PNHP

Congress plots to pay for a trade deal by raiding Medicare

Congress plots to pay for a trade deal by raiding Medicare

By Michael Hiltzik
Los Angeles Times, May 18, 2015

Medicare means many things to many people. To seniors, it’s a program providing good, low-cost healthcare at a stage in life when it’s most needed.

To Congress, it’s beginning to look more like a piggy bank to be raided.

That’s the only conclusion one can draw from a provision slipped into a measure to extend and increase the government’s Trade Adjustment Assistance program, which provides assistance to workers who lose their jobs because of trade deals. The measure, introduced by Rep. David Reichert (R-Wash.), proposes covering some of the $2.7-billion cost of the extension by slicing $700 million out of doctor and hospital reimbursements for Medicare.

The plan on Capitol Hill is to move the Trade Assistance Program expansion in tandem with fast-track approval of the Trans-Pacific Partnership trade deal, possibly as early as this week. We explained earlier the dangers of the fast-track approval of this immense and largely secret trade deal. But the linkage with the assistance program adds a new layer of political connivance: Congressional Democrats demanded the expansion of the Trade Assistance Program, Congressional Republicans apparently found the money in Medicare, and the Obama White House, which should be howling in protest, has remained silent.

Medicare advocates have taken up the slack by raising the alarm. “To take this cut and apply it to something completely unrelated sets a terrible precedent,” Max Richtman, head of theNational Committee to Preserve Social Security and Medicare, told me.

The Medicare raid was so stealthy that critics in Congress, including members of the Congressional Progressive Caucus, are just now gearing up to oppose it. “It was sort of buried” in the bill, Rep. Keith Ellison (D-Minn.), the caucus co-chair, told me Monday. The caucus expects to circulate a letter opposing the arrangement as soon as later this week. Ellison, an opponent of granting fast-track authority on the TPP, says the Medicare cut amounts to piling the costs of trade liberalization onto its victims.

“There will be fabulous wealth generated by the Trans-Pacific Partnership,” he says. “The people who are hurt shouldn’t have to pay for it with their jobs and then have inadequate Medicare when they get older.”

Ellison labeled the extension of the assistance program a “consolation prize” for those injured by trade deals. But there are grounds to question how much good the Trade Adjustment Assistance actually does. 

Some of its benefits are direct. The program extends unemployment benefits for workers laid off because of competition from international trade and subsidizes their healthcare insurance. It funds job retraining programs and subsidizes job searches. Older workers can get limited “wage insurance” covering a portion of any wage reductions they suffer in moving to new jobs. Some of this assistance is skimpier in the new bill than they were in the last major reauthorization of the program in 2011, following trade deals with Colombia, South Korea and Panama. 

But in a 2008 study, Kara M. Reynolds of American University and her associate John S. Palatucci found that workers receiving trade assistance did scarcely better than other laid-off workers at finding new employment — and that they earned on average 30% less at their new jobs, compared with the roughly 10% pay cut faced by unassisted workers. 

One reason, they posited, is that the workers in the trade program were in worse-hit industries and were trying to replace relatively high wages. But taking advantage of job training also kept them out of the workforce longer, which may have made them less desirable to employers.

What makes the Medicare cut especially stealthy is that it’s slipped into the federal budget for 2024 — it won’t even show up on the books until the assistance program itself has expired. Moreover, it’s pitched as an extension to the 2011 sequester, possibly to make it seem all the more painless.

The sequester, an economically damaging bit of fiscal hugger-mugger Congress devised as a route out of an impasse over the debt limit, left Medicare relatively but not entirely unscathed: much of the program was exempted from cuts, though provider reimbursements were pared by 2% each year through 2023. Last year, the Medicare sequester was extended into 2024 to cover a reversal of cost-of-living cuts to veterans’ pension benefits — another case of raiding Medicare for an unrelated program. The new proposal cuts Medicare provider benefits by another quarter of a percentage point from October 2024 through March 2025.

This is different from the $700-billion cost reduction in Medicare enacted via the Affordable Care Act. That includes efforts to make the program more efficient by improving the incentives governing how doctors and hospitals deliver care to their patients, along with reductions in payments to Medicare Advantage plans. Richtman points out that much of this amounts to a reallocation within Medicare — “it’s piled back into the program by paying for improvements in preventive care, closing the ‘doughnut’ hole in Medicare Part D (the prescription drug benefit)” and other measures. In the broadest sense, the cost reductions in Medicare are netted against other healthcare costs within the Affordable Care Act.

By contrast, the new proposal would take $700 million out of Medicare, period. Nothing in the TAA will help Medicare function better, augment its services to members, or cover healthcare costs. Slicing into physician and hospital reimbursements may have the opposite effect, by reducing members’ access to care. “I’d characterize this as money stolen from Medicare,” Richtman says.

The greater danger is that Congress gets addicted to looking to Medicare for spare cash. Richtman and other social insurance advocates have grown accustomed to keeping their eyes on efforts in Medicare legislation to tamper with the program’s benefits and finances; now they have to watch out for raids from all directions. 

http://www.latimes.com/business/hiltzik/la-fi-mh-congress-plots-to-raid-medicare-20150518-column.html

PwC: Billing and payment for a “New Health Economy”

Money matters: Billing and payment for a New Health Economy

PricewaterhouseCoopers (PwC), Health Research Institute, May 2015

At a glance

The nation’s healthcare billing and payment system is an artifact of an earlier age. Much can be done to improve the system in the short term, but in the long term, structural change is needed to compete in the New Health Economy

Key findings include:

  • Patients and affluent consumers are most dissatisfied with the healthcare billing and payment system.
  • Cost-conscious millennials are more likely than the general population to judge healthcare organizations based on their billing practices.
  • Consumers and new entrants are beginning to circumvent the claims-based healthcare payment system, especially in primary care services and chronic disease management.
  • Four in five adults with commercial insurance paid less than $1,000 in out-of-pocket expenses in a year, according to an HRI analysis.

What this means for your business

  • Accelerate the move to digital.
  • Embrace simplicity.
  • Sidestep claims. The growth of high-deductible plans means more consumers will pay for care out-of-pocket. New entrants are reconsidering whether these cash payments require claims. Consumers are interested, even though receiving credit toward deductibles is more important than ever.
  • Multiply payment options. Offering choices for payment, making payment easy and helping consumers plan for costs can reduce bad debt and days in accounts receivable.

