Milliman, May 2013

The MMI represents the projected total cost of medical care for a hypothetical American family of four (two adults and two children) covered under an employer-sponsored PPO health benefit program.

Key findings

*  As measured by the 2013 MMI, the total annual cost of healthcare for a typical family of four covered by an employer-sponsored preferred provider plan (PPO) is $22,030.
 
*  The 6.3% increase over 2012 is the fourth consecutive year of decreasing trends, but the total dollar increase of $1,302 is the fourth year in a row of increases over $1,300.

*  Of the $22,030 healthcare cost for a family of four, the employer pays about $12,886 in employer subsidy while the employee pays the remaining $9,144, which is a combination of $5,544 in payroll deductions and $3,600 in employee out-of-pocket costs. For employees, this represents a cost increase of 6.5% over last year’s total employee cost of $8,584.

*  We expect that the emerging reforms required by the Patient Protection and Affordable Care Act (ACA) will have little impact on the cost of care for our family of four in 2013 because this family tends to be insured through a large group health plan. Some of the most far-reaching reforms will not become effective until 2014, and they are focused primarily on the individual and small employer markets. Additionally, while those reforms will likely have immediate impacts on premium rates in those markets, it is unclear whether they will have any near-term effects on growth in the cost of healthcare services for a given person.

http://publications.milliman.com/periodicals/mmi/pdfs/mmi-2013.pdf

Comment:

By Don McCanne, M.D.

According to the Milliman Medical Index (MMI), the average projected cost for health care today for the typical family of four with an employer-sponsored preferred provider plan (PPO) is $22,030. That includes an employee contribution to the premium of $5,544, out-of-pocket expenses of $3,600, both totaling $9,144, plus an employer contribution of $12,886 which is actually paid by the employee through forgone wage increases.

Median annual household income is now $51,404 (February 2013). Although that does not represent the same demographic group as working families with four members, it does give you a general perspective of the burden of today’s health care costs on families and households.

An important point made in the MMI report: “the Patient Protection and Affordable Care Act (ACA) will have little impact on the cost of care for our family of four in 2013 because this family tends to be insured through a large group health plan,” and ACA is “focused primarily on the individual and small employer markets.” Since employment remains the primary source of health care coverage, the majority of families can anticipate little relief from these health care cost burdens.

A fundamental flaw in employer-sponsored coverage is that the entire burden of health care costs is placed on the employee (when considering forgone wages), yet it is clearly not affordable for low- or middle-income families. Progressive financing of health care is an imperative.

ACA provides at least modest income-indexed public subsidies which extend into the middle-income ranges, though they are still inadequate. Premiums for employer-sponsored plans are tax deductible, which is a form of public subsidy (tax expenditure), but since the premiums represent forgone wages, this tax subsidy benefits higher-income individuals much more than those with lower incomes. Thus the financing of health care through employer-sponsored coverage is terribly regressive (lower-income families pay a much larger percentage of their income for health care than do higher-income families).

This outrageous $22,000 burden on typical working families should be enough to provide us with an incentive to fix our health care financing system. A single payer national health program that includes everyone and is financed with progressive taxes is precisely what we need. Keep in mind this $22,000 burden when you discuss health care reform with others. ACA is not going to make that go away.

By Kristy Gonzalez Morganti, Sebastian Bauhoff, Janice C. Blanchard, Mahshid Abir, Neema Iyer, Alexandria Smith, Joseph V. Vesely, Edward Okeke, Arthur L. Kellermann
RAND Health, May 20, 2013

To develop a more complete picture of how EDs (emergency departments) contribute to our modern health care system, the Emergency Medicine Action Fund asked RAND to conduct this mixed-methods study.

Key findings include the following:

• Between 2003 and 2009, inpatient admissions to U.S. hospitals grew at a slower rate than the population overall. However, nearly all of the growth in admissions was due to a 17 percent increase in unscheduled inpatient admissions from EDs. This growth in ED admissions more than offset a 10 percent decrease in admissions from doctors’ offices and other outpatient settings. This pattern suggests that office-based physicians are directing to EDs some of the patients they previously admitted to the hospital.

• In addition to serving as an increasingly important portal of hospital admissions, EDs support primary care practices by performing complex diagnostic workups and handling overflow, after-hours, and weekend demand for care. Almost all of the physicians we interviewed—specialist and primary care alike—confirmed that office-based physicians increasingly rely on EDs to evaluate complex patients with potentially serious problems, rather than managing these patient themselves.

• As a result of these shifts in practice, emergency physicians are increasingly serving as the major decisionmaker for approximately half of all hospital admissions in the United States. This role has important financial implications, not only because admissions generate the bulk of facility revenue for hospitals, but also because inpatient care accounts for 31 percent of national health care spending.

• Although the core role of EDs is to evaluate and stabilize seriously ill and injured patients, the vast majority of patients who seek care in an ED walk in the front door and leave the same way. Data from the Community Tracking Study indicate that most ambulatory patients do not use EDs for the sake of convenience. Rather, they seek care in EDs because they perceive no viable alternative exists, or because a health care provider sent them there.

• Medicare accounts for more inpatient admissions from EDs than any other payer. To gain insight into whether care coordination makes a difference in the likelihood of hospital admission from an ED, we compared ED admission rates among Medicare beneficiaries enrolled in a Medicare Choice plan versus beneficiaries enrolled in Medicare fee-for-service (FFS). We found no clear effect on inpatient admissions overall, or on a subset of admissions involving conditions that might be considered “judgment calls.”

