combat overutilization. What should be done in Dr. Gawande’s case? Should he and the hospital be denied payment for the thyroidectomy? Should he be assigned low quality scores that will reduce future payments for his health care services? Should he be disciplined by the appropriate medical staff committee? Was his violation serious enough to report him to the state medical licensing board for consideration of disciplinary action?

No to all of these. He is a highly respected, ethical surgeon who certainly tries to do the right thing. He did make a clinical decision that could be challenged, especially in today’s environment where overutilization is the primary target in health care reform.

Most cases of supposed overutilization as reported in many studies, such as those from Dartmouth, represent similar judgmental decisions in which opinion as to the optimal way to proceed would vary amongst the best of authorities, and Dr. Gawande’s judgement in this case falls within the realm of acceptable medical practices (she did have cancer!).

We do not have and likely never will have processes through which we can identify, with certainty, medical care that should be aborted in advance because it clearly would constitute overutilization. Complex clinical settings defy clarity in health care utilization. (There are exceptions in which clear guidelines can be established, and those guidelines certainly should be enforced.)

As mentioned yesterday, designing health policy based on overutilization has been detrimental because it results in concepts such as patient-driven health care, especially high deductibles, that have impaired patient access to beneficial medical care and have exposed patients to financial hardship. It also has generated concepts such as accountable care organizations that, to this date, have not accomplished much more than to increase the profound administrative waste that permeates the U.S. system.

Our efforts should not be directed to trying to ferret out reputable physicians such as Dr. Gawande, accuse them of overutilization, and chase them out of the profession. That could be all of us, and who then would be left to care for patients? (This is not to say that we shouldn’t rein in blatant abusers.)

Instead we should turn our attention to policies that would would make health care truly universal, comprehensive, equitable, accessible, and priced appropriately, while increasing efficiencies through policies that would actually be effective in recovering waste – the prime example being the replacement of our expensive, fragmented system of financing care with an efficient single payer national health program.

The harm done by the overutilization narrative

Overutilization, Overutilized

By Deborah Levine and Jessica Mulligan
Journal of Health Politics, Policy and Law, April 2015

Abstract

Overutilization is commonly blamed for escalating costs, compromising quality, and limiting access to the US health care system. Recent estimates suggest that nearly one-third of health care spending in the United States is a result of unnecessary care. Despite the surge of exposés that purport to uncover this “new” problem, narratives about overutilization have been circulating in health policy debates since the beginnings of the health insurance industry. This article traces how the term overutilization has spread in popularity from a relatively small community of mid-twentieth-century insurance experts to economists, physicians, epidemiologists, and eventually the news media of the early twenty-first century. A quick glimpse at the history of the term reveals that there has been constant disagreement and debate over the meaning and impact of overutilization. Moreover, the term has been put to very different uses, from keeping socialism at bay to preserving the fiscal integrity of Medicare to protecting the health of patients. The overutilization narrative, seductive in its promise of cutting costs without sacrificing access to quality care, too often drowns out other difficult conversations about social welfare, health equity, prices, and universal coverage.

Conclusion: Overutilization Has Overreached

For sixty years, overutilization has been a key term in health policy debates. The term emerged in literature about the potential demise of voluntary insurance and then spread to new domains: first with inpatient hospital stays and then eventually with almost every other form of care. The audience for this narrative expanded as well: from industry insiders to economists, physicians, public health researchers, the media, and finally, patients.

Utilization review and other techniques for curbing overutilization like requiring prior authorization, capitated payments, and increasing patient cost sharing have now been employed by insurers and providers for decades. Yet the overall impact on health care costs appears negligible; costs continue to rise. Moreover, some analysts point out that the United States may be underutilizing a host of important services relative to other countries, especially primary care.

Overutilization of certain services probably is one of the many problems in our health care system. But there are grave consequences to considering overutilization the central problem. For one, the increased patient cost sharing that is supposed to rein in overutilization has contributed to a situation in which 31.7 million people with insurance are considered underinsured because they dedicate such a high proportion of their household income to medical bills. And as to the sizable uninsured population, the prospect of expanding coverage has too often been cast as a menace to the system rather than a laudable and socially responsible achievement.