Strategy: Sidestep claims

An HRI analysis of commercial claims for over 34 million Americans in 2012 found that 80% paid less than $1,000 in out-of-pocket expenses. That year, the average annual deductible for an individual was about $1,000. Nearly half of consumers with commercial insurance incurred less than $1,000 in medical bills in a year. These consumers are ripe for poaching by new entrants from the emerging claims-free healthcare economy.

Marcee Chmait, CEO of SpendWell, a new entrant direct-pay marketplace for healthcare services, said she foresees a future when “cash is king” in healthcare. Higher deductibles, real-time adjudication of claims and transparency will phase-out negotiated rates and discounts.

These changes create a true retail shopping experience between buyer and supplier (consumer and provider). When third party pricing arrangements are eliminated, pricing falls as suppliers costs fall as suppliers set their prices directly to their end buyers.

Even as companies targeting consumers with low annual medical expenses forge a direct-pay economy, the majority of medical costs are borne by a small percentage of people with serious and chronic illnesses. These costs require different fixes.

Conclusion: A roadmap

Many improvements can be made in the near-term, from offering consumers cost and payment information before they arrive for service to aggregating their medical bills on a simple online site. In the longer term, the system will need to be re-engineered to accommodate the millions of consumers paying cash for care. Here’s a roadmap for near-term pain relievers and longer-term fixes:

CURRENT STATE CLAIMS MODEL

  • Eligibility verification
  • Care delivery/charge capture
  • Claim submission
  • Claim adjudication
  • Payment/advice delivery

NEW HEALTH ECONOMY

Before arrival:

  (Near term):

  • Online shopping for care
  • Cost estimates/discussion during scheduling
  • Payment information capture upon scheduling
  • Discussion of costs and choices
  • Loyalty programs enrollment
  • Transparency
  • Enrollment in online bill management and payment tool

  (Long term):

  • Loyalty programs
  • Subscriptions for primary care and chronic disease management
  • Flat-fee services
  • Layaway

  Claims-free model

  • Flat-fee model
  • Subscriptions
  • Other models
  • Direct-pay
  • Discounts
  • Loyalty program rewards

Upon arrival:

  • Coverage verification through combined ID and payment card
  • Estimates allow out-of-pocket collection
  • Discussion of costs and choices

  (Long term):

  • Menu of prices
  • Out-of-pocket payment due at service

Claim acquisition and submission

  • Practice management software integrated with payments/claims network
  • Capture and processing of claims data

Eligibility verification

  • Eligibility for specific benefits verified prior to claims adjudication

Claim pricing

  • Determination of provider contract rules and fee schedules
  • Capitation determination

Claim adjudication

  (Near term):

  • Estimates
  • Accumulators updated automatically

  (Long term):

  • Real-time adjudication of claims

Consumer liability calculation

  • Deductible and patient responsibility healthcare calculated at provider

Sophisticated patient payment options

  • Consumer payment through multiple accounts
  • Flexible payment plan options
  • Financial counseling

  (Long term):

  • Amortization for some treatments
  • Loans
  • e-wallet

Clearance

  • Verification of funds availability
  • Payment authorization

Payment information transmission

  • Fund requests and payment transmission

Settlement

  • Payment of consumer liability (next day)
  • Payment of plan deductible (1–5 days)
  • Real time payment

Reporting/statements

  • Integrated statements for all health related transactions
  • Immediate updating of online accounts, web portal or app

http://pwchealth.com/cgi-local/hregister.cgi/reg/pwc-hri-healthcare-billing-and-payments.pdf

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Comment:

By Don McCanne, MD

To better understand what this PwC report is all about, think about the recent pervasive shift to high-deductible health plans and what that means for the way the majority of us pay our health care bills, or at least the way that many in the policy community believe that we should be paying our bills.

Remember that about 20 percent of us have high health care expenses and use about 80 percent of our health care dollars. That means that the other 80 percent of us who are relatively healthy use only 20 percent of health care funds.

This report confirms what we already knew: 80 percent of individuals with commercial insurance paid less than $1000 out-of-pocket for medical expenses. That means that the insurance companies essentially are paying benefits for primarily the 20 percent with more serious medical problems. The rest of us are essentially on a cash basis, though with constraints such as provider networks and contracted provider rates.

If you read the full report, you will see that the medical-industrial complex is introducing innumerable innovations to try to capture this cash-and-carry business. Providers are attempting to circumvent contracted rates so they can collect their full charges. Third party money managers are coming out of the woodwork to sell us their various services – whether they be traditional insurers with new innovations in their products, or other third parties with innovative methods of managing cash accounts. Whatever innovations they introduce, they are clearly designed to capture as much of these cash payments as possible.

Now maybe you can make some sense out of this PwC report. Much of their report describes how unsatisfactory the current billing and payment system is, and especially the dissatisfaction of health care “consumers,” especially those who are wealthy or who are sick. So what do they suggest? We should abandon the current claims model and switch to a simplified, digital model that sidesteps the current claims process. They call their model the “New Health Economy.”

But look at the specifics of their recommendations. First they list the five simple steps of the current claims system, but label this “an artifact of an earlier age.” Then they show us their “New Health Economy” model. Are they kidding? Look at it! This is their “simplified” method of processing the cash segment of health care financing. What is ironic is that they convert the process of paying cash into expensive, complex digital processes, in the name of simplification!

As long as we continue on the path of consumer-directed health care, with its high deductibles and other cost sharing, we can anticipate many more such innovations that serve the industry well, but at a cost of shifting more of the burden onto patients. Look again at the “New Health Economy” and try to explain to yourself exactly how their scheme makes patients better health care shoppers.

Now think about how this would be handled through a single payer national health program, with first dollar coverage (a highly successful model used by several other nations). We would not need to shop for health care bargains since not only would our own public stewards have already obtained the best prices, but also we would not have to be involved in payment decisions at all since our stewards would make the payments directly through our single, equitably-funded, universal risk pool.

Really. Look again at the “New Health Economy.” Do we really want to proceed with this marketplace model of reform that works well for the industry? Or do we want a public program that works well for all of us?

Affordable Insurance Or Affordable Healthcare

By Lynn Moses Yellott and Chess Yellott, M.D.
The Observer (Shepherdstown, W.Va.), May 7, 2015

Reflecting the excessively long and tortuous law, a lengthy and complicated Observer article (April 2015) asks “Has the Affordable Care Act Met Expectations?”

