PNHP

Exposing the Private Equity Threat

Exposing the Private Equity Threat

Summary: Massive private equity investment has substantially transformed US health care. A highly respected health news service, KHN, highlights the trend and its downsides. The Private Equity Stakeholder Project documents these investments and resulting patient care problems. Single payer would correct the skewed health system dynamics that favor private equity.

Patients For Profit: How Private Equity Hijacked Health Care, How Private Equity Is Investing in Health Care: A Video Primer, KHN (Kaiser Health News), October 26, 2022, by Hannah Norman

See video (3 minutes)

“A common move is to ‘roll up’ a string of businesses under one more established ‘platform’ and find new ways to make money. But as a result, patient care can suffer.” (2:25)

Private Equity Stakeholder Project: Healthcare

Private equity increasingly makes up a substantial portion of investment in U.S. healthcare companies, touching virtually every sector of the industry, and is expected to continue to grow. Asset managers have record levels of available capital earmarked for healthcare investment; as of 2019, private equity firms had $29.2 billion in capital waiting to be invested in healthcare.

This is despite the fact that private equity investment in healthcare companies carries substantial risk to patients, workers, and investors. The typical private equity investment playbook—pursuing outsized returns over short time horizons while using high levels of debt—may lead to behavior that jeopardizes patient care.

For example, private equity-owned healthcare companies have seen the following issues:

  • Reduced staffing, or filling beds without adequate staffing ratios
  • Over-reliance on unlicensed staff to reduce labor costs
  • Failure to provide adequate training
  • Pressure on providers to provide unnecessary and potentially costly services
  • Violation of regulations required for participants in Medicare and Medicaid such as anti-kickback provisions, creating litigation risk

PESP has studied the impacts of private equity investment in key healthcare sectors, including safety net hospitals, behavioral health, nursing homes, prisons and detention centers and dental care. We have also written about the practice of taking debt-funded dividends from healthcare companies; private equity’s role in medical debt collection; and the relationship of private equity ownership and Medicare fraud. PESP also tracks private equity healthcare acquisitions on a monthly basis, highlighting notable transactions in a variety of sectors.

Comment:

By Jim Kahn, M.D., M.P.H.

Private equity (PE) is a menace to US health care, extracting profits and leaving care underfunded and patients at risk. HJM has written frequently about specific PE issues among providers (eg, here), capitated “direct contracting” (including ACO REACH) by PE and other corporations in Medicare (eg, here), and the dangerous growing corporate ownership of providers. The broad PE critique offered by today’s sources is important.

The rising prices that plague US healthcare reflect growing provider power through corporate acquisitions and mergers – often driven by PE. Massive private health insurers are only too happy to pass along the high costs and associated high profits to payers (CMS and private employers, mainly) and patients (in the form of punishing cost-sharing and financial barriers to care). Private equity is turbo-charged exploitation enabled by our complex, fragmented, and chaotic insurance landscape.

How will single payer help? It will correct the distorted power imbalance, with a global payer that can effectively negotiate prices with large provider groups, reducing costs. It will simultaneously empower small providers (remember solo practice?) by treating them the same as the largest providers. It will simplify billing administration for physicians, removing the incentive to sell to corporations to shed the annoyingly complex paperwork. Many providers and patients prefer a non-corporate setting with greater autonomy and personalization, and will have that choice.

In short, single payer will unravel and replace the play space for aggressive corporate profit-taking. In so doing, it will support smaller providers and, of course, patients. Investor gains will yield to equitable, accessible, and affordable health care.

P.S. See the first comment — additional resources from NY PNHP

http://healthjusticemonitor.org…

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Medicare Advantage? Medicare Disadvantage would be a better name.

By Jessica Schorr Saxe, M.D.
The Charlotte Observer, October 25, 2022

Along with leaves changing color and the omnipresence of pumpkin spice comes the avalanche of ads, commercials and telephone calls, entreating us to believe that Medicare Advantage is the best thing since the invention of the Internet. With open enrollment season upon us, it’s critical to examine that claim.

In traditional Medicare, the government pays doctors and hospitals directly. Recipients usually pay premiums and must meet deductibles, and many choose a supplemental “Medigap” plan to help with out-of-pocket costs.

Medicare Advantage was designed about 20 years ago as an alternative to traditional Medicare, meant to provide innovative ways of delivering care at lower cost. It pays insurers — middlemen — a monthly fee per patient to manage their care. Premiums are often lower than traditional Medicare, and can offer perks such as gym memberships or limited dental or vision care.

However, while traditional Medicare gives access to any participating provider, Medicare Advantage plans limit care to doctors and hospitals in their networks. They are also more likely to deny needed care by requiring prior authorizations for tests or procedures.

Earlier this year, the federal government reported that 13% of denials in Medicare Advantage would not have been refused under traditional Medicare. Medicare Advantage plans are also increasingly ending nursing home and rehabilitation care before providers consider patients ready to go home. While medical professionals make those decisions under traditional Medicare, in Medicare Advantage the insurer decides.

So instead of innovating care, Medicare Advantage seems to mainly withhold it. It has also proven to be costly. Because such plans get higher government payouts for sicker patients, insurers have an incentive to exaggerate the sickness of enrollees.

According to federal audits, 8 of 10 of the largest companies have submitted inflated bills, and 4 of 5 of the very largest have faced federal lawsuits accusing them of fraud. In 2020 alone, these exaggerated risk scores generated $12 billion in excess payments. Because of this and other factors, the government actually spends 4% more for Medicare Advantage enrollees than those in traditional Medicare.

