Let New York Health help pay the bills

By Richard N. Gottfried
timesunion.com, April 1, 2012
You buy a health insurance policy that covers care by “in-network” doctors and other providers, but also promises that if you go to an “out of network” provider, it will pay based on “usual and customary charges.” Your family doctor refers you to an out-of-network specialist, and it turns out the insurance company offers to pay about half the bill you get.
A few years ago, then-Attorney General Andrew Cuomo and a group of physicians brought a massive lawsuit against the top insurance companies. The charge was that those insurers were promising to pay based on “usual and customary” rates for out-of-network services, but those rates were bogus — and outrageously low.
The insurance companies agreed to settle the case. They agreed that the attorney general would set up an independent nonprofit organization, called Fair Health, to publish legitimate data the insurance companies would use for determining “usual and customary” charges.
Now, insurers are getting around the settlement by no longer promising to pay based on usual and customary; they will pay whatever they choose to pay.
So I have introduced a bill in the Assembly, carried in the Senate by Senate Health Committee chairman Kemp Hannon. It says that your health insurer company must disclose how it calculates out-of-network payments, and state them as a percentage of the Fair Health usual-and-customary rate. And it says the state Department of Financial Services — the new name of what used to be the Insurance Department — may not approve an out-of-network insurance policy unless it actually provides “significant coverage” of the Fair Health usual-and-customary rate.
In other words, insurers have to be open with their customers, and they can’t claim a policy covers out-of-network services if it doesn’t really pay reasonable amounts for them.
The Fair Health court settlement was hailed as a landmark. But the health insurance companies quickly found a way around it. If our bill becomes law, they may find a way around that, too. The problem is, whatever reforms we enact, our health coverage still relies on insurance companies.
Instead, New York should establish a universal publicly funded single-payer system, funded by broad-based revenue based on ability to pay. I sponsor an Assembly bill, carried in the Senate by Tom Duane, to set up such a system, called “New York Health.”
You and your doctor would work on keeping you healthy, and New York Health would pay the bill.
(Richard N. Gottfried of Manhattan is chairman of the state Assembly Committee on Health.)
http://www.timesunion.com/default/article/Let-New-York-Health-help-pay-the-bills-3451653.php

Yesterday’s Quote of the Day message explained how, in a legal settlement, private insurers were required to develop a new program – FAIR Health – to be used to determine what were fair “usual and customary” fees after they had been caught cheating patients through the Ingenix program they had been using. We were rightfully outraged when the insurers bypassed this new program on the basis that the legal settlement did not require them to actually use FAIR Health.
Chairman Richard Gottfried of the New York State Assembly Committee on Health has introduced a bill – A. 7489-B – which would require private insurers to disclose how they calculate usual and customary fees plus require that they disclose them as a percentage of what the FAIR Health fees would be. There is nothing like requiring transparency of entities that are trying to cheat you.
But what will this accomplish? As Gottfried states, “The Fair Health court settlement was hailed as a landmark. But the health insurance companies quickly found a way around it. If our bill becomes law, they may find a way around that, too. The problem is, whatever reforms we enact, our health coverage still relies on insurance companies.”
The private insurers will never change. Gottfried certainly understands this. That is why he has introduced another Assembly bill – A. 7860. As he states, instead of relying on insurance companies, “New York should establish a universal publicly funded single-payer system, funded by broad-based revenue based on ability to pay.”
Come to think of it, we should do that for the entire nation.

By Nina Bernstein
The New York Times, April 23, 2012

Despite a landmark settlement that was expected to increase coverage for out-of-network care, the nation’s largest health insurers have been switching to a new payment method that in most cases significantly increases the cost to the patient.

The settlement, reached in 2009, followed New York State’s accusation that the companies  manipulated data they used to price such care, shortchanging the nation’s patients by hundreds of millions of dollars.

The agreement required the companies to finance an objective database of doctors’ fees that patients and insurers nationally could rely on. Gov. Andrew M. Cuomo, then the attorney general, said it would increase reimbursements by as much as 28 percent.