The article confines itself to the same narrow limits the corporate media and Congress happily imposed on themselves when the bill was hammered out. The undue influence of the health insurance industry and free market advocates convinced politicians and others with power that Medicare for all should be off the table. Likewise, last month’s article ignored the option of Medicare for all along with two key questions.

The first is: Does the Affordable Care Act (ACA) ensure quality healthcare for everyone at a reasonable cost?

The answer is no, and the reasons include:

“Affordable” health insurance is no guarantee of affordable healthcare. In many cases, “affordable” insurance premiums have both high deductibles and high out of pocket maximums.  As a result, too many people delay needed care and get sicker. They are forced to choose between healthcare and other necessities.

The narrowed provider networks imposed by the insurance companies (not by government) restrict patient choice. If doctor and patient conclude that an out-of-network physician, lab, or hospital is best, the cost to the patient can be exorbitant.

Although this point and our previous were included in the article, they were made by a spokesperson who went unchallenged in her characterization of the ACA as a “federal takeover of healthcare.” As a result, the reader may come away with the impression that narrow provider networks and unaffordable out-of-pocket expenses result from government controlling our healthcare. On the contrary, the ACA represents the escalation of the takeover by the health insurance industry.

No other country spends as much per person for medical care as the US. Other countries have better outcomes on numerous measures. Why?

Because preventive care and management of chronic illness are affordable in other nations. People are able to get needed treatment early enough to prevent the conditions from becoming more serious and treatment more costly.

Other countries prevent drug corporations from gouging patients. Thus medications are much more affordable. The ACA sags under the weight of Big Pharma. Here, staff and providers continue to waste time deciphering more and more complex drug formularies. As a result, many patients experience delays in getting their medicines while also paying unnecessarily high prices.

No other developed nation allows the use of free-market pricing for medical care. They recognize that healthcare is a human right, not a commodity, and supporting healthcare for all improves the well-being of their country.

In other developed countries, healthcare dollars are not spent on insurance companies who deny care in order to make a profit.

As good as it gets?

On to our second question: is the ACA the best we can do? The answer is also no. There is no perfect solution, but one proposal should have been highlighted in the article and should have been seriously considered by Congress: Expanded and Improved Medicare for All Act (HR 676).

HR 676 provides publicly funded, privately delivered healthcare for everyone. All medically necessary care is covered, birth to death. You choose any doctor, hospital, lab, diagnostic services, dentist, therapist, audiologist, etc. None is “out of network.” Private pay and private insurance are allowed only for procedures deemed not medically necessary, such as elective cosmetic surgery. Physicians and other providers would negotiate their reimbursement rates with the government; pharmaceutical prices would be negotiated also. And few physicians would flee to other countries because all other developed countries have similar systems.

How would we would pay for HR 676? Through a fair tax. Your healthcare tax dollars would go to healthcare and not be wasted on premiums, copays, deductibles, campaign contributions, lobbying, insurance executives’ exorbitant salaries, profits, advertising, armies of paper pushers denying claims, multiple and confusing billing systems for providers, nor on medical office staff paid to resubmit claims and wait on the phone for insurance and drug corporation approvals.

An important analysis by economist Gerald Friedman reveals that HR 676 saves enough money to provide all medically necessary care for everyone — as well as funding to train health insurance-company employees for the new jobs that would be created.

We heard the thunderous outcry, “Don’t touch my Medicare,” when folks were misled to fear that the ACA would take it away. So why don’t we institute an improved Medicare for all? Those who would argue that we can’t afford it are also being misled by those same corporate interests who want to maintain their profits.

If the political mess, fueled by vested interests, does succeed in rescinding the ACA, will we be ready to demand that it be replaced by something better, such as HR 676, or will we be content to return to pre-ACA conditions?

Those discouraged by the well-financed opposition to the ACA may conclude that achieving improved Medicare for all is impossible. Let’s stop accepting this fatalism and start effectively organizing to demand improved Medicare for all. To become active in the local effort, email epspan@gmail.com.

Chess Yellott, recently retired family doctor from a community health center, and Lynn, longtime human rights advocate, have been active in the Eastern Panhandle Single-Payer Action Network, a chapter of Physicians for a National Health Program. They reside in Shepherdstown, W.Va.

References:
www.pnhp.org/news/2013/february/4-things-to-know-about-medicares-overhead-costs
www.politifact.com/truth-o-meter/statements/2011/may/30/barbara-boxer/barbara-boxer-says-medicare-overhead-far-lower-pri/
http://kff.org/medicaid/fact-sheet/where-are-states-today-medicaid-and-chip/
www.commonwealthfund.org/publications/fund-reports/2014/jun/mirror-mirror
https://pnhp.org/blog/2013/07/24/why-does-u-s-health-care-cost-so-much-the-hidden-in-plain-sight-answer/
http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/?_r=0
www.pnhp.org/sites/default/files/Funding%20HR%20676_Friedman_7.31.13_proofed.pdf

http://wvobserver.com/2015/05/affordable-insurance-or-affordable-healthcare/

Raise the quality of health care

By John Sytsma, M.D.
Lewiston (Maine) Sun Journal, Letters, May 17, 2015

By now, most people must realize how expensive the health care system has become under the Affordable Care Act.

Who is paying for all the subsidies to private health care corporations? Taxpayers are.

Who is paying their millionaire CEOs, their lobbyists, lawyers, stockholders and for the TV ads? The taxpayers are.

The Affordable Care Act allows 20 percent of health care costs to go to those wasteful enterprises called “overhead,” while the actual health care benefits they deliver are lower than with any other industrialized nation in the world.

A government-sponsored, not for profit, system of universal health care coverage — basically, an improved Medicare for all — can pay for health care services for everybody with an overhead of around 3 percent. According to Physicians for a National Health Program, the U.S. could save $400 billion per year. That money could be spent on medical services that are not presently covered.

An expanded Medicare could negotiate physician fees, hospital costs, drug prices, costs of procedures, and prices of medical equipment. It could do meaningful studies on the effectiveness of medical treatments and of outcome measures.

How can this nation afford to not have a national health insurance program?

How can the people of this nation afford to not raise the quality of health care in this country?