There is a need for a more critical conversation about who wins and loses thanks to the present system setup. Some work is already happening in this regard, but it has yet to reach the wide popular audiences and become “common sense” in the way that overuse has. Academic researchers have called attention to how much we pay for services and pointed out that our high prices are largely to blame for runaway health care costs. Others have argued that risk-pooling techniques need to be resocialized by turning away from the highly segmented, experience-rated pools that currently dominate insurance marketplaces. But it is too difficult for these counternarratives to be heard above the seductive din about overutilization and the attendant need for individual consumer restraint that continues to dominate discussions of health care costs in the United States.

Overutilization is a management neologism that has become an economistic health policy fairy tale where costs can be cut, services denied, and hospital days reduced with no harm — financial, physical, or otherwise — to patients, providers, or payers. Curbing overutilization alone will not redeem our health care system. And real people stand to lose when reducing utilization and increasing efficiency is seen as the primary goal of health policies.

http://jhppl.dukejournals.org/content/40/2/421.full

****

Comment:

By Don McCanne, MD

Yesterday’s Quote of the Day message on the prevalence of underinsurance and its consequences, largely caused by the increased use of high deductibles designed to decrease utilization of health care, is a prime example of the pervasiveness of the misguided concept that “overutilization” needs to be the primary target of reform.

Hopefully this article, “Overutilization, Overutilized,” will become a landmark paper in the chronology of health care reform. The concept of overutilization of health care has driven much of the political and policy decisions in our reform efforts. This is tragic because it “too often drowns out other difficult conversations about social welfare, health equity, prices, and universal coverage,” according to the authors.

The policies designed to correct alleged overutilization have not only been relatively ineffective in reducing spending to a meaningful degree, often they have also been harmful, impairing access to health care and frequently creating financial hardships for those with health care needs.

This is particularly shameful when there remains disagreement on which particular applications of health care are clearly excessive, and whether they are truly as pervasive as is often claimed. Further, if this waste is as common as is often claimed, most of it is not recoverable because of the difficulty of establishing precise guidelines that can be applied reliably to complex clinical settings.

We have a much greater problem with health care underutilization and its adverse consequences which are compounded by policies designed to curtail utilization.

The Abstract and Conclusion above describe the general theme of the article, but the details are important if we are to turn the reform process into one that aims to provide health care for everyone, and away from our current processes that are blunt instruments designed to reduce utilization while ignoring harm to the patient.

For those who do not have access to the current issue of the Journal of Health Politics, Policy and Law, this article can be downloaded at the link above for a fee of $15. It is unfortunate that this article is behind a paywall, because it does need to be distributed widely.

We need to do all that we can to change the dialogue on reform. Instead of imperiling our health care system with misguided policies to haphazardly reduce utilization, we need to advance policies that would make health care truly universal, comprehensive, equitable, accessible, and priced appropriately, while increasing efficiencies through policies that would actually be effective in recovering waste – the prime example being the replacement of our expensive, fragmented system of financing care with an efficient single payer national health program.

Let’s change the narrative.

Obesity epidemic is another reason for single payer

By James Binder, M.D.
The Charleston (W.Va.) Gazette, May 21, 2015

Our country would be better able to help its citizens prevent and manage chronic illnesses if we adopted a single-payer system. Our current primary care structure is designed to treat acute illnesses. Primary care providers do not have adequate time or the training to effectively treat the increasing burden of chronic conditions in our society, conditions such as obesity, diabetes mellitus, substance use disorders, depression.

Obesity will soon be our number one health problem. One-third of adults are obese.

Twenty percent of children 2 to 5 years of age are overweight or obese. Besides being associated with a number of serious medical conditions, such as heart disease and diabetes mellitus, obesity is associated with emotional/mental consequences (discouragement, depression) and social discrimination. Our national security is at risk with 30 percent of young Americans too heavy to meet the requirements for joining the Armed Services.

There are conscientious efforts to prevent and combat obesity being made right now in our communities and schools. However, these are often uncoordinated and unsustainable, not helping our children make lasting changes. A strong, multi-modal, evidence-based approach is needed.