It has not turned out that way. Though the settlement required the companies to underwrite the new database with $95 million, it did not obligate them to use it. So by the time the database was finally up and running last year, the same companies, across the country, were rapidly shifting to another calculation method, based on Medicare rates, that usually reduces reimbursement substantially.

In the 2009 settlement, the insurers did not admit wrongdoing. But they paid to set up FAIR Health as a replacement for Ingenix, a database owned by the insurance giant United Healthcare. Mr. Cuomo said Ingenix had consistently understated local “usual and customary” rates — so-called U.C.R.’s — that were used nationally to determine how much of a bill was paid when a patient used an out-of-network doctor.

FAIR Health collects billions of bills from insurers to calculate a usual fee for each medical procedure in a given locality. But increasingly, reimbursement is not based on such prevailing rates.

“This shift is mirrored across the country, and the implications in terms of declines in reimbursement are similar,” said Rob Parke, a benefits expert at Milliman, an international actuarial and consulting firm.

The level of reimbursement varies by plan, pegged to benchmarks unknown or misunderstood by many consumers. The traditional benchmark was 80 percent of the U.C.R., while newer ones mostly range from 140 percent to 250 percent of Medicare rates. That sounds like more, but typically amounts to less, and is drastically below charges in large, emergency out-of-network bills.

Depending on the plan, insurers may cover 60 percent to 80 percent of the benchmark sum; the patient is not only responsible for the rest but also for any outstanding balance, to which out-of-pocket maximums do not apply. The average emergency bill that insurers reported to state investigators, for example, totaled $7,006, or 1,421 percent of the Medicare rate, and left patients owing an average of $3,778.

http://www.nytimes.com/2012/04/24/nyregion/health-insurers-switch-baseline-for-out-of-network-charges.html?_r=1&hpw&pagewanted=all

Comment: 

By Don McCanne, MD

One of the many reasons that private insurers lost their credibility as being a fair arbiter of our health care dollars is the story of Ingenix.

An acquired subsidiary of health insurance giant UnitedHealth but used by other major insurers, Ingenix established an elaborate method of calculating “usual and customary” fees that would be paid by the insurers for out-of-network care. As it turned out, they cheated. They used innovative calculations that resulted in lower payments than fees that were truly usual and customary. In many instances, the patients were responsible not only for the deductibles, coinsurance and co-payments, but also for the higher balances resulting from these dishonest calculations.

In a settlement, the insurers agreed to set up a new program called FAIR Health as a replacement for Ingenix. We now learn that the settlement did not require the insurers to use this program. Instead many switched to Medicare as the benchmark for usual and customary fees, though the Medicare rates are usually lower, especially for specialized services.

Under Medicare, physicians and hospitals are not allowed to bill the patients for more than the Medicare-allowed balances, but in many states there is no such limitation for privately insured patients. Thus privately-insured patients may face much larger out-of-pocket costs than they would if they were covered by Medicare.

In those instances where balance billing for privately insured patients is prohibited, as is often the case with emergency care, then the providers are forced to accept less than usual and customary fees even though they have no contract with the private insurers requiring them to do so. In these instances, the state is enforcing contract provisions that do not even exist – placing the state in a position of siding with the private insurers and against the providers.

There are two sides to this story. One is that private commercial insurers cannot be relied upon to play fair. They will always game the system to protect their products and benefit their investors. The other is that insured patients must be protected from excessive out-of-pocket costs, which Medicare theoretically does by prohibiting health care providers from billing more then the Medicare-authorized amounts. The private insurers are merely following Medicare’s lead. The obvious problem is that private insurers do not have the ability to enforce prohibition of balance billing, thus patients are heavily penalized.

For many patients, even the more modest Medicare-allowed balances are an excessive burden that can impair access to care because of lack of affordability. An improved Medicare would prohibit any cost sharing for essential health care services. Yet the private insurers would never be able to produce a product that covered all essential services while eliminating patient cost sharing. Especially when adding in the costs of their administrative excesses, the premiums that would have to be charged would have a market only for the 1 percent – obviously not a viable product.

The conclusion is obvious. We need an improved Medicare that covers everyone, reduces administrative waste, eliminates the financial barriers of cost sharing, and is equitably funded. We certainly don’t need an industry forced on us that is required to establish “FAIR Health” but then uses loopholes to skirt fairness.