Dr. John Sytsma resides in Farmington.

http://www.sunjournal.com/news/letters/2015/05/17/j-sytsma-raise-quality-health-care/1705364

Impact of ACA on employers and their employees

2015 Employer-Sponsored Health Care: ACA’s Impact

International Foundation of Employee Benefit Plans

On March 26, 2015, the International Foundation of Employee Benefit Plans deployed its sixth survey in a series on how single employer plans are being affected by the Affordable Care Act (ACA).

From the Key Findings:

Health Insurance Exchanges

  • Ninety-four percent of all surveyed organizations continue to provide health care coverage for all full-time employees in 2015 and, among that group, nearly all plan to continue coverage in 2016. Respondents overwhelmingly chose three reasons for maintaining coverage: to attract future talent, retain current employees and maintain/increase employee satisfaction and loyalty.
  • Less than 5% of organizations provide coverage to full- or part-time employees through private health insurance exchanges. However, more than one in ten organizations that provide coverage to retirees aged 65 and older are doing so via private exchanges, and 17% more are considering doing so.

Cost-Containment Strategies

  • More than one-third of organizations now have increased out-of-pocket limits, in-network deductibles and/or participants’ share of premium costs in response to ACA. More than one in five organizations have increased copayments or coinsurance for primary care, increased participants’ share of prescription drug costs and/or increased the employee proportion of dependent coverage cost.
  • One in five organizations has adopted or expanded wellness initiatives because of ACA and another 17% plan to do so in the next 12 months.
  • Fifteen percent of organizations have adjusted hours so fewer employees quality for full-time employee medical insurance.

Cadillac Tax

  • The excise tax on high-cost group health plans (a.k.a. Cadillac tax) is considered the top ACA cost driver beyond 2015. Since 2011, a steadily increasing percentage of organizations has taken action to avoid triggering the excise tax — a trend likely to continue. More than one in ten organizations already have adopted changes to prevent them from triggering the tax, 21% are working on changes and 28% plan to act sometime prior to 2018. Only one-quarter said changes were not necessary either because they have no high-cost plans (23%) or because they plan to pay the tax (2%).
  • The most common action taken to avoid triggering the excise tax is moving to a consumer-driven health plan (CDHP). In particular, more than one-quarter of all responding organizations have increased emphasis or added a high-deductible health plan (HDHP) with a health savings account (HSA) because of ACA, and an additional 14% are considering doing so. Nearly one in ten organizations has adopted a full-replacement HDHP because of ACA.

Cost Impact

  • Two-thirds of organizations have conducted an analysis to determine how ACA will affect 2015 health care plan costs. Among all organizations, 82% expect the law will increase their organization’s health care costs this year, with most projecting a 1% to 6% increase. The median cost increase is 3% among organizations that know their exact 2015 cost change because of ACA. However, ACA-related costs are hitting smaller employers much harder than larger ones. General ACA administrative costs and costs associated with reporting, disclosure and notification requirements are the top ACA cost drivers for 2015.

https://www.ifebp.org/pdf/research/aca-impact-survey-2015.pdf

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Comment:

By Don McCanne, MD

This is yet one more highly credible report that indicates that the quintessence of health insurance coverage – employer-sponsored health plans – is deteriorating.

Most of the changes are responses to the very high costs of health care. Employers are shifting more of the costs to employees through much higher deductibles, higher copayments and coinsurance, higher premium contributions, higher shares of drug costs, and an increase in contributions for dependent coverage. This trend began before the Affordable Care Act (ACA) was implemented. ACA actually has very few provisions that lead to major cost increases, except that most employers complain of increased administrative costs associated with compliance with ACA.

Another exception where ACA does play a consequential role for employers is the excise tax that will be assessed on plans with higher premiums. The tax will be significant, and so employers are already taking action to keep insurance premiums below the threshold at which the tax will be assessed. The most common action being taken is to move employees into consumer-driven health plans – high deductible health plans with or without health savings accounts.

Innumerable studies have confirmed that high-deductible health plans both impair access and increase the risk of financial hardship, so they have a negative impact on both the health security and the financial security of the employees.

Some employers understand that an improved Medicare that covered everyone – a single payer national health program – would ensure accessible and affordable health care for all of their employees, while eliminating the headache of having to administer their health benefit programs. It is too bad they are not joining together to advocate for single payer. It just seems like the logical thing to do.

Families USA: Forgoing health care because of high out-of-pocket costs

Non-Group Health Insurance: Many Insured Americans with High Out-of-Pocket Costs Forgo Needed Health Care

Families USA, May 2015

Our study examined adults who bought private health insurance in the non-group market in 2014

  • Just over one-quarter (25.2 percent) of adults who were insured for a full year went without needed medical care because they could not afford it
  • Adults with lower to middle incomes were the most likely to forgo needed medical care
  • Adults with high deductibles were more likely to forgo needed medical care
  • In 2014, half (50.6 percent) of adults had high deductibles of $1,500 or more, and 30 percent had exceedingly high deductibles of $3,000 or more

Why are people still struggling with out-of-pocket costs?

  1. Premium tax credits are tied to silver plans, which often have cost-sharing that is too high for many consumers to be able to afford
  2. Only a portion of the lower-income consumers who are eligible for subsidies to reduce cost- sharing in silver plans receive substantial help to also reduce their deductibles
  3. Insurers are choosing to design silver plans with upfront cost-sharing that is too high for lower- and middle-income consumers to afford

Policy Recommendations

  • Health insurers should offer more plans at the silver level that have low or no cost-sharing for primary care, other outpatient services, and prescription drugs.
  • Policymakers at the state and federal levels should require health insurers to sell silver plans with lower cost-sharing for primary care, other outpatient services, and prescription drugs.
  • At the federal level, Congress should: Provide cost-sharing reduction subsidies to middle-income consumers (above 250% FPL) and increase the generosity of this help.
  • At the state level, lawmakers can also strengthen financial assistance.

http://familiesusa.org/sites/default/files/product_documents/ACA_HRMSurvey%20Urban-Report_final_web.pdf

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Designing Silver Health Plans with Affordable Out-of-Pocket Costs for Lower- and Moderate-Income Consumers

Families USA, May 2014

Silver plans have an actuarial value of 70 percent, meaning that they are required to cover 70 percent of people’s health care costs (on average). 

Insurers have some flexibility in how they design plans to meet the actuarial value requirements for silver plans. However, analyses of current marketplace plans suggests that the majority of silver plans have high deductibles.