Our current fragmented private insurance infrastructure has not and is not capable of supporting an effective response. Private insurance companies have one priority — to make a profit, not to improve the collective health of our nation.

The world-renowned Institute of Medicine published a blueprint to resolve the obesity epidemic (Progress in Childhood Obesity: How Do We Measure Up, 2006). An effective national response for preventing and treating childhood obesity would have three components:

  • Strong leadership and coordination.
  • Evaluation of approaches.
  • Monitoring progress of specific interventions and making adjustments when necessary.

A single-payer system would provide the infrastructure needed to implement each of these three components. Emphasis would shift from the micromanagement of each decision made by a clinician to the macromanagement of resources.

Micromanagement increases paperwork and expenses, discourages clinicians and patients alike, and is often ill-considered.

I treat a number of children with obesity as a pediatrician in a rural medical clinic. I recently referred a child with a BMI greater than 99 percent to a comprehensive Healthy Kids clinic in Charleston.

This child had failed stage I and II obesity treatments. Despite meeting the specific recommendations of the American Academy of Pediatrics for specialty referral, the family’s private insurance company refused to cover the treatment. The child had not yet developed an associated medical condition (e.g. diabetes mellitus).

This type of micromanagement would be unnecessary in a single-payer system because the emphasis would be on the collective health of the community, not the cost of one referral. It is so important that we return to a model based on caring professional judgment.

Even more importantly, we need to develop and implement programs that really work.

We know that it takes time to help families with such complex issues as weight control. The standard 15-minute clinic visits are not enough time to counsel families on complex issues, especially when there are other problems to discuss and five to seven minutes of that visit is spent on the computer, much of it devoted to meeting insurance company billing demands.

We know families must be involved in the solution since children learn good nutrition and healthy habits in the context of their immediate families. And, we know it takes coordination between communities, schools, industry, medical clinics, and the government to develop and sustain effective interventions.

A single-payer system would allow us to incorporate all these elements into treatment planning since its main goal is the collective health of the community.

Of course, the best strategy is to prevent the problem in the first place. Private insurers attach funding to individual patients. Broader societal goals are not funded. Less than 3 percent of health spending currently goes for prevention. We can do better than that.

A single -payer system would provide the framework to solve the problem and allow us to change our children’s environment. It would not solve the problem for us. We would still have to do that. However, we have the expertise and health professionals needed to accomplish that. We just need the framework. It is another reason many physicians support single payer.

James Binder, M.D., is co-president of the West Virginia Chapter of Physicians for a National Health Program and a pediatrician at Cabin Creek Health Systems.

http://www.wvgazette.com/article/20150521/GZ04/150529902#sthash.k8WzKvbp.dpuf

Rising deductibles will make underinsurance worse

The Problem of Underinsurance and How Rising Deductibles Will Make It Worse

By Sara R. Collins, Petra W. Rasmussen, Sophie Beutel, Michelle M. Doty
The Commonwealth Fund, May 20, 2015

Abstract

New estimates from the Commonwealth Fund Biennial Health Insurance Survey, 2014, indicate that 23 percent of 19-to-64-year-old adults who were insured all year — or 31 million people — had such high out-of-pocket costs or deductibles relative to their incomes that they were underinsured. These estimates are statistically unchanged from 2010 and 2012, but nearly double those found in 2003 when the measure was first introduced in the survey. The share of continuously insured adults with high deductibles has tripled, rising from 3 percent in 2003 to 11 percent in 2014. Half (51%) of underinsured adults reported problems with medical bills or debt and more than two of five (44%) reported not getting needed care because of cost. Among adults who were paying off medical bills, half of underinsured adults and 41 percent of privately insured adults with high deductibles had debt loads of $4,000 or more.

Exhibit 2. Underinsured rates among adults ages 19-64 who were insured all year, by source of coverage at the time of the 2014 survey
20% – Employer-provided coverage
37% – Individual coverage
22% – Medicaid
42% – Medicare (under age 65, disabled)

Conclusion

The rate of growth in medical costs and insurance premiums has slowed in recent years. However, millions of consumers continue to be saddled with high out-of-pocket health care costs. While the number of underinsured people in the United States held constant in 2014, the steady growth in the proliferation and size of deductibles threatens to increase underinsurance in the years ahead.