Insurers Alter Cost Formula, and Patients Pay More

By Nina Bernstein
The New York Times, April 23, 2012
Despite a landmark settlement that was expected to increase coverage for out-of-network care, the nation’s largest health insurers have been switching to a new payment method that in most cases significantly increases the cost to the patient.
The settlement, reached in 2009, followed New York State’s accusation that the companies  manipulated data they used to price such care, shortchanging the nation’s patients by hundreds of millions of dollars.
The agreement required the companies to finance an objective database of doctors’ fees that patients and insurers nationally could rely on. Gov. Andrew M. Cuomo, then the attorney general, said it would increase reimbursements by as much as 28 percent.
It has not turned out that way. Though the settlement required the companies to underwrite the new database with $95 million, it did not obligate them to use it. So by the time the database was finally up and running last year, the same companies, across the country, were rapidly shifting to another calculation method, based on Medicare rates, that usually reduces reimbursement substantially.
In the 2009 settlement, the insurers did not admit wrongdoing. But they paid to set up FAIR Health as a replacement for Ingenix, a database owned by the insurance giant United Healthcare. Mr. Cuomo said Ingenix had consistently understated local “usual and customary” rates — so-called U.C.R.’s — that were used nationally to determine how much of a bill was paid when a patient used an out-of-network doctor.
FAIR Health collects billions of bills from insurers to calculate a usual fee for each medical procedure in a given locality. But increasingly, reimbursement is not based on such prevailing rates.
“This shift is mirrored across the country, and the implications in terms of declines in reimbursement are similar,” said Rob Parke, a benefits expert at Milliman, an international actuarial and consulting firm.
The level of reimbursement varies by plan, pegged to benchmarks unknown or misunderstood by many consumers. The traditional benchmark was 80 percent of the U.C.R., while newer ones mostly range from 140 percent to 250 percent of Medicare rates. That sounds like more, but typically amounts to less, and is drastically below charges in large, emergency out-of-network bills.
Depending on the plan, insurers may cover 60 percent to 80 percent of the benchmark sum; the patient is not only responsible for the rest but also for any outstanding balance, to which out-of-pocket maximums do not apply. The average emergency bill that insurers reported to state investigators, for example, totaled $7,006, or 1,421 percent of the Medicare rate, and left patients owing an average of $3,778.
http://www.nytimes.com/2012/04/24/nyregion/health-insurers-switch-baseline-for-out-of-network-charges.html?_r=1&hpw&pagewanted=all

One of the many reasons that private insurers lost their credibility as being a fair arbiter of our health care dollars is the story of Ingenix.
An acquired subsidiary of health insurance giant UnitedHealth but used by other major insurers, Ingenix established an elaborate method of calculating “usual and customary” fees that would be paid by the insurers for out-of-network care. As it turned out, they cheated. They used innovative calculations that resulted in lower payments than fees that were truly usual and customary. In many instances, the patients were responsible not only for the deductibles, coinsurance and co-payments, but also for the higher balances resulting from these dishonest calculations.
In a settlement, the insurers agreed to set up a new program called FAIR Health as a replacement for Ingenix. We now learn that the settlement did not require the insurers to use this program. Instead many switched to Medicare as the benchmark for usual and customary fees, though the Medicare rates are usually lower, especially for specialized services.
Under Medicare, physicians and hospitals are not allowed to bill the patients for more than the Medicare-allowed balances, but in many states there is no such limitation for privately insured patients. Thus privately-insured patients may face much larger out-of-pocket costs than they would if they were covered by Medicare.
In those instances where balance billing for privately insured patients is prohibited, as is often the case with emergency care, then the providers are forced to accept less than usual and customary fees even though they have no contract with the private insurers requiring them to do so. In these instances, the state is enforcing contract provisions that do not even exist – placing the state in a position of siding with the private insurers and against the providers.
There are two sides to this story. One is that private commercial insurers cannot be relied upon to play fair. They will always game the system to protect their products and benefit their investors. The other is that insured patients must be protected from excessive out-of-pocket costs, which Medicare theoretically does by prohibiting health care providers from billing more then the Medicare-authorized amounts. The private insurers are merely following Medicare’s lead. The obvious problem is that private insurers do not have the ability to enforce prohibition of balance billing, thus patients are heavily penalized.
For many patients, even the more modest Medicare-allowed balances are an excessive burden that can impair access to care because of lack of affordability. An improved Medicare would prohibit any cost sharing for essential health care services. Yet the private insurers would never be able to produce a product that covered all essential services while eliminating patient cost sharing. Especially when adding in the costs of their administrative excesses, the premiums that would have to be charged would have a market only for the 1 percent – obviously not a viable product.
The conclusion is obvious. We need an improved Medicare that covers everyone, reduces administrative waste, eliminates the financial barriers of cost sharing, and is equitably funded. We certainly don’t need an industry forced on us that is required to establish “FAIR Health” but then uses loopholes to skirt fairness.