• Irrespective of the impact of care coordination, EDs may be playing a constructive role in constraining the growth of inpatient admissions. Although the number of non-elective ED admissions has increased substantially over the past decade, inpatient admissions of ED patients with “potentially preventable admissions” (as defined by the Agency for Healthcare Research and Quality) are flat over this time interval.

Our study indicates that: (1) EDs have become an important source of admissions for American hospitals; (2) EDs are being used with increasing frequency to conduct complex diagnostic workups of patients with worrisome symptoms; (3) Despite recent efforts to strengthen primary care, the principal reason patients visit EDs for non-emergent outpatient care is lack of timely options elsewhere; and (4) EDs may be playing a constructive role in preventing some hospital admissions, particularly those involving patients with an ambulatory care sensitive condition. Policymakers, third party payers, and the public should be aware of the various ways EDs meet the health care needs of the communities they serve and support the efforts of ED providers to more effectively integrate ED operations into both inpatient and outpatient care.

http://www.rand.org/pubs/research_reports/RR280.html

Comment:

By Don McCanne, M.D.

This RAND Health report provides an excellent perspective on how emergency departments (EDs) have evolved into institutions providing a greater central role in health care delivery. It is a particularly valuable report because it sets aside many misperceptions about ED functions – misperceptions that can lead to flawed policy recommendations.

It is crucial that we continue to assess and recommend improvements in the health care delivery system. This report reflects the benefit of such an approach since EDs have expanded their roles in very beneficial ways. As they continue to evolve, integration with both inpatient and outpatient care should become more efficient, especially from the perspective of benefiting patients.

The current focus of policy reform seems to be not so much on the improvement of health care delivery, but rather on mechanisms that supposedly would slow the growth in health care spending. Accountable care organizations, bundling of payments, innovative insurance designs such as those that erect financial barriers to care, are the types of policy approaches that will have very little impact on overall costs while inappropriately expanding the administrative excesses of our dysfunctional system.

This report is well worth downloading. As you read it, you can see many opportunities to further expand the progress that we have seen through the evolving improvements in the role of EDs in our health care system. Thinking about how further improvement in integrating their role with both inpatient and various community outpatient services can help us envision further opportunities to achieve the goals of a high-performance system.

An example of the misguided and misdirected emphasis on innovative payment reform is the failure to find any clear effect on inpatient admissions when comparing the public Medicare program with the much more expensive private Medicare Advantage plans. Payment innovation is simply not where it’s at.

We need to get this right. Let’s continue to work on fixing the health care delivery system so that it works best for patients. That is the key to improving value in health care. It will work as long as we adopt a financing system that is designed exclusively to fund a high-performance health care system (single payer), as opposed to one that is designed to keep policy wonks and insurance administrators employed in bringing us ever-expanding payment innovations that we don’t want (Obamacare).

By Christopher Weaver and Anna Wilde Matthews
The Wall Street Journal, May 19, 2013

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn’t cover surgery, X-rays or prenatal care at all.

Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing.

The idea that such plans would be allowable under the law has emerged only recently. Some benefits advisers still feel they could face regulatory uncertainty. The law requires employers with 50 or more workers to offer coverage to their workers or pay a penalty. Many employers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs.

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm. That affects only about 30 million of the more than 160 million people with private insurance, including 19 million people covered by employers, according to a Citigroup Inc. C +0.20% report. Larger employers, generally with more than 50 workers, need cover only preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce penalty.

Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms.

Administration officials confirmed in interviews that the skinny plans, in concept, would be sufficient to avoid the across-the-workforce penalty. Several expressed surprise that employers would consider the approach.

Firms now offering low-cost policies known as mini-meds, generally plans that cap benefits at low levels, could favor the tactic. Companies sought federal health department waivers to cover nearly four million with mini-meds and other similar plans, which will be barred next year. Some employers are “thinking of this as a replacement for the mini-med plan,” said Tracy Watts, national leader for health-care reform at Mercer, a consulting unit of Marsh & McLennan Cos.

San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will replace its own mini-med with a new, skinny plan in July. The new plan… will cover only preventive services, six annual doctors’ visits and generic drugs. X-rays and tests at a local urgent care chain will also be covered. It wouldn’t cover surgeries or hospital stays.

Tex-Mex restaurant chain El Fenix also said it would offer limited plans to its 1,200 workers, covering doctors visits, preventive care and drugs, but not hospital stays or surgery.

http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html

Comment:

By Don McCanne, M.D.

Imagine health insurance not covering hospitalizations nor surgery. Yet this is still possible because the Affordable Care Act applies the essential health benefit requirement only to plans for small businesses and individuals and not to larger employers.

This has opened up the opportunity for a conspiracy between larger employers who could care less whether or not their employees have health insurance and private insurers who are quite willing to sell these almost worthless bare-bones products as long as there is a profitable market for them.

The solution is obvious. Cover all care that people need, and then provide that coverage to everyone, automatically. Maybe these uncaring employers might not like that, but when the taxes to pay for an equitable system are obligatory, they would get used to the idea of their employees being able to obtain health care when they need it. Not such a bad idea after all, especially when their competitors are treated the same.