Despite all this, the low premiums and perks may still be attractive to seniors who are not (yet) sick. The situation often changes when they develop an illness. They may find that a specialist or hospital they wish to see is out of network. They may experience delays or denials of care due to administrative barriers. Their out-of-pocket costs will often be higher.

A little known fact about Medicare is that when patients are enrolled in Medicare Advantage for over 12 months but want to change to traditional Medicare, Medigap plans are no longer obligated to take them without underwriting, which involves passing a health screen. In other words, if you get cancer and want to go to a cancer center not covered by your Medicare Advantage plan, you may be stuck.

Surely this program should be called Medicare Disadvantage. When a middleman makes profits from “managing” your healthcare, they inevitably do so by limiting the care you get. Medicare recipients, beware! And as citizens and taxpayers, we should all demand that Congress take Medicare out of the hands of corporations, freeing billions of dollars in savings to deliver actual health care.

Dr. Jessica Schorr Saxe is a retired family physician in Charlotte and chairwoman of Health Care Justice – NC.

https://www.charlotteobserver.com…

Why Are Political Barriers to Health Reform So Great?

Summary: Many voters are willing to cast their ballot for the candidate who supports reform to reduce health care costs. Yet the GOP seems to hate health insurance. Can’t we agree on reliable insurance for all, and a simple uniform way to pay for it?

West Health – Gallup 2022 Healthcare in America Report, October 20, 2022

In the next election, how likely are you to vote for a candidate from a political party you don’t typically support if reducing healthcare costs was their top priority?

Very or somewhat likely:

  • Democrats – 40%
  • Republicans – 22%

Republicans look to Obamacare’s ‘family glitch’ for post-midterm fight, POLITCOPRO, October 20, 2022, by Daniel Payne

House Republicans on Thursday asked the Treasury Department to preserve documents related to the administration’s fix of Obamacare’s “family glitch,” preparing for an investigation of what they claim was an “illegal expansion” of health coverage should the GOP regain control of the chamber in the midterms.

In a letter to Treasury Secretary Janet Yellen obtained by POLITICO, Republicans on the Ways and Means Committee told the administration to save and share with the committee information related to the new rule, which extended health insurance subsidies to 1 million Americans.

The letter signals a larger investigation Republicans are planning if they win the House in November, according to a congressional staffer familiar with the matter.

Comment:

By Don McCanne, M.D.

No surprises here. Many Democrats would be willing to break party ranks to support efforts to reduce health care costs. But how likely is that – a Democratic opponent more reform-minded than the Dem? Far fewer Republican voters prioritize reform, but 20% isn’t nothing – and that situation arises all the time. Yet GOP leaders are so opposed to health insurance that they will fight to reduce it if they regain control. These are the strange political positions staked out around a broken health care system desperately in need of reform.

Suppose we all agreed that we need to provide comprehensive high-quality care to absolutely everyone. I bet even Republicans would endorse that. The only political decision is whether to pay for it through a progressive tax system that is affordable for everyone – a sharp contrast to today’s haphazard financial burdens, barriers to care, and medical debt. Isn’t that a political decision we could all live with? Why not?

http://healthjusticemonitor.org…

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Two Women Prioritize Helping the Public over Protecting the Rich

Summary: Two news stories highlight visionary women pursuing community benefit. One, a lawyer and new MacArthur fellow, seeks drug patent law changes that favor access for patients over benefit to Big Pharma stockholders. Another, an heiress, advocates for high taxation of inherited wealth. Both missions align well with single payer.

Priti Krishtel, Health Justice Lawyer, MacArthur Fellows Program, Class of 2022

Priti Krishtel is a health justice lawyer exposing the inequities in the patent system to increase access to affordable, life-saving medications on a global scale. By distilling the technical aspects of the patent system to show its sometimes devastating impact on people’s lives, Krishtel is galvanizing a movement to center people instead of only commercial interests in our medicines patent policy.

… In 2006, Krishtel co-founded the Initiative for Medicines, Access, and Knowledge (I-MAK) to ensure the public had a voice in the pharmaceutical patent system. Krishtel and the organization are drawing attention to weaknesses within the patent system while identifying needed reforms to make it more responsive to the public good. Patents are intended to incentivize innovation by ensuring that only the patent holder can sell and profit from the product for a fixed time. However, many pharmaceutical companies seek to extend their monopolies by filing multiple patents on small changes (such as changes in dosage) to existing drugs over several years. This stifles competition, delays generic production, and keeps medicines out of the hands of people who need them the most. I-MAK has successfully contested patents worldwide, saving governments billions of dollars in public health spending and giving millions of people access to life-saving treatments. … I-MAK brings together a range of stakeholders—including patient groups, policymakers, and patent lawyers and judges—to deepen collective understanding of the impact of the patent system across different communities. … Their proposed reforms include ensuring only meaningful inventions are rewarded with a patent, increasing oversight from other government branches, and increasing public participation in the patent process.

She’s Inheriting Millions. She Wants Her Wealth Taxed Away, New York Times, October 21, 2022, by Emma Bubola

Marlene Engelhorn, 30, heir to a fortune, isn’t interested in philanthropy, believing it only perpetuates existing power dynamics. She’s calling for structural change to how the ultrarich are taxed.

By the time her extraordinarily wealthy grandmother died last month, Marlene Engelhorn already knew who she wanted to be the ultimate beneficiary of the enormous inheritance coming her way: the tax man.

“The dream scenario is I get taxed,” said Ms. Engelhorn, the co-founder of a group called Tax Me Now.

Ms. Engelhorn, a 30-year-old who grew up in Vienna, is part of a growing movement of young, leftist millionaires who say they want governments to take a much larger share of their inherited wealth, arguing that these unearned fortunes should be democratically allocated by the state.