The Affordable Care Act’s coverage expansions and protections have greatly improved the quality of insurance coverage available to people who lack job-based health benefits. In addition, cost-sharing subsidies significantly reduce deductibles for people with low incomes who buy plans in the marketplaces. But those subsidies phase out quickly, leaving families with deductibles that may be high relative to their incomes. In addition, the law has only limited ability to improve the cost protection of employer plans, which is the source of most American’s health insurance.

Reforms and new approaches are needed to improve the cost protection of health plans. These could include innovations in benefit design that slow growth in deductibles and emphasize incentives that encourage people to utilize, rather than delay, timely health care. In addition, policymakers should identify and address holes in health plans — like out-of-network physicians in in-network hospitals — which are surprising many families with unexpected costs. Finally, systemwide efforts to lower the underlying rate of medical cost growth and share those savings with consumers will be critical.

http://www.commonwealthfund.org/publications/issue-briefs/2015/may/problem-of-underinsurance

****

Comment:

By Don McCanne, MD

This update of The Commonwealth Fund’s continuing study of the rate of underinsurance confirms that the problem persists, and the trend of increasing deductibles may well make it worse.

It is alarming that, since 2003, the category with the most comprehensive coverage – employer-provided coverage – has doubled the rate of underinsurance increasing from 10% to 20%. The greatest contributing factor has been the increase in the use of high deductibles.

Because this study was of individuals insured for a full year, and it was completed before the end of 2014 – the first year of the ACA exchanges – the underinsurance rate of enrollees in the exchanges could not be separated out, and they were included in the category of individual coverage. In total, 37% of those with individual coverage were underinsured. This is no surprise since high deductibles have been used in the individual market in an attempt to prevent premiums from becoming even less affordable, but this has been at the cost of more than doubling the rate of underinsurance.

Although we do not have the data yet, we can make some assumptions, based on plan design, for the trends in underinsurance for those enrolled in the exchanges. Because of the subsidies for out-of-pocket expenses for those with the lowest incomes that qualify for the exchange plans, it is possible that the rate of underinsurance is slightly reduced for this group. However, for those with moderate incomes, especially for those who do not qualify for cost-sharing subsidies, the relatively low actuarial values (percent of costs that the plans cover) that most exchange enrollees select will likely perpetuate and perhaps even expand the prevalence of underinsurance. So middle-income Americans do not escape the risk of being underinsured.

Although Medicaid provides more comprehensive benefits with fewer out-of-pocket expenses, the very low incomes of Medicaid beneficiaries leave many of them underinsured since the modest cost sharing that they do have consumes an excessive percentage of their incomes.

Patients under 65 who receive Medicare do so because of major long-term disabilities. Since most of them have very limited incomes and other expenses, and Medicare’s comprehensiveness is limited, this group has the highest rates of underinsurance – 42%. Obviously, when we speak of Medicare for all, it is imperative that we clarify that we mean an improved Medicare that has much more comprehensive coverage.

Can this trend be reversed? Can we put in place policies that will result in reducing or even eliminating the deductibles?

If the plans were to maintain the same actuarial values to keep the premiums the same while reducing deductibles, the out-of-pocket costs would shift to those with greater health care needs who already have enough financial problems. That would defeat one of the most important functions of health insurance – preventing financial hardship in the face of medical need.

Another possibility would be to reduce the deductibles and shift the actuarial values upward, but that would result in sharp increases in insurance premiums. That would not be acceptable to employers, nor would it be acceptable to politicians who would have to find revenue sources to increase the premium subsidies for the exchange plans. It is easy to cut spending for employers and for the budget hawks in Congress, but it is almost impossible to reverse the cuts and restore or even expand that spending.

Suppose we leave the higher deductibles in place, but provide enough subsidies to eliminate underinsurance for everyone. The administrative complexity alone would make this a very foolish idea. Also when you look at who is underinsured, you would have to increase the amounts of the subsidies and expand eligibility to cover many more of the moderate income individuals in the exchanges, and you would also have to provide subsidies for those enrolled in employer-provided plans to cover the increase in deductibles and other cost sharing in those plans. This would further compound the wasteful administrative excesses that already characterize our health care financing system.