When we say that silver plans must meet an actuarial value of 70 percent, we mean that a silver plan’s cost-sharing must be designed so that the plan pays for, on average, 70 percent of people’s medical expenses in a year. Consumers are expected to pay 30 percent of the cost of care out of pocket (on average) through deductibles, copayments, and co-insurance.

Because silver plans must stay within the bounds of a 70 percent actuarial value, they can never completely protect consumers from having to pay higher out-of-pocket costs if they need expensive care.

Insurers must make trade-offs when deciding how to distribute the cost-sharing in their silver plans to meet the required 70 percent actuarial value. Silver plans that set higher deductibles are able to charge relatively lower copayments for care received after a consumer meets the deductible. On the other hand, silver plans that set low deductibles, or that exempt coverage for certain services from the deductible and instead charge copayments for those exempted services, may have to charge relatively higher copayments or co- insurance for other health care services.

Actuarial value considers only the costs of covered services that are delivered by in-network health care providers. A plan’s actuarial value does not consider out-of-pocket costs that consumers must pay if they need services that are not included in the plan’s covered benefits or if they receive care out of network.

Trade-Offs in Plan Design

The featured plan designs show that, because silver plans must meet specific actuarial value requirements, the plans are limited in how low they can keep cost- sharing overall. This is evident in the trade-offs that these plan designs make: Since the plans keep cost-sharing for some services more affordable, the plans must charge relatively higher cost-sharing for other services.

Many of the plan designs with affordable cost-sharing for routine and minor care charge higher cost-sharing for more expensive services, such as inpatient and emergency care, outpatient surgeries, imaging, and specialty drugs.

When silver plans have relatively affordable cost-sharing, consumers with greater health care needs will likely still face high out- of-pocket costs. For example, consumers who need expensive medications or more complex care (such as surgery) will still have to pay high out-of-pocket costs in many of these plans until they reach their out-of- pocket spending limit.

Potentially Problematic Cost-Sharing Designs

  • Three-Tiered Provider Networks
  • Four-Tiered Drug Formularies
  • Potentially Discriminatory Cost-Sharing for Select Treatments

Conclusion

The findings of our analysis prove that it is possible to design silver plans that don’t have high deductibles and that do have more affordable copayments, at least for routine care and care for minor health problems. Putting policies in place that require or encourage insurers to offer these types of plans in the marketplace will help make sure that lower- and moderate-income consumers can afford routine care.

By design, silver plans cannot necessarily shield consumers who need expensive care from high out- of-pocket costs. That is why, over the longer term, efforts to get marketplaces to offer more diverse silver plans must be part of a larger initiative to identify and implement state and federal solutions that will prevent lower- and moderate-income consumers from being underinsured. Examples of such solutions include policies to ensure that this population receiving greater financial assistance to help them afford more comprehensive coverage, or policies to expand cost-sharing assistance to more moderate-income consumers.

http://familiesusa.org/sites/default/files/product_documents/ACT_Assessing%20Alternatives%20Silver%20Plans%20Designs%20Brief_final_web2.pdf

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Comment:

By Don McCanne, MD

Today Families USA released their report that confirms, once again, that many adults insured with high-deductible health plans are likely to forgo needed medical care, especially if they have lower to middle incomes. So what are their recommendations?

In order to remove financial barriers to care, they recommend that more plans offered at the silver level – the benchmark plans –  have lower or no cost-sharing for primary care, other outpatient services, and prescription drugs. This has the advantage of increasing access to primary care services, which most agree would significantly improve the performance of our health care system.

The problem is that the barely affordable silver plans must have an actuarial value of 70 percent (the patient pays 30 percent of health care costs, up to a given maximum). Higher deductibles are used in most of these plans in order to meet this actuarial value. But in a report that Families USA released last year, they explain that if the deductibles and copayments were reduced to more affordable levels, then the required 30 percent of out-of-pocket costs must be shifted to more expensive services.

So this scheme would help the majority who simply need primary care services, but it would make care less affordable, even catastrophic, for those who have greater health care needs. As long as our benchmark plans are set at an actuarial value of 70 percent, this trade-off cannot be avoided.

Families USA also suggests the obvious. We should increase federal and/or state subsidies for both the purchase of plans and for cost sharing for low and middle income individuals and families.

But if you are going to make care affordable for everyone, why continue with this highly inefficient, administratively complex system that wastes so many of our health care dollars. Surely by now Families USA should acknowledge that our dysfunctional system should be replaced by a much more efficient single payer national health program – an improved Medicare for all. We’ve experimented extensively with their preferred model, and it didn’t work.

Obamacare’s health plan choice benefits are vastly overrated

By Philip Caper, M.D.
Bangor (Maine) Daily News, May 14, 2015

It is well documented that many other countries have created health care systems that are more popular than ours, cover everybody, are more effective as measured by better health outcomes, are better able to restrain increases in costs and, therefore, have per-capita costs that are a fraction of ours.

One of the reasons for the popularity of universal health care systems elsewhere in the developed world is that when everybody is in the same system, everybody has an incentive to make that program work. The people of those countries have a sense of ownership and responsibility for their common system.

That contrasts sharply with the situation here in the U.S., where people primarily and often exclusively are concerned with their own little piece of the system, such as Medicare, the Veterans Affairs, their own employment-based or veteran’s insurance, plans purchased on the Obamacare exchanges, Medicaid and so on.

Americans also are confused about who owns the system. Is it the government, their employer or their union? Or, as more Americans are coming to believe, health insurance companies, the pharmaceutical industry or the increasingly consolidated corporate providers of health care such as large hospital systems?

In other words, we lack the solidarity that both is an expression of and created by the existence of a single common way of dealing with the challenges of providing affordable health care coverage for all.

I’m a great fan of the goals of the Affordable Care Act — expanding coverage, restricting the most anti-social practices of health insurance companies and attempting to control overall costs. But I’m not a fan of how it tries to accomplish them.

Obamacare is based on the concept of choice among insurance plans. Such choice is greatly overrated.

In order to provide choice among insurance plans, something most people don’t care much about, we are losing choice among healers, something we care a lot about. We are discovering that choice of insurance plans comes at the cost of losing our choice of doctors and hospitals, as insurance companies vainly attempt to control their premium prices by restricting their networks of “providers.”