For more than a year, Ms. Engelhorn has been campaigning for tax policies that would redistribute her eight-figure windfall — and anyone else’s.

Comment:

By Jim Kahn, M.D., M.P.H.

We all need inspiration in the pursuit of community values. That’s especially true in today’s world where the profit-takers have such firm control of the rules of the game – influencing laws and regulations that favor them and exploiting those to the max.

Ms. Krishtel and Ms. Engelhorn exhibit admirable community values, talent, and determination. Ms. Krishtel works on pivotal details of patent law, and Ms. Engelhorn targets inheritance taxes for the wealthy. I was exhilarated reading about them.

Single payer, of course, also embodies community health and prosperity over private gain. The profiteers are wealthy health system stakeholders — insurers, pharma, provider conglomerates, and the private equity firms that participate in all those roles. Community includes all the patients and providers who deserve a better system.

There are so many of us engaged in social justice crusades. Let’s draw renewed energy and vision from these amazing women.

http://healthjusticemonitor.org…

Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.

The Rise of Despair and Conservative Politics

Summary: Anne Case & Angus Deaton are leaders in defining the links between rising hopelessness, declining health, and political division. A linchpin is the growing economic penalty from lacking a college degree; another is increasingly unaffordable healthcare. Single payer is harder to achieve in this polarized context, but more needed to overcome our political disarray.

There Are Two Americas Now: One With a B.A. and One Without, NY Times, October 5, 2022, by Thomas Edsall

The Republican Party has become crucially dependent on a segment of white voters suffering what analysts call a “mortality penalty.”

This penalty encompasses not only disproportionately high levels of so-called deaths of despair — suicide, drug overdoses and alcohol abuse — but also across-the-board increases in several categories of disease, injury and emotional disorder.

“Red states are now less healthy than blue states, a reversal of what was once the case,” Anne Case and Angus Deaton, economists at Princeton, argue in a paper they published in April, “The Great Divide: Education, Despair, and Death.”

… the correlation between Republican voting and life expectancy “goes from plus 0.42 when Gerald Ford was the Republican candidate — healthier states voted for Ford and against Carter — to minus 0.69 in 2016 and minus 0.64 in 2020. States classified as the least healthy voted for Trump and against Biden.”

… the ballots cast for Donald Trump by members of the white working class “are surely not for a president who will dismantle safety nets but against a Democratic Party that represents an alliance between minorities — whom working-class whites see as displacing them and challenging their once solid if unperceived privilege — and an educated elite that has benefited from globalization and from a soaring stock market, which was fueled by the rising profitability of those same firms that were increasingly denying jobs to the working class.”

The Great Divide: Education, Despair, and Death, Annual Review of Economics, April 2022, by Anne Case and Angus Deaton

Abstract

Deaths of despair, morbidity, and emotional distress continue to rise in the United States, largely borne by those without a college degree—the majority of American adults—for many of whom the economy and society are no longer delivering. Concurrently, all-cause mortality in the United States is diverging by education in a way not seen in other rich countries. We review the rising prevalence of pain, despair, and suicide among those without a bachelor’s degree. Pain and despair created a baseline demand for opioids, but the escalation of addiction came from pharma and its political enablers. We examine the politics of despair, or how less-educated people have abandoned and been abandoned by the Democratic Party. Whereas healthier states once voted Republican in presidential elections, now the less-healthy states do. We review deaths during COVID-19, finding that mortality in 2020 maintained or exacerbated existing relative mortality differences between those with and without college degrees.

Excerpts

[T]he economy has increasingly come to serve some, but not all, Americans, and where a central division is between those who do and those who do not have a 4-year college degree. While the college wage premium has soared to unprecedented levels, the inequality between these two groups involves much more than money. The college degree has now become “a condition of dignified work and of social esteem” as well as a matter of life and death, with adult life expectancy rising for the college educated and falling for the rest.

In our book [2020], we developed an account of the rising tide of despair, focusing on declining employment opportunities for those without a BA, especially the fall in good jobs, those that offer a sense of belonging, meaning, and purpose and prospects for advancement. This was aggravated by an ever more expensive health care system—more than twice as expensive as in other rich countries—a fifth of which is financed by an approximately flat tax on workers in amounts that often make low-skilled workers unemployable. An employer-sponsored individual (family) health plan cost $7,470 ($21,342) in 2020, $3.73 ($10.67) per hour for a 2,000-hour year, money that comes out of wages and take-home pay (KFF 2020). We also noted the lack of a comprehensive safety net in the United States for those who are neither elderly nor children … Both the safety net and the financing of health care are radically different in other rich countries where—with a few exceptions—there are few deaths of despair. …[W]e emphasized the corrosive effects of American meritocracy on the unsuccessful, on Young’s “populists” who have to live with the meritocratic hubris of the well-credentialed … and who, as they strive not to blame themselves, believe—with much justification— that society is rigged against them. …

Deaths of despair among Blacks and among Hispanics began to rise after 2010; like those for Whites, the increases are largely confined to those without a 4-year college degree. About three-quarters of the increase for Blacks and Hispanics without a BA is accounted for by drug overdoses.