By Robert Pear
The New York Times, April 22, 2012

Medicare is wasting more than $8 billion on an experimental program that rewards providers of mediocre health care and is unlikely to produce useful results, federal investigators say in a new report.

The report, to be issued Monday by the Government Accountability Office, a nonpartisan investigative arm of Congress, urges the Obama administration to cancel the program, which pays bonuses to health insurance companies caring for millions of Medicare beneficiaries.

Administration officials, however, defended the project and said they would not cancel it because it could improve the quality of care for older Americans.

In the 2010 health care law, Congress cut Medicare payments to managed care plans, known as Medicare Advantage, and authorized bonus payments to those that provide high-quality care. Investigators found that most of the money paid under the demonstration program went to “average-performing plans” rated lower than the benchmarks set by Congress.

A separate federal panel, the independent Medicare Payment Advisory Commission, also criticized the project, saying it increases “spending at a time when Medicare already faces serious problems with cost control and long-term financing.”

The panel denounced Medicare’s “overly broad use of demonstration authority” and said “limited Medicare dollars should go to truly high-performing plans.” It said “the extension of quality bonuses to the vast majority of plans is likely to result in far greater program costs than the reward system enacted” by Congress, and that by spreading the rewards so broadly, “the demonstration lessens the incentive to achieve the highest level of performance.”

The commission said payments to private plans, including the bonuses, were still about 7 percent higher than what the government would pay for similar beneficiaries in the traditional Medicare program.

The G.A.O. said the project “dwarfs all other Medicare demonstrations” in its impact on the budget, but is so poorly designed that researchers could not tell whether the bonus payments led to improved care. As a result, it said, it is unlikely to “produce meaningful results.”

http://www.nytimes.com/2012/04/23/health/policy/gao-says-medicare-test-project-is-wasting-8-billion.html

And…

Medicare Advantage: Quality Bonus Payment Demonstration Undermined by High Estimated Costs and Design Shortcomings

Government Accountability Office (GAO)
March 21, 2012 (Released April 23, 2012)

Conclusion
 
Estimated to cost more than $8 billion, the MA Quality Bonus Payment Demonstration offsets a significant portion of PPACA’s MA payment reductions during its 3-year time frame. At the same time, the design shortcomings of the demonstration may undermine its ability to achieve CMS’s stated research goal — to test whether a scaled bonus structure leads to larger and faster annual quality improvement compared with what would have occurred under PPACA. Rather than rewarding only high performing plans, most of the additional payments made under the demonstration will accrue to average performing plans. In addition, the demonstration’s ability to test an alternative quality improvement incentive structure is compromised by its design. The reliance on predemonstration performance data, the absence of an appropriate comparison group of MA plans, and design features that are inconsistent with its research goal make it unlikely that the demonstration will produce meaningful results.

http://www.gao.gov/assets/590/589473.pdf

And…

By Don McCanne
Quote of the Day, September 16, 2011

The Medicare Advantage program began as a fraud. These private plans were paid 113 percent of the costs of the traditional Medicare program so that they could offer extra benefits to entice individuals away from the public program. Once a sufficient number of individuals joined the private plans, funding for the public program would be slashed and patients would flee into the private plans. Only then would the public learn that the next planned step would be to shift to a Ryan-type voucher (premium support), which would dump much more of the costs onto patients.