The financial price of giving people choice of insurance plans, the very reason for the existence of the problem-plagued health insurance exchanges, is very high. A recent Washington Post article documents the financial struggles of most of the state-run exchanges, struggles that are expected to last indefinitely.

There are other costs, as well. The complex nature of the health insurance “marketplaces” has created unnecessary anxiety and confusion among those using them. That in turn has spawned the creation of armies of consultants, “navigators” and other helpers to assist people in finding their way through the maze of choices created by the health insurance industry and exacerbated by Obamacare. This only adds to our national health care bill and does not buy one doctor visit, lab test, Band-Aid or aspirin.

Complexity is a huge drag on the popularity of our health care system as a whole. I have written before about the barriers to further reform of our health care system — fear, anger, ignorance, ideology, apathy and greed.

Apathy often characterizes people who already are well covered and don’t see any reason to worry about those who aren’t. They include the 55 million beneficiaries of Medicare and roughly 140 million covered by employment-related insurance who like it so much that they are frightened and angered by any program designed to expand coverage for others, fearful that it willreduce their own benefits.

Our obsession with “choice” among health plans not only is misplaced but economically costly and confusing and itself is a huge barrier to political solidarity. The infighting among groups covered by different plans is a powerful ally of those profiting from and wedded to the status quo. It is an important barrier to the one common sense idea most bolstered by evidence of fairness and of effectiveness — improved Medicare for all.

We urgently need fundamental reform of the way we finance health care in the U.S.

Fundamental change is extremely difficult in politics. But as the race to the bottom created by the folly of attempting to interject more choice and competition among insurance plans becomes clearer, the public becomes better informed about the alternatives and frustration grows, and people in Maine and elsewhere will come to demand it.

Physician Philip Caper of Brooklin is a founding board member of Maine AllCare, a nonpartisan, nonprofit group committed to making health care in Maine universal, accessible and affordable for all. He can be reached at pcpcaper21@gmail.com or through his website at philcaper.net.

http://bangordailynews.com/2015/05/14/health/blogs-and-columns/obamacares-health-plan-choice-benefits-are-vastly-overrated/

Speaker to allow vote on universal health care bill

By James Bormley
The Legislative Gazette (Albany, N.Y.), May 5, 2015

During a rally Tuesday in support of a universal health care bill, Assembly Health Committee Chair Richard Gottfried told supporters that Speaker Carl Heastie plans to let the chamber vote on the bill before the end of session.

Under the New York Health Act (S.3525/A.5062), which has been introduced in the Assembly every year since 1992, every New York resident would be eligible to enroll in a publicly-funded health care system, regardless of age, income, wealth, employment or other status.

The goal of the bill is to replace the multi-payer system of employer-based insurance, individually purchased coverage and federally sponsored programs with a single system that charges consumers based on their income and ability to pay.

“Assembly members should be able to go home and tell their constituents they did something for New Yorkers,” Gottfried told the group of advocates during a rally outside the Capitol. More than a hundred supporters planned to meet with lawmakers throughout the afternoon in hopes of signing them on as co-sponsors to the bill.

“Getting it passed in the Assembly would be an enormous step,” Gottfried continued. “The people will realize [universal health care] is not impossible, but inevitable.” The bill has 79 sponsors in the Assembly and was reported to the Codes Committee in February.

Under the legislation, there would be no premium, deductibles, or co-pays for health care in New York because coverage would be publicly funded. The benefits would include outpatient and inpatient medical care, primary and preventive care, prescription drugs, laboratory tests, rehabilitative, dental, vision and hearing care — all of which are benefits currently required by state insurance law or provided by the state public employee package, Family Health Plus, Child Health Plus, Medicare and Medicaid.

The bill passed the Assembly in 1992 but has died in either the Health Committee or the Ways and Means Committee every year since then. The Senate version of the bill, with 20 sponsors, was introduced by Bill Perkins, D-Harlem, and has been in the Health Committee since February 11.

Supporters of the bill say it would save taxpayers $45 billion in just the first year if adopted, or $2,200 per New Yorker. A study by Gerald Friedman, chair of the Department of Economics at UMass Amherst, shows that the share of a New Yorker’s income spent on health care has risen from an average of 12 percent in 1991 to 16 percent in 2014. If the bill were passed and signed, the largest savings would go to households earning less than $75,000 a year and 98 percent of New York’s households would spend less on health care than they do now.

Gottfried told the crowd that if the bill passes the Assembly, lawmakers will be forced to talk about the issue of universal health care with their constituents. “We want New Yorkers to ask their representatives: ‘Why haven’t you made this happen yet?'”

http://www.legislativegazette.com/Articles-Top-Stories-c-2015-05-05-91652.113122-Speaker-to-allow-vote-on-universal-health-care-bill.html

Blue Cross Blue Shield of Michigan fraudulently collected hidden administrative fees

Court case shows how health insurers rip off you and your employer

By Wendell Potter
The Center for Public Integrity, May 11, 2015

It turns out that one of the reasons workers have been paying more for their coverage is allegedly a common practice among insurers:  charging their employer customers unlawful hidden fees.

The fees came to light when Hi-Lex Controls, an automotive technology company, took Blue Cross Blue Shield of Michigan (BCBSM) to court in 2013 after becoming suspicious that the company had been systematically cheating it over 19 years. After reviewing evidence in the case, a judge ordered that BCBSM stop charging the hidden fees and pay Hi-Lex $6.1 million.

Documents filed in the case showed that in 1993 BCBSM implemented a scheme through which it would collect additional revenue by adding certain mark-ups to hospital claims paid by its self-insured customers. Self-insured companies hire firms  like BCBSM to do the paperwork. It is the employer’s money—not the insurance company’s—that is “at risk” in such arrangements.

After suing and getting documentation from BCBSM, attorneys for Hi-Lex were able to show the court that BCBSM marked up hospital claims by as much as 22 percent. BCBSM didn’t disclose the markups, however. As part of the scheme, regardless of the amount BCBSM was required to pay a hospital for a given service, it reported a higher amount to Hi-Lex and pocketed the difference.

The hidden fees were listed in internal BCBSM documents under a variety of names:  provider network fees, contingency/risk fees, retiree surcharges, and—my personal favorite—other-than-group subsidy fees. Internal company emails showed that BCBSM knew customers were unaware of the markups and that the company actually trained its employees to downplay the hidden fees should customers suspect they were being gouged.