A Politics of Despair

If the majority of Americans are failing to thrive while a minority prospers, why does the democratic process not work to improve their material and health outcomes? … [L]iving in a functioning democracy is good in and of itself, and the lack of effective political voice is one reason to despair. Woolhandler et al. (2021) in a Lancet Commission report on public policy and health in the Trump era … describe a negative feedback loop in which “the neoliberal policies that inflicted economic hardship and worsened health” did not, as might have been expected in a well-functioning democratic state, generate a political demand for better safety nets and health provision, because less-educated whites see such policies as favoring minorities at their expense. … Blacks and more educated whites react in the opposite direction, widening political polarization, which on net favors the right and provides an opening for populist politicians such as Donald Trump. …

[A]fter the US presidential election of 2016, several studies noted correlations between deaths of despair, changes in life expectancy, and the Republican share of the vote (Monnat 2016, Bor 2017). Bor (2017) finds a correlation of −0.67 across counties between changes in life expectancy from 1980 and 2014 and the share of each county’s vote going to Trump. There is a similar cross-county correlation of Trump’s vote share with the fraction of each county’s White population without a college degree …

The economy began to turn against the white working class around 1970. Real wages began to decline for workers without a BA, and there was a long, slow decline—interrupted but never fully restored during economic booms—in job opportunities for less-educated men, much of which was driven by the decline in employment in American manufacturing. Globalization was important, though less important than automation, as was the relentless increase in the cost of health care, much of which is paid for through what is essentially a head tax on wages. …

Since the 1970s, there has been a slow-rolling and still ongoing divorce between Democrats and the white working class, a divorce that is central to the politics of despair. Especially after the catastrophic 1968 Democratic National Convention, the party slowly oriented itself away from its traditional working-class and union base toward what it is today, a coalition of minorities and educated professionals. …

Comment:

By Don McCanne, M.D. and Jim Kahn, M.D., M.P.H.

The political realignment that has taken place has racial minorities joining the better educated professionals, improving their own educational levels and their own health status, whereas less educated largely white populations have aligned with the Republicans as their despair and sense of being abandoned has risen. Hence worse health and rising drugs, depression, and suicide in GOP-dominated states. With the conservatives more volubly exploiting these issues, our hopes for reaching social solidarity on a universal health care system diminish.

Is there pride in being uneducated? In being at high risk of those factors that lead to deaths of despair? Of having a shorter life expectancy? Of being used by the conservative political forces to impede social progress in our nation? If these concepts were better understood, we could raise social solidarity and accomplish goals such as health care justice for all.

Providing universal, stable, affordable, high-quality care would sharply decrease political alienation and hopelessness, and tangibly convey the virtues of a community orientation over private profit. No wonder single payer is so frightening to the conservative purveyors of political schism. Halloween is coming, time to embrace our worse fears!

http://healthjusticemonitor.org…

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Prevalence and Correlates of Patient Rationing of Insulin in the United States: A National Survey

By Adam Gaffney, M.D., M.P.H.; David U. Himmelstein, M.D.; and Steffie Woolhandler, M.D., M.P.H.
Annals of Internal Medicine, October 18, 2022

Background: Insulin is life saving for many patients with diabetes, but high prices and inadequate insurance coverage may impede access to it. A single-center study (1) and web-based surveys (2) suggest that cost-related insulin nonadherence may be common, although reliable national data are lacking.

Objective: To determine the prevalence and correlates of insulin rationing.

Methods: We analyzed the 2021 National Health Interview Survey (NHIS) done by the Centers for Disease Control and Prevention, which collected data for 1 randomly selected adult in a nationally representative sample of U.S. households (response rate = 52.8%). …

full study:
https://www.acpjournals.org…

Adults Give US Healthcare Cs and Ds

Summary: A national poll of US adults yields terrible scores for our healthcare system: more “poor” and “fail” marks than “excellent” and “good”. The Gallup organization calls these Cs and Ds, but that’s a generous interpretation – we’re failing. We need a total do-over, adopting methods proven in other wealthy nations.

Majorities Rate Cost, Equity of U.S. Healthcare Negatively, Gallup News – Politics, October 6, 2022, by Nicole Willcoxon

Comment:

By Jim Kahn, M.D., M.P.H.

Yowzah. That’s massive under-performance. Only 21% of US adults think our healthcare system grade is good or excellent. Only 7% for costs, 22% for equity, and 31% for access. Quality of care scores highest – 47% say it’s good or excellent. But what is quality without access?

Sad, but not surprising. Indeed, we’ve performed at the bottom of wealthy countries for a long time. See HJM on the latest Commonwealth comparison here, and cross-national satisfaction surveys here and here.

If only we had better examples of how to pay for healthcare. If we could find, somewhere in the world, places that spend less while faring much better on access and outcomes. Oh, wait, all those countries that do better, they also cost a lot less.

Sorry I’m dripping with sarcasm today. It’s SO frustrating that we don’t learn our lesson. To paraphrase Winston Churchill, “Americans always do the right thing, after first trying everything else.” Well, we’ve tried everything else. Time to do the right thing – single payer!

http://healthjusticemonitor.org…

Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.

Medicare for All Explained Podcast: Episode 87

The Illogic and Fraud of Medicare Advantage Plans

October 15, 2022

Podcast host Joe Sparks points out the fundamental flaws of Medicare Advantage, a program that allows commercial health insurance to administer Medicare benefits.

“Medicare Advantage plans want to maximize profits,” he says, pointing to a recent bombshell report in The New York Times. “They and don’t care about the people they insure.”

Additional episodes will be uploaded twice monthly. Subscribe in iTunes, or access a complete archive of the podcast, below.

https://medicareforallexplained.podbean.com

Dr. Susan Rogers on “Healthcare-NOW”

PNHP president Dr. Susan Rogers appeared on the “Healthcare-NOW” podcast on October 12, 2022. Dr. Rogers discussed the lure of privately administered Medicare Advantage plans, which offer lower premiums to seniors, but can prove costly in the long-run when it comes to copays and outright denial of care.