The Affordable Care Act included a provision to gradually reduce these Medicare Advantage overpayments. The scheduled reduction for 2012 will be less than 1 percent. But members of the Obama administration have been listening to the insurers and the Republicans. They decided that this very modest reduction might make them more vulnerable to Republican attacks as we enter an election year. So what did they do?

They replenished the reductions with billions of dollars in quality bonuses designed for top tier 4 and 5 star plans, but they expanded the program to include 3 star plans. That way, plans covering 90 percent of Medicare Advantage enrollees would receive additional payments. A quality bonus for almost every plan is nothing more than a blanket payment increase. They have preserved this gift to the private insurers and then have the gall to claim that the programs are stronger and more popular as a result of their “strong negotiations” with the plans!

https://pnhp.org/news/2011/september/obama-administrations-dishonest-promotion-of-medicare-advantage

Comment: 

By Don McCanne, MD

When we need to reinforce the traditional Medicare program and provide it for everyone, the Obama administration has given more of our tax money to already-overpaid private Medicare Advantage plans in an effort to reinforce them instead.

The Affordable Care Act was designed by and for the private insurance industry in spite of overwhelming evidence that costs were higher and administration much less efficient than with the Medicare program. A concession was made to reduce the overpayments to the private Medicare Advantage plans to help balance the costs of the legislation. But when it came time for the reductions, the insurance industry prevailed on the administration to intervene since they would lose their competitive edge of being able to offer greater benefits and lower out-of-pocket costs because of these overpayments they were receiving.

The payment reductions were part of the legislation, so not much could be done about them. Instead, these phony quality bonuses were given to 90 percent of the plans, permitting them to sustain their competitive edge over Medicare. As the GAO report indicates, there is no way that these could be considered legitimate awards for higher quality. The only reasonable interpretation is that the Obama administration is supporting the private insurance industry by using extra tax dollars to give it a distinct edge over our public Medicare program.

This does not bode well for the next presidential term. If Barack Obama is reelected, he is already in bed with the insurers, and we can forget about any further move beyond ACA towards a public financing program for our health care. If Mitt Romney is elected, at least he wouldn’t be giving as much of our tax dollars to private insurers, but then he would abandon federal responsibility and turn the financing problems over to cash-starved state governments. The choice seems to be between bad and worse.

This should be a call for us to intensify our efforts to educate, to build coalitions, and to enlist the grassroots in support of health care justice for all. Not
all of us will see the fruition of these efforts, but nothing will happen if we don’t step up the effort now. Some of us will have to be satisfied with seeing a good start, but that’s better than watching our elected officials continue to bow in obsequious servitude to the insurance oligarchy.

G.A.O. Calls Test Project by Medicare Costly Waste

By Robert Pear
The New York Times, April 22, 2012
Medicare is wasting more than $8 billion on an experimental program that rewards providers of mediocre health care and is unlikely to produce useful results, federal investigators say in a new report.
The report, to be issued Monday by the Government Accountability Office, a nonpartisan investigative arm of Congress, urges the Obama administration to cancel the program, which pays bonuses to health insurance companies caring for millions of Medicare beneficiaries.
Administration officials, however, defended the project and said they would not cancel it because it could improve the quality of care for older Americans.
In the 2010 health care law, Congress cut Medicare payments to managed care plans, known as Medicare Advantage, and authorized bonus payments to those that provide high-quality care. Investigators found that most of the money paid under the demonstration program went to “average-performing plans” rated lower than the benchmarks set by Congress.
A separate federal panel, the independent Medicare Payment Advisory Commission, also criticized the project, saying it increases “spending at a time when Medicare already faces serious problems with cost control and long-term financing.”
The panel denounced Medicare’s “overly broad use of demonstration authority” and said “limited Medicare dollars should go to truly high-performing plans.” It said “the extension of quality bonuses to the vast majority of plans is likely to result in far greater program costs than the reward system enacted” by Congress, and that by spreading the rewards so broadly, “the demonstration lessens the incentive to achieve the highest level of performance.”
The commission said payments to private plans, including the bonuses, were still about 7 percent higher than what the government would pay for similar beneficiaries in the traditional Medicare program.
The G.A.O. said the project “dwarfs all other Medicare demonstrations” in its impact on the budget, but is so poorly designed that researchers could not tell whether the bonus payments led to improved care. As a result, it said, it is unlikely to “produce meaningful results.”
http://www.nytimes.com/2012/04/23/health/policy/gao-says-medicare-test-project-is-wasting-8-billion.html