After rumors began circulating in the early 2000s that BCBSM was charging hidden fees, the company told insurance brokers, falsely, that its customers got 100 percent of the hospital discounts it negotiated.

The Court of Appeals affirmed the $6.1 million fraud judgment, agreeing with the lower court that “BCBSM committed fraud by knowingly misrepresenting and omitting information about the disputed feeds in contract documents.”

BCBSM hoped the U.S. Supreme Court would take the case but the high court refused, meaning the lower courts’ rulings stand.  As a consequence, as many as 50 of BCBSM’s other customers also filed suit.

Lest you think this scheme was something BCBSM dreamed up on its own, an actuary from the consulting firm Milliman Inc. testified under oath that many other insurers engaged in the same practices.

http://www.publicintegrity.org/2015/05/11/17317/court-case-shows-how-health-insurers-rip-you-and-your-employer

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Comment:

By Don McCanne, MD

Wasteful administrative services are the private insurers’ primary product that they are selling us, and the only product when they administer the plans of our nation’s large, self-insured employers. The insurers have devised many devious methods of diverting risk pool funds into their own coffers, but this report shows us that they are truly nefarious to the core when they are fraudulently padding the bill for their administrative services alone.

Not only does this report show that the supposedly cleanest of the insurers – Blue Cross Blue Shield of Michigan – engages in this thievery, many other insurers engage in the same practices, according to the sworn testimony of a Milliman actuary.

Had enough? Time for our own publicly-administered single payer program.

Court case shows how health insurers rip off you and your employer

Blue Cross Blue Shield of Michigan added hidden fees to hospital claims

By Wendell Potter
Center for Public Integrity, May 11, 2015

If you think you’re paying too much for employer-sponsored health coverage, you might want to forward this to the HR department. It’s possible, maybe even likely, that your health insurer has been ripping off both you and your employer—to the tune of several million dollars every year—for decades.

Many Americans, according to various polls, blame Obamacare for every hike in premiums despite the fact that the rate of increase for most folks was actually greater before 2010, the year the law went into effect.

Health insurers are delighted that many folks blame Obamacare for rate increases because it deflects attention away from them and, according to documents made public in a recent lawsuit against a big Blue Cross plan, the questionable activities they’ve been engaging in for years to boost profits.

It turns out that one of the reasons workers have been paying more for their coverage is allegedly a common practice among insurers:  charging their employer customers unlawful hidden fees.

The fees came to light when Hi-Lex Controls, an automotive technology company, took Blue Cross Blue Shield of Michigan (BCBSM) to court in 2013 after becoming suspicious that the company had been systematically cheating it over 19 years. After reviewing evidence in the case, a judge ordered that BCBSM stop charging the hidden fees and pay Hi-Lex $6.1 million.

Documents filed in the case showed that in 1993 BCBSM implemented a scheme through which it would collect additional revenue by adding certain mark-ups to hospital claims paid by its self-insured customers. Most of the country’s largest employers self-insure, which means that they are on the hook for medical claims when employees and their dependents get sick or injured. Self-insured companies hire firms  like BCBSM to do the paperwork. It is the employer’s money—not the insurance company’s—that is “at risk” in such arrangements.

After suing and getting documentation from BCBSM, attorneys for Hi-Lex were able to show the court that BCBSM marked up hospital claims by as much as 22 percent. BCBSM didn’t disclose the markups, however. As part of the scheme, regardless of the amount BCBSM was required to pay a hospital for a given service, it reported a higher amount to Hi-Lex and pocketed the difference.

The hidden fees were listed in internal BCBSM documents under a variety of names:  provider network fees, contingency/risk fees, retiree surcharges, and—my personal favorite—other-than-group subsidy fees. Internal company emails showed that BCBSM knew customers were unaware of the markups and that the company actually trained its employees to downplay the hidden fees should customers suspect they were being gouged.

One of the documents that came to light was a survey BCBSM conducted that found that 83 percent of its self-insured customers were completely unaware of the fees.  Other documents revealed a course of conduct designed to conceal evidence of the company’s wrongdoing. For example, after rumors began circulating in the early 2000s that BCBSM was charging hidden fees, the company told insurance brokers, falsely, that its customers got 100 percent of the hospital discounts it negotiated.

In ruling in favor of Hi-Lex, the court said BCBSM committed fraud by knowingly misrepresenting and omitting information about the disputed fees in contract documents. Specifically, the administrative services contract it signed with Hi-Lex, as well as its monthly and quarterly claims reports, misled Hi-Lex into believing that the fees and charges it disclosed to its customers were the only forms of compensation that BCBSM retained for itself. 

When the lower court found in favor of H-Lex, BCBSM filed an appeal with the U.S. Court of Appeals for the Sixth Circuit.  In essence, the insurer claimed—I’m not making this up—that its customers bore some of the financial responsibility for being ripped off because they weren’t paying close enough attention to what BCBSM was doing. It argued that Hi-Lex and its other employer customers should make a “contribution” to defray the judgment against the company because its customers didn’t act soon enough to put a stop to the scheme.

As you can imagine, attorneys for Hi-Lex called BCBSM’s “contribution theory” absurd.

“Just as a bank robber cannot keep ill-gotten gains by seeking contribution from the bank’s security guard who failed to thwart the robbery,” attorneys for Hi-Lex wrote in response to the insurer’s motion, “BCBSM cannot keep the disputed fees by seeking contribution from employers for failing to discover and thwart its illegal taking of millions of dollars form (its self-insured customers’) plans.”

Lest you think this scheme was something BCBSM dreamed up on its own, an actuary from the consulting firm Milliman Inc. testified under oath that many other insurers engaged in the same practices.

The Court of Appeals affirmed the $6.1 million fraud judgment, agreeing with the lower court that “BCBSM committed fraud by knowingly misrepresenting and omitting information about the disputed fees in contract documents.” This misrepresentation, the court said, “helped sustain the illusion that BCBSM was more cost-competitive” than its competitors.

BCBSM hoped the U.S. Supreme Court would take the case but the high court refused, meaning the lower courts’ rulings stand.  As a consequence, as many as 50 of BCBSM’s other customers also filed suit. Rather than risking a similar fate in the courts, the insurer is reportedly settling with at least some of the other companies.

You might want to suggest that your employer look into this. It’s just the most recent evidence that some insurers are more interested in padding their bottom lines than doing the right thing for their customers.  