“I’m not an MBA, but I know that if I spend more money than I bring in, [then] I have to change something,” said Dr. Rogers in reference to the high administrative costs that are another hallmark of Medicare Advantage. “What they’ve changed is not providing care.”

False Fixes for Administrative Bloat in US Health Care

Summary: Health Affairs did a very credible review of administrative excess in US health care, and a review of “targeted” reforms within the current system. Most optimistically, they would save a few billion dollars of the hundreds of billions in waste that single payer would eliminate.

The Role of Administrative Waste in Excess US Health Spending, Health Affairs Research Brief, October 6, 2022, by Health Affairs Staff

The US Spends More on Health Care Administration than Comparable Countries

One estimate from the Peterson Foundation, based on 2021 data from the OECD, finds that the US spends $1,055 per capita on administrative costs—by far the highest amount on a list of twelve OECD nations plus the US. The country with the next highest level of per capita administrative spending is Germany, at $306 per capita.

At least Half of Administrative Spending Is Wasteful

If administrative spending is about 15–30 percent of national health spending, then wasteful administrative spending comprises half of that, or 7.5–15 percent of national health spending (or $285–$570 billion in 2019).

Systemic Health Care Reforms Can Reduce Administrative Waste

Three main systemic reforms have the potential to not only reduce administrative waste but also offer other benefits to the health care system: all-payer rate setting, single-payer systems, and capitation.

Although these systemic reforms have the potential to reduce wasteful administrative spending, the targeted reforms discussed below are likely to be more realistic and actionable in the US in the near future.

  • Centralized Claims Clearinghouse (Cutler estimates that $300 million (NB not billion!) could be saved annually)
  • Standardized Or Limited Prior Authorization (CAHQ estimates that $417 million could be saved annually by switching to a fully electronic prior authorization system)
  • Harmonized Quality Reporting (Cutler suggests that an improved quality measurement system could save up to $7 billion annually)
  • Standardization Of Benefits (There is a lack of clear evidence that such standardization leads to administrative savings)
  • Standardization Of Provider Directories and Credentialing (Nationally, using a standardized platform for maintaining provider directories could save more than $1.1 billion per year, according to CAQH research)

Comment:

By Don McCanne, M.D.

The failure of our fragmented and dysfunctional health care financing system to provide health care for everyone along with financial security has been a driving force behind the call to enact and implement a humane, rational financing system such as single payer.

Although the political barriers are great, various incremental measures have been implemented with less than sterling results. Numerous studies have shown the profound administrative waste in our system which would be dramatically reduced by single payer. But the political resistance has been too great.

Now a leader in health policy – Health Affairs – is suggesting that, instead of systemic reform, we consider targeted reforms that are listed above. Two problems: If all of them were implemented, highly unlikely, the evidence for their effectiveness is missing. Never tested, conjectural. And, even if achieving the targets, the savings would constitute only a small fraction of the hundreds of billions we are spending on administration that we currently consider wasteful.

Worse, we would leave in place all of the injustices in health care access and in financial hardship due to lack of affordability of care. Also, nothing would have been done to reverse the massive private sector fraud and other waste exemplified by the recent New York Times expose on Medicare Advantage.

I don’t want to squander more space on trying to understand why Health Affairs isn’t supporting effective reform. Instead, I just want to climb up to the mountaintop and shout out: SINGLE PAYER!

Please feel free to join me.

http://healthjusticemonitor.org…

Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.

Medicare Advantage is a “Cash Monster” Absconding with Billions

Summary: The New York Times published a well-researched, clearly-presented, and hard-hitting article about the Medicare Advantage diagnostic upcoding money machine. This superb reporting translates for the public what analysts and reform advocates have warned about for years.

‘The Cash Monster Was Insatiable’: How Insurers Exploited Medicare for Billions, New York Times, October 8, 2022, by Reed Abelson and Margot Sanger-Katz

(bolding by HJM)

The health system Kaiser Permanente called doctors in during lunch and after work and urged them to add additional illnesses to the medical records of patients they hadn’t seen in weeks. Doctors who found enough new diagnoses could earn bottles of Champagne, or a bonus in their paycheck.

Anthem, a large insurer now called Elevance Health, paid more to doctors who said their patients were sicker. And executives at UnitedHealth Group, the country’s largest insurer, told their workers to mine old medical records for more illnesses — and when they couldn’t find enough, sent them back to try again.

Each of the strategies — which were described by the Justice Department in lawsuits against the companies — led to diagnoses of serious diseases that might have never existed. But the diagnoses had a lucrative side effect: They let the insurers collect more money from the federal government’s Medicare Advantage program….

[A] New York Times review of dozens of fraud lawsuits, inspector general audits and investigations by watchdogs shows how major health insurers exploited the program to inflate their profits by billions of dollars….

Eight of the 10 biggest Medicare Advantage insurers — representing more than two-thirds of the market — have submitted inflated bills, according to the federal audits. And four of the five largest players — UnitedHealth, Humana, Elevance and Kaiser — have faced federal lawsuits alleging that efforts to overdiagnose their customers crossed the line into fraud. … The fifth company, CVS Health, which owns Aetna, told investors its practices were being investigated by the Department of Justice. …

The additional diagnoses led to $12 billion in overpayments in 2020, according to an estimate from the group that advises Medicare on payment policies — enough to cover hearing and vision care for every American over 65.

Another estimate, from a former top government health official, suggested the overpayments in 2020 were double that, more than $25 billion.