Do we really need to say it again? A well designed single payer system would fix this.

Study: ‘Underinsured’ population has doubled to 31 million

By Sarah Ferris
The Hill, May 20, 2015

One-quarter of people with healthcare coverage are paying so much for deductibles and out-of-pocket expenses that they are considered underinsured, according to a new study.

An estimated 31 million insured people are not adequately protected against high medical costs, a figure that has doubled since 2003, according to the 2014 national health insurance survey by the Commonwealth Fund.

Rising deductibles — even under ObamaCare — are the biggest problem for most people who are considered underinsured, according to the 22-page report.

“The steady growth in the proliferation and size of deductibles threatens to increase underinsurance in the years ahead,” the report warns.

The data is an early warning sign for the Obama administration, which has promised that the millions of people who gained healthcare under the president’s law would have affordable access to healthcare.

The survey found that millions of people are paying into healthcare but are largely unable to reap the benefits.

People who purchase the lowest-quality health insurance are also less likely to see a doctor when they are ill or injured because they fear their high out-of-pocket costs.

“People who have high deductibles do tend to skimp on healthcare,” the study’s lead author, Sara Collins, told reporters.

When people do see a doctor, the costs accumulate quickly.

Half of underinsured adults and 41 percent of privately insured adults with deductibles of $1,000 or higher were paying off accumulated medical bills of $4,000 or more, the report found.

Still, the survey does not offer a clear picture on the workings of ObamaCare one year after its healthcare exchanges launched across the country. The data does not take into account people who lacked insurance before 2014.

“We’re unable to separately assess the effects of the law with these data,” Collins said. “What we’re seeing, though, in the data is ever-growing deductibles.”

The increase in deductibles comes even as the nation’s healthcare costs have flatlined overall, which the Obama administration has taken partial credit for.

The underinsured rate has flattened over the last several years, with the biggest increases in the underinsured population occurring between 2003 and 2010.

People are most likely to be underinsured if they are employed by a small business, the study found.

http://thehill.com/policy/healthcare/242584-study-underinsured-population-has-doubled-to-31-million

Health Beat: The Single-Payer System – Maybe it’s Time for Another Look

Could the billions of dollars America spends on health care be allotted more efficiently, with better service for patients?

By Kathleen Kozak, M.D.
Honolulu Civil Beat, May 20, 2015

All across the nation, health insurance exchanges are facing some difficult financial realities. Right here at home, the Hawaii Health Connector has already announced a contingency plan for ceasing operations and deferring the management of the insurance exchange to the federal government as of Sept. 30.

The main reason is money. It’s very expensive to run the IT platform and also deal with all of the intricacies of the different insurance plans and their rules. The Health Connector is not sustainable the way it is run now.

The billions of dollars that are spent on health insurance make the industry very profitable. But for whom?

The insurance industry has operating costs, and after paying their CEO millions of dollars, their chief executives, their presidents, vice presidents, secretaries, and even low-paid clerks, everyone gets a piece of the premiums. After all is said and done, there are millions of dollars spent on things other than actual care for the sick. That’s not even looking at what’s paid to hospitals, pharmacies and doctors like me.

What might streamline the health care costs now and into the near future? Well, when I first started in practice, I abhorred the idea, but perhaps a single-payer system might be the best solution after all.

Under a single-payer system, all residents nationwide would be covered for all medically necessary services, including doctor, hospital, preventive, long-term care, mental health, reproductive health care, dental, vision, prescription drug and medical supply costs.

I’m all about free choice, and want people to have options, but from what I see right now, insurance companies make most of the decisions regarding care anyway.

Take medications. Each insurance plan contracts with different pharmaceutical companies to provide preferred drugs at a cheaper cost. Technically, the insurance plan didn’t say someone can’t have his or her brand name drug to treat, say, high blood pressure, but that the cost would be so large each month that people are financially forced to choose the drug that is preferred on the insurance formulary.