Wendell Potter is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans and Obamacare: What’s in It for Me? What Everyone Needs to Know About the Affordable Care Act.

http://www.publicintegrity.org/2015/05/11/17317/court-case-shows-how-health-insurers-rip-you-and-your-employer

50 years later, Medicare has room for improvement

By David Welch, RN
Chico (Calif.) Enterprise-Record, Letters, May 12, 2015

As I approach a significant milestone in my life — age 65 and impending retirement after 34 years as a registered nurse — I become aware of a closely related milestone in our national life: the 50th anniversary of the Medicare program on July 30 of this year.

Aside from playing a big part in making a secure retirement possible for me and tens of millions of other Americans, Medicare also transformed American health care and my own profession.

Fifty years ago, there was little that could be done for many of the major diseases we treat effectively today. Cardiac surgery barely existed, cancer treatment was primitive, dialysis was in its infancy and available only to a few. Intensive care units were a new concept. Fifty years ago, science and medicine were on the brink of a transformation. But the very people who had the greatest need for many of the new therapies had no way to pay for them.

And thus, with great political struggle — and over fierce opposition from conservatives and the medical establishment of the time — the Medicare program was born. Where would we be without it?

As we look back on 50 years, it’s worth remembering something: The original vision was for a comprehensive program that would have covered all Americans. Political realities forced it to be scaled back to a program for the elderly and disabled. So, let’s celebrate what Medicare has accomplished, protect it for the future, work to make it even better — and extend it to everyone.

David Welch resides in Chico.

http://www.chicoer.com/opinion/20150511/letter-50-years-later-medicare-has-room-for-improvement

New evidence that individuals do not make sensible health insurance decisions

Do Individuals Make Sensible Health Insurance Decisions? Evidence from a Menu with Dominated Options

By Saurabh Bhargava, George Loewenstein, and Justin Sydnor
National Bureau of Economic Research, NBER Working Paper No. 21160, May 2015

Abstract 

The recent expansion of health-plan choice has been touted as increasing competition and enabling people to choose plans that fit their needs. This study provides new evidence challenging these proposed benefits of expanded health-insurance choice. We examine health-insurance decisions of employees at a large U.S. firm where a new plan menu included a large share of financially dominated options. This menu offers a unique litmus test for evaluating choice quality since standard risk preferences and beliefs about one’s health cannot rationalize enrollment into the dominated plans. We find that a majority of employees – and in particular, older workers, women, and low earners – chose dominated options, resulting in substantial excess spending. Most employees would have fared better had they instead been enrolled in the single actuarially-best plan. In follow-up hypothetical-choice experiments, we observe similar choices despite far simpler menus. We find these choices reflect a severe deficit in health insurance literacy and naïve considerations of health risk and price, rather than a sensible comparison of plan value. Our results challenge the standard practice of inferring risk attitudes and assessing welfare from insurance choices, and raise doubts whether recent health reforms will deliver their promised benefits.

Conclusion

Our principle contribution is to document widespread and costly violations of dominance in the health-insurance decisions of a large and diverse sample of U.S. employees. Unlike most prior work, our paper is able to transparently assess choice quality without making assumptions about risk preferences or beliefs, by analyzing employee choice from a standardized plan menu with a large share of financially dominated options. For the majority of employees who chose dominated plans—a disproportionate share of whom were of low income—the adverse financial consequences of poor choice outweigh the estimated benefits of recent policy measures (e.g., the effect of the exchange on insurance premiums, or the penalty associated with the individual mandate) that have attracted far more policy attention.

Our initial results prompted us to address the question of why employees make such disadvantageous decisions. Through a series of online experiments with hypothetical choices modeled on the firm’s plan menu, we find evidence for a modest role of search/menu complexity and much larger role of low health literacy. Confirming other research, we find widespread deficits in employee understanding of the insurance choices they face. Even with simple menus with few options, we observed significant errors in plan choice, suggesting that plan choice is difficult to improve. The online studies suggest that poor choice may partly reflect a heuristic understanding of health insurance such that consumers sort into plans based on perceived health risk and inferences about plan generosity from the rank-ordering of plan deductibles rather than a careful assessment of financial plan value.

The promise of recent reforms that expand choice and aim to increase provider competition is premised on the assumption—challenged by our research—that enrollees will make sensible plan choices. While efforts to improve choice through simplification, education, and other modifications to the choice environment may improve the quality of decisions, our results suggest value in shifting focus from helping consumers navigate complicated insurance options to simplifying and standardizing the options themselves. At the extreme, if all firms offered identical products, then competition would be far more likely to focus exclusively on price and quality. Beyond implications for policy, our study asserts that traditional attempts to infer risk preferences from health insurance choices may be misguided. Rather than reflecting rational deliberations involving cost, need, and risk, many health plan choices likely reflect heuristic choice strategies grounded in a fundamental deficit of health plan literacy.

http://www.nber.org/papers/w21160

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Comment:

By Don McCanne, MD

Regarding whether or not individuals make sensible decisions when purchasing health insurance, these authors conclude, “many health plan choices likely reflect heuristic choice strategies grounded in a fundamental deficit of health plan literacy.” That is, individuals do not understand health plan options well enough to make sensible choices on their own.

So much for the political campaign that led to the Affordable Care Act – you remember, the campaign that called for CHOICE, when by choice they meant choosing exactly the health insurance you want. As the authors state, “We find these choices reflect a severe deficit in health insurance literacy and naïve considerations of health risk and price, rather than a sensible comparison of plan value.” This raises “doubts whether recent health reforms will deliver their promised benefits.”

The authors further state, “At the extreme, if all firms offered identical products, then competition would be far more likely to focus exclusively on price and quality.”

But we can go them one better. Suppose we had one identical comprehensive product for everyone, and removed price as an issue by funding care through an equitably-funded, universal risk pool. Then we would all get the care we need, and select our care based on quality.

It may be that the perception of quality would be based on “heuristic choice strategies” with a “deficit of health (quality) literacy,” but limiting decision options to only that of perceived quality, whether or not the perception is valid, would result in a vastly superior concept of choice than that which applies to the health plan marketplace – whether the individual insurance market, the ACA exchanges, employer-sponsored plans, or Medicare Advantage and Part D plans.

Obviously, under a single-payer improved Medicare for all, the only choice that we would have to make would be our health care professionals and institutions, and that choice would be based on perceived quality – a much better deal for us all.