The increased privatization has come as Medicare’s finances have been strained by the aging of baby boomers. But for insurers that already dominate health care for workers, the program is strikingly lucrative: A study from the Kaiser Family Foundation, a research group unaffiliated with the insurer Kaiser, found the companies typically earn twice as much gross profit from their Medicare Advantage plans as from other types of insurance. …

[R]egulators overseeing the plans at the Centers for Medicare and Medicaid Services, or C.M.S., have been less aggressive, even as the overpayments have been described in inspector general investigations, academic research, Government Accountability Office studies, MedPAC reports and numerous news articles, over the course of four presidential administrations.

Congress gave the agency the power to reduce the insurers’ rates in response to evidence of systematic overbilling, but C.M.S. has never chosen to do so. A regulation proposed in the Trump administration to force the plans to refund the government for more of the incorrect payments has not been finalized four years later. Several top officials have swapped jobs between the industry and the agency.

Comment:

By Jim Kahn, M.D., M.P.H.

This is remarkable reporting. The NYT nailed it: Medicare Advantage is a cash monster focused on maximizing revenue and profits regardless of the impact on beneficiary access to care. See our bolding for key points. A few elaborations:

  1. The problem is partly fraud. There’s plenty of that.
  2. The full extent of the cash extraction from Medicare is due to both legal and fraudulent diagnostic upcoding, and critically the failure of CMS to exercise its regulatory authority to correct for this upcoding.
  3. The projected excess payments to Medicare Advantage is $600 billion over ten years.
  4. This doesn’t even include cherry picking and lemon dropping, which contribute substantially to the differences in risk and money extraction.
  5. As noted in the article, private insurer profits are much higher with Medicare than in the private sector. And, as shown in HJM, the actual (de-facto) profit returns are obscenely high, 30% or more.

What’s most remarkable about this reporting isn’t the content. That’s terrific, accurate and powerful. What’s most remarkable is the placement: on the front page of the New York Times (for NYT old-timers, “above the fold”). Premier attention to this critical issue. As I can tell from my email and twitter traffic, rapid widespread sharing.

Let’s hope this represents a sea change in how the public understands and reacts to the private insurance takeover of Medicare Advantage, of Medicaid, and – with ACO REACH – traditional Medicare.

We need a health care financing system that elevates patients over profits. Single payer.

http://healthjusticemonitor.org…

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‘The Cash Monster Was Insatiable’: How Insurers Exploited Medicare for Billions

By next year, half of Medicare beneficiaries will have a private Medicare Advantage plan. Most large insurers in the program have been accused in court of fraud.

By Reed Abelson and Margot Sanger-Katz
The New York Times, October 8, 2022

The health system Kaiser Permanente called doctors in during lunch and after work and urged them to add additional illnesses to the medical records of patients they hadn’t seen in weeks. Doctors who found enough new diagnoses could earn bottles of Champagne, or a bonus in their paycheck.

Anthem, a large insurer now called Elevance Health, paid more to doctors who said their patients were sicker. And executives at UnitedHealth Group, the country’s largest insurer, told their workers to mine old medical records for more illnesses — and when they couldn’t find enough, sent them back to try again.

Each of the strategies — which were described by the Justice Department in lawsuits against the companies — led to diagnoses of serious diseases that might have never existed. But the diagnoses had a lucrative side effect: They let the insurers collect more money from the federal government’s Medicare Advantage program.

Medicare Advantage, a private-sector alternative to traditional Medicare, was designed by Congress two decades ago to encourage health insurers to find innovative ways to provide better care at lower cost. If trends hold, by next year, more than half of Medicare recipients will be in a private plan.

But a New York Times review of dozens of fraud lawsuits, inspector general audits and investigations by watchdogs shows how major health insurers exploited the program to inflate their profits by billions of dollars.

The government pays Medicare Advantage insurers a set amount for each person who enrolls, with higher rates for sicker patients. And the insurers, among the largest and most prosperous American companies, have developed elaborate systems to make their patients appear as sick as possible, often without providing additional treatment, according to the lawsuits.

As a result, a program devised to help lower health care spending has instead become substantially more costly than the traditional government program it was meant to improve.

Eight of the 10 biggest Medicare Advantage insurers — representing more than two-thirds of the market — have submitted inflated bills, according to the federal audits. And four of the five largest players — UnitedHealth, Humana, Elevance and Kaiser — have faced federal lawsuits alleging that efforts to overdiagnose their customers crossed the line into fraud.

The fifth company, CVS Health, which owns Aetna, told investors its practices were being investigated by the Department of Justice.

In statements, most of the insurers disputed the allegations in the lawsuits and said the federal audits were flawed. They said their aim in documenting more conditions was to improve care by accurately describing their patients’ health.

Many of the accusations reflect missing documentation rather than any willful attempt to inflate diagnoses, said Mark Hamelburg, an executive at AHIP, an industry trade group. “Professionals can look at the same medical record in different ways,” he said.

The government now spends nearly as much on Medicare Advantage’s 29 million beneficiaries as on the Army and Navy combined. It’s enough money that even a small increase in the average patient’s bill adds up: The additional diagnoses led to $12 billion in overpayments in 2020, according to an estimate from the group that advises Medicare on payment policies — enough to cover hearing and vision care for every American over 65.

Another estimate, from a former top government health official, suggested the overpayments in 2020 were double that, more than $25 billion.

The increased privatization has come as Medicare’s finances have been strained by the aging of baby boomers. But for insurers that already dominate health care for workers, the program is strikingly lucrative: A study from the Kaiser Family Foundation, a research group unaffiliated with the insurer Kaiser, found the companies typically earn twice as much gross profit from their Medicare Advantage plans as from other types of insurance.

For people choosing between traditional Medicare and Medicare Advantage, there are trade-offs. Medicare Advantage plans can limit patients’ choice of doctors, and sometimes require jumping through more hoops before getting certain types of expensive care.