Every January when the formularies change, I have dozens of patients calling to change their medicine because their insurance picked a different preferred drug for their medical condition, and they want to change their pills and save money. Medically this doesn’t make sense. Generic medicine is cheap, but even that has a high co-pay if it’s not preferred. Why have such a system? Because it saves money for the insurance companies to have most of their market share taking certain medications to guarantee a lower cost for the pills.

As for diagnostic testing, well, these days insurance plans require pre-authorization for most testing to be completed, and that doesn’t happen immediately. All the notes from the visit have to be done immediately, making other patients wait for paperwork. The staff  has to call a 1-800 number for the company, and plead its case. The insurance company has to process the request and then get approval from its own selection of decision-makers, who may or may not be doctors, nurses, or even medically trained. So the patient waits.

If it takes too long, and the patient is getting worse, then there is only one option. Go to the emergency room where prior authorization isn’t needed anymore. Testing can be done without any pre-approval and the patient can be taken care of immediately. But if the ER visit is considered medically unnecessary, it might not be covered by insurance. Who has to pay the bill? The patients, who already paid their insurance premium to give them coverage for scans and tests that their doctor recommends, but now can’t do.

So what might be the benefit of a single-payer system? Am I the only one who thinks this is a good idea? Not according to a recent poll. Fifty percent of those surveyed supported such a system.

First of all, it would eliminate the confusion of the different rules that each insurance carrier operates under. It would streamline paperwork because there would only be one system to deal with. Costly executives with high salarie? Well, they would have no role.

Perhaps the issue of drug formularies could be fixed. Instead of picking one medicine for a certain patient who has HMSA, another for someone with Humana, and a different one for Medicaid or Quest, patients could be treated with the most effective medicine available for their condition.

Instead of having to check a spreadsheet of each test that requires prior authorization from each different insurance company, if patients need a CT scan, they could just have it done. Right now we delay those who need approval and fast-track those who can just have their scan done anytime.

Health Maintenance Organizations could go away. Why should people be forced to see only doctors at one facility just because their insurance says so? I know specialists at other medical centers that have more expertise than some of the ones I work with, but HMO patients can’t see them if we have the same specialty here, unless that doctor recommends it, too. Again, another barrier to getting the care that patients need by the doctors they need it from.

A single-payer system doesn’t have to be the government, but it should be truly non-profit, so that any extra money is put back into the system, not paid to shareholders or as bonuses to executives. It could also be one of the ways to put the power back into the patients’ hands and even provide a platform for their medical records to be available to any doctor who sees them through some type of insurance portal. No more duplication of tests because it’s all available to all providers, not just those at a certain medical facility, like what happens now.

Years ago, when one of my colleagues said he supported a single-payer system, I thought he was nuts, a maverick, going against the norm, bucking the status quo. Now I see that he just had a lot more expertise with the inefficiencies and inequities of the health care system than I did at the time. But I’ve caught up, and really see a value of eliminating the very system I work in, because in the end, all of us just want good quality care and less hassle when we are sick, so we can focus our energies on getting better, not going broke paying for it. 

Kathleen Kozak, M.D., is an internal medicine physician at Straub Clinic and Hospital. She is also the host of The Body Show on Hawaii Public Radio.

http://www.civilbeat.com/2015/05/health-beat-the-single-payer-system-maybe-its-time-for-another-look/

Why pharmacists should endorse healthcare for all

By Fred Mayer, R.Ph., M.P.H.
Drug Topics: Voice of the Pharmacist, May 10, 2015

As healthcare professionals, pharmacists do not want to see anyone refused services for lack of health insurance. That is why in California 250 national organizations have united to support “The Expanded and Improved Medicare For All Act,” H.R. 676, which will guarantee healthcare for all Americans through a universal single-payer healthcare plan.

Rep. John Conyers Jr. (D-MI) reintroduced H.R. 676 on February 3, 2015. The original bill was introduced in 2003 and has been reintroduced in every Congress that followed. At present, H.R. 676 has 48 co-sponsors.

The Expanded and Improved Medicare For All Act would establish a publicly financed, privately delivered healthcare system that would extend the already existing Medicare program to all residents of the United States and U.S. territories, and ensure that everyone, regardless of employment, income, or health status, will have access guaranteed by law to cost-effective healthcare services of the highest quality.