But they often have lower premiums or perks like dental benefits — extras that draw beneficiaries to the programs. The more the plans are overpaid by Medicare, the more generous to customers they can afford to be.

“Medicare Advantage is an important option for America’s seniors, but as Medicare Advantage adds more patients and spends billions of dollars of taxpayer money, aggressive oversight is needed,” said Senator Charles Grassley of Iowa, who has investigated the industry. The efforts to make patients look sicker and other abuses of the program have “resulted in billions of dollars in improper payments,” he said.

Many of the fraud lawsuits were initially brought by former employees under a federal whistle-blower law that allows them to get a percentage of any money repaid to the government if their suits prevail. But most have been joined by the Justice Department, a step the government takes only if it believes the fraud allegations have merit. Last year, the department’s civil division listed Medicare Advantage as one of its top areas of fraud recovery.

“It’s an extremely high priority for us,” said Michael Granston, a deputy assistant attorney general for the civil division.

In contrast, regulators overseeing the plans at the Centers for Medicare and Medicaid Services, or C.M.S., have been less aggressive, even as the overpayments have been described in inspector general investigations, academic research, Government Accountability Office studies, MedPAC reports and numerous news articles, over the course of four presidential administrations.

Congress gave the agency the power to reduce the insurers’ rates in response to evidence of systematic overbilling, but C.M.S. has never chosen to do so. A regulation proposed in the Trump administration to force the plans to refund the government for more of the incorrect payments has not been finalized four years later. Several top officials have swapped jobs between the industry and the agency.

C.M.S. officials declined interview requests. In a statement, the C.M.S. administrator, Chiquita Brooks-LaSure, said the agency recently sought feedback on how to improve the program. “We are committed to making sure that Medicare dollars are used efficiently and effectively in Medicare Advantage,” she said.

The popularity of Medicare Advantage plans has helped them avoid legislative reforms. The plans have become popular in urban areas, and have been increasingly embraced by Democrats as well as Republicans. Nearly 80 percent of U.S. House members signed a letter this year saying they were “ready to protect the program from policies that would undermine” its stability.

“You have a powerful insurance lobby, and their lobbyists have built strong support for this in Congress,” said Representative Lloyd Doggett, a Texas Democrat who chairs the House Ways and Means Health subcommittee.

Some critics say the lack of oversight has encouraged the industry to compete over who can most effectively game the system rather than who can provide the best care.

“Even when they’re playing the game legally, we are lining the pockets of very wealthy corporations that are not improving patient care,” said Dr. Donald Berwick, a C.M.S. administrator under the Obama administration, who recently published a series of blog posts on the industry. “When you skate to the edge of the ice, sometimes you’re going to fall in.”

Congress’s first attempt to design a privatized Medicare plan paid insurers the same amount for every patient with similar demographic characteristics.

In theory, if the insurers could do better than traditional Medicare — by better managing patients’ care, or otherwise improving their health — their patients would cost less and the insurers would make more money.

But some insurers engaged in strategies — like locating their enrollment offices upstairs, or offering gym memberships — to entice only the healthiest seniors, who would require less care, to join. To deter such tactics, Congress decided to pay more for sicker patients.

Almost immediately, companies saw ways to exploit that system. The traditional Medicare program provided no financial incentive to doctors to document every diagnosis, so many records were incomplete. Under the new program, insurers began rigorously documenting all of a patient’s health conditions — say depression, or a long-ago stroke — even when they had nothing to do with the patient’s current medical care.

In one early case, a Florida medical practice was accused of falsifying diagnoses to enrich its owner and Humana. When Humana told the doctor who owned the practice that his Medicare risk adjustment, or M.R.A., scores had increased significantly, he responded by email, according to the whistle-blower lawsuit: “Good, I am trying to buy that house based on M.R.A. scores.” The case was settled for more than $3 million.

The doctor denied any wrongdoing. Humana declined to comment on the lawsuit and said it takes compliance “seriously.” The company recently told investors it had been questioned by the Justice Department about its billing practices and expected additional litigation.

At conferences, companies pitched digital services to analyze insurers’ medical records and suggest additional codes. Such consultants were often paid on commission; the more money the analysis turned up, the more the companies kept.

The insurers also began hiring agencies that sent doctors or nurses to patients’ homes, where they could diagnose them with more diseases.

One company, Mobile Medical Examination Services, worked with Anthem and Molina, among others. Its doctors and nurses were pushed to document a range of diagnoses, including some — vertebral fractures, pneumonia and cancer — they lacked the equipment to detect, according to a whistle-blower lawsuit. According to the lawsuit, employees who drew patients’ blood often were not provided with a centrifuge or cooler; spoiled blood analyzed a day later produced strange results that could be used to justify valuable diagnoses, including kidney disease and leukemia. The company was acquired by Quest Diagnostics after the case was settled for an undisclosed amount in 2016; Quest said the company complies with all federal and state laws and regulations.

Cigna hired firms to perform similar at-home assessments that generated billions in extra payments, according to a 2017 whistle-blower lawsuit, which was recently joined by the Justice Department. The firms told nurses to document new diagnoses without adjusting medications, treating patients or sending them to a specialist.

According to the lawsuit, some patients were diagnosed with cancer and heart disease. Nurses were told to especially look for patients with a history of diabetes because it was not “curable,” even if the patient now had normal lab findings or had undergone surgery to treat the condition.

The company declined to comment. “We will vigorously defend our Medicare Advantage business against these allegations,” Cigna said in an earlier statement regarding the lawsuit.