More than 40 million U.S. residents are uninsured and another 50 million underinsured. The time has come to change our inefficient, costly, and fragmented non-healthcare system and replace the insurance industry, managed care organizations, and pharmacy benefit managers (PBMs) with a single payer.

Who is eligible?

Once they enroll at the appropriate location, every person living in the United States and U.S. territories, including the undocumented, would receive a United States National Health Insurance (USNHI) Card and ID number. Social Security numbers will not be used when assigning ID cards.

Covered healthcare services

This program will cover all medically necessary services, including primary care, inpatient care, outpatient care, emergency care, prescription drugs, durable medical equipment, long-term care, mental health services, dentistry, eye care, chiropractic, and treatment for substance abuse. Patients will have their choice of physicians, pharmacies, pharmacists, providers, hospitals, clinics, and practices. No co-pays or deductibles will be permissible under this act.

Administrative cost savings

Our fragmented private insurance bureaucracy consumes 31% of U.S. healthcare spending. Elimination of the private insurance industry, managed care organizations, and PBMs could save enough administrative overhead costs to provide comprehensive healthcare to all residents of the United States.

At present, $3.2 trillion dollars are spent annually on administrative overhead; 21% to 31% of that could be saved, with results comparable to the 3.2% spent by Medicaid, the 3.9% spent by the VA system, the 4.2% spent by the Kaiser system, and the 4.8% spent by Medicare. More than $800 billion per year could be saved in administrative costs alone.

Proposed funding

Maintain current federal and state funding for existing healthcare programs; levy an employer payroll tax of 3% on incomes less than $53,000 and an employer payroll tax of 6% on incomes more than $53,000, in addition to the already existing 1.45% for Medicare; establish a 6% healthcare tax on the top 5% of income earners with incomes greater than $225,000; and tax stock transactions by .005 % (half of 1%).

The time has come

It’s time for the U.S. government to save lives and save money by moving to single-payer, universal healthcare coverage for all Americans. And it is time for pharmacists to wake up and save our profession. We can take an important step by joining the national movement and partnering with the 250 organizations that have endorsed H.R. 676 in support of healthcare for all.

Fred Mayer has been a member of Drug Topics’ editorial advisory board for 25 years and a pharmacist for more than 50 years. A past president of the California Public Health Association and a former pharmacy owner, he is president of Pharmacists Planning Service Inc. (www.ppsinc.org), a nonprofit consumer/public health/pharmacy education organization in San Rafael, Calif. Contact him at ppsi@aol.com.

http://drugtopics.modernmedicine.com/drug-topics/news/why-pharmacists-should-endorse-healthcare-all?page=full

BCBS warns of higher premiums for 2016

Health Plans Poised to Ask for Higher Premiums for 2016, Blue Cross Executive Warns

By Sara Hansard
Bloomberg BNA, Health Care Blog, May 14, 2015

Look for health plans to request higher rates for 2016, a Blue Cross and Blue Shield Association (BCBSA) executive warned May 13.

Costs for health plans in 2014 were higher than expected due to fewer young enrollees signing up for Affordable Care Act plans during the first year that the major provisions of the law took effect requiring people to have coverage or pay a fine, Kim Holland, BCBSA director for state affairs, said at a conference on ACA health insurance exchanges.

That left health plans sold on the ACA exchanges with a high portion of enrollees who had previously unmet medical needs, such as costly transplants, Holland said. “Those plan costs were higher and those are expected to play out in higher rates,” she said. “We’re starting to see that now as plan filings are becoming public, and that is likely to continue.”

Moreover, she added, it’s unlikely that plans will receive much of the money they had expected from the ACA’s risk corridors program, which was intended to help cover insurers’ losses in the event they ended up with a sicker-than-average population. Too many plans had to cover high medical bills, leaving too few plans to pay into the fund for the program, she said.

Holland also warned that there are “unrealistic pressures” on insurers to keep premiums down. “You cannot have every doctor in your network, very low copays, broad benefits and lower costs. It just can’t work that way,” she said.

http://www.bna.com/health-plans-poised-b17179926525/

Health Insurance Exchange Summit, May 11-13 2015, Washington, DC, Health Plan Strategic Response Roundtable, with Kim Holland (Video, fee $59.95): http://www.healthinsuranceexchangesummitportal.com/view_media.php?mid=122

****

Affordable Care Act is wrong framework to fix adverse selection

Quote of the Day, August 25, 2010

Any health care financing system that divides health care funds into separate risk pools inevitably experiences adverse selection. In fact, private insurers do all that they can to see that their own risk pools contain low-cost healthier individuals while shifting higher-cost individuals into other public or private risk pools.

Adverse selection was not simply an inconvenient policy problem that the legislators had to fiddle with merely because they rejected the concept of a single universal risk pool that eliminates the problem of adverse selection. Far worse, it was a deliberate policy decision supported by the leadership of the private insurance industry.

https://www.pnhp.org/news/2010/august/affordable-care-act-is-wrong-framework-to-fix-adverse-selection

****

Analysis Finds No Nationwide Increase in Health Insurance Marketplace Premiums

The Commonwealth Fund Blog, December 22, 2014

A new analysis of the Affordable Care Act’s health insurance marketplace costs finds that, nationwide, marketplace premiums did not increase at all from 2014 to 2015, though there were substantial average premium increases in some states and declines in others.

While average premiums nationwide did not change from 2014 to 2015, there were wide differences across states.

The risk stabilization programs, which include risk adjustment, risk corridors, and reinsurance, diminish insurers’ risk of financial losses and allow them to price their plans more aggressively.

An outstanding question, however, is the long-term sustainability of current trends in premiums.

http://www.commonwealthfund.org/publications/blog/2014/dec/zero-inflation-nationwide-for-marketplace-premiums

****

Comment:

By Don Mccanne, MD

Supporters of the Affordable Care Act (ACA) tout the fact that premiums for plans offered in the ACA exchanges did not increase in the second year, showing that ACA has been effective in slowing the cost of health care. Yet Kim Holland, Blue Cross Blue Shield Association director for state affairs, warns that private insurers will be requesting higher rates for 2016. How can we explain this?

We warned long ago that ACA would not eliminate adverse selection – the concentration into insurance risk pools of patients with more expensive medical problems.

According to Kim Holland, “costs for health plans in 2014 were higher than expected due to fewer young enrollees signing up for Affordable Care Act plans,” and “that left health plans sold on the ACA exchanges with a high portion of enrollees who had previously unmet medical needs, such as costly transplants.” Although private insurers have been masters at gaming adverse selection, they have now become victims of it.

A couple things happened to cause this. First, although HHS claims that healthier, younger individuals did sign up in large numbers, the insurers’ numbers show that this enrollment was inadequate to dilute the ACA risk pools. Another factor is that there was a surge in enrollees who had major unmet medical needs requiring expensive procedures such as joint replacements or organ transplants. In addition, the risk corridor program set up to compensate for these greater losses appears to be inadequate since the the profits in the risk pools insuring healthier individuals were not large enough to offset the greater losses in the more expensive pools.

If this is the case, then why didn’t the premiums increase for 2015? That’s simple. The insurers had only a few months of experience with their first year enrollees when they had to submit their premium requests for 2015. So they had to rely primarily on claims experiences prior to 2014. Now they are in the process of submitting their requests for 2016, and they now have a full year’s experience demonstrating that costs actually were higher, at least partly due to adverse selection.

The Commonwealth Fund’s report showing that premium increases for 2015 were insignificant should not have been interpreted as showing that costs did not go up. Costs did go up, but the premiums were based primarily on the same data used to establish premiums for 2014.

Five years into ACA we now have the right to be in a “we told you so” mode. We were not prescient. Health policy science is advanced enough to predict quite accurately the consequences of these policy decisions. Just think of the multitude of other adverse consequences we have predicted, and we have not been wrong yet.

We have also predicted the benefits of a properly designed single payer national health program. We cannot see the results of such a program here in the United States since we don’t have a single payer system (and Medicare is not single payer because it is only one player in an administratively inefficient, fragmented system). But other nations do have single payer systems, and their beneficial results were fully predictable.

Ignore health policy science at your own risk, or maybe we should say at the nation’s risk.