Adding the code for a single diagnosis could yield a substantial payoff. In a 2020 lawsuit, the government said Anthem instructed programmers to scour patient charts for “revenue-generating” codes. One patient was diagnosed with bipolar disorder, although no other doctor reported the condition, and Anthem received an additional $2,693.27, the lawsuit said. Another patient was said to have been coded for “active lung cancer,” despite no evidence of the disease in other records; Anthem was paid an additional $7,080.74. The case is continuing.

The most common allegation against the companies was that they did not correct potentially invalid diagnoses after becoming aware of them. At Anthem, for example, the Justice Department said “thousands” of inaccurate diagnoses were not deleted. According to the lawsuit, a finance executive calculated that eliminating the inaccurate diagnoses would reduce the company’s 2017 earnings from reviewing medical charts by $86 million, or 72 percent.

In a statement, the company, now named Elevance, said it would “vigorously defend our Medicare risk adjustment practices” and accused the government of holding it to standards “that are not grounded in formal statutory and regulatory rules.”

Some of the companies took steps to ensure the extra diagnoses didn’t lead to expensive care. In an October 2021 lawsuit, the Justice Department estimated that Kaiser earned $1 billion between 2009 and 2018 from additional diagnoses, including roughly 100,000 findings of aortic atherosclerosis, or hardening of the arteries. But the plan stopped automatically enrolling those patients in a heart attack prevention program because doctors would be forced to follow up on too many people, the lawsuit said.

Kaiser, which both runs a health plan and provides medical care, is often seen as a model system. But its control over providers gave it additional leverage to demand additional diagnoses from the doctors themselves, according to the lawsuit.

“The cash monster was insatiable,” said Dr. James Taylor, a former coding expert at Kaiser who is one of 10 whistle-blowers to accuse the organization of fraud.

At meetings with supervisors, he was instructed to find additional conditions worth tens of millions of dollars. “It was an actual agenda item and how could we get this,” Dr. Taylor said.

Marc T. Brown, a Kaiser spokesman, said in a statement, “We are confident in our compliance with Medicare Advantage risk-adjustment program requirements,” and added, “Our policies and practices represent well-reasoned and good-faith interpretations of sometimes vague and incomplete guidance from C.M.S.”

Last year, the inspector general’s office noted that one company “stood out” for collecting 40 percent of all Medicare Advantage’s payments from chart reviews and home assessments despite serving only 22 percent of the program’s beneficiaries. It recommended Medicare pay extra attention to the company, which it did not name, but the enrollment figure matched UnitedHealth’s.

A civil trial accusing UnitedHealth of fraudulent overbilling is scheduled for next year. The company’s internal audits found numerous mistakes, according to the lawsuit, which was joined by the Justice Department. Some doctors diagnosed problems like drug and alcohol dependence or severe malnutrition at three times the national rate. But UnitedHealth declined to investigate those patterns, according to the suit.

Matthew Wiggin, a spokesman for the company, called the inspector general’s report “misleading.” He said the company uses diagnostic coding to improve patient care, and noted that the whistle-blower in the lawsuit had not worked for the company in nearly a decade. “Our chart review process complies with regulatory standards,” he said, adding, “Our robust compliance program also proactively seeks to identify fraud, waste and abuse in the system.”

The company countered by suing Medicare, arguing that it wasn’t required to fix inaccurate records before regulations changed in 2014. It won at first, then lost on appeal. In June, the Supreme Court declined to hear the case.

Even before the first lawsuits were filed, regulators and government watchdogs could see the number of profitable diagnoses escalating. But Medicare has done little to tamp down overcharging.

Several experts, including Medicare’s advisory commission, have recommended reducing all the plans’ payments. Congress has ordered several rounds of cuts and gave C.M.S. the power to make additional reductions if the plans continued to overbill. The agency has not exercised that power.

The agency does periodically audit insurers by looking at a few hundred of their customers’ cases. But insurers are fined for billing mistakes found only in those specific patients. A rule proposed during the Trump administration to extrapolate the fines to the rest of the plan’s customers has not been finalized.

Some of the agency’s top leaders have had close ties to industry. Marilyn Tavenner, a former C.M.S. administrator, left in 2015, then ran the main trade group for health insurers; she was replaced by Andy Slavitt, a former executive at UnitedHealth. Jonathan Blum, the agency’s current chief operating officer, worked for an insurer after leaving the agency in 2014, then became an industry consultant, before returning to Medicare last year.

Ted Doolittle, who served as a senior official for the agency’s Center for Program Integrity from 2011 to 2014, said officials at Medicare seemed uninterested in confronting the industry over these practices. “It was clear that there was some resistance coming from inside” the agency, he said. “There was foot dragging.”

There are signs the problem is continuing.

“We are hearing about it more and more,” said Jacqualine Reid, a government research analyst at the Office of Inspector General who has analyzed Medicare Advantage overbilling.

The Justice Department has brought or joined 12 of the 21 cases that have been made public. But whistle-blower cases remain secret until the department has evaluated them. “We’re aware of other cases that are under seal,” said Mary Inman, a partner at the firm Constantine Cannon, which represents many of the whistle-blowers.

But few analysts expect major legislative or regulatory changes to the program.

“Medicare Advantage overpayments are a political third rail,” said Dr. Richard Gilfillan, a former hospital and insurance executive and a former top regulator at Medicare, in an email. “The big health care plans know it’s wrong, and they know how to fix it, but they’re making too much money to stop. Their C.E.O.s should come to the table with Medicare as they did for the Affordable Care Act, end the coding frenzy, and let providers focus on better care, not more dollars for plans.”

Alicia Parlapiano contributed graphics.

https://nytimes.com…