And…

Medicare Advantage: Quality Bonus Payment Demonstration Undermined by High Estimated Costs and Design Shortcomings

Government Accountability Office (GAO)
March 21, 2012 (Released April 23, 2012)
Conclusion
Estimated to cost more than $8 billion, the MA Quality Bonus Payment Demonstration offsets a significant portion of PPACA’s MA payment reductions during its 3-year time frame. At the same time, the design shortcomings of the demonstration may undermine its ability to achieve CMS’s stated research goal — to test whether a scaled bonus structure leads to larger and faster annual quality improvement compared with what would have occurred under PPACA. Rather than rewarding only high performing plans, most of the additional payments made under the demonstration will accrue to average performing plans. In addition, the demonstration’s ability to test an alternative quality improvement incentive structure is compromised by its design. The reliance on predemonstration performance data, the absence of an appropriate comparison group of MA plans, and design features that are inconsistent with its research goal make it unlikely that the demonstration will produce meaningful results.
http://www.gao.gov/assets/590/589473.pdf

And…

By Don McCanne
Quote of the Day, September 16, 2011
The Medicare Advantage program began as a fraud. These private plans were paid 113 percent of the costs of the traditional Medicare program so that they could offer extra benefits to entice individuals away from the public program. Once a sufficient number of individuals joined the private plans, funding for the public program would be slashed and patients would flee into the private plans. Only then would the public learn that the next planned step would be to shift to a Ryan-type voucher (premium support), which would dump much more of the costs onto patients.
The Affordable Care Act included a provision to gradually reduce these Medicare Advantage overpayments. The scheduled reduction for 2012 will be less than 1 percent. But members of the Obama administration have been listening to the insurers and the Republicans. They decided that this very modest reduction might make them more vulnerable to Republican attacks as we enter an election year. So what did they do?
They replenished the reductions with billions of dollars in quality bonuses designed for top tier 4 and 5 star plans, but they expanded the program to include 3 star plans. That way, plans covering 90 percent of Medicare Advantage enrollees would receive additional payments. A quality bonus for almost every plan is nothing more than a blanket payment increase. They have preserved this gift to the private insurers and then have the gall to claim that the programs are stronger and more popular as a result of their “strong negotiations” with the plans!
https://pnhp.org/news/2011/september/obama-administrations-dishonest-promotion-of-medicare-advantage

When we need to reinforce the traditional Medicare program and provide it for everyone, the Obama administration has given more of our tax money to already-overpaid private Medicare Advantage plans in an effort to reinforce them instead.
The Affordable Care Act was designed by and for the private insurance industry in spite of overwhelming evidence that costs were higher and administration much less efficient than with the Medicare program. A concession was made to reduce the overpayments to the private Medicare Advantage plans to help balance the costs of the legislation. But when it came time for the reductions, the insurance industry prevailed on the administration to intervene since they would lose their competitive edge of being able to offer greater benefits and lower out-of-pocket costs because of these overpayments they were receiving.
The payment reductions were part of the legislation, so not much could be done about them. Instead, these phony quality bonuses were given to 90 percent of the plans, permitting them to sustain their competitive edge over Medicare. As the GAO report indicates, there is no way that these could be considered legitimate awards for higher quality. The only reasonable interpretation is that the Obama administration is supporting the private insurance industry by using extra tax dollars to give it a distinct edge over our public Medicare program.
This does not bode well for the next presidential term. If Barack Obama is reelected, he is already in bed with the insurers, and we can forget about any further move beyond ACA towards a public financing program for our health care. If Mitt Romney is elected, at least he wouldn’t be giving as much of our tax dollars to private insurers, but then he would abandon federal responsibility and turn the financing problems over to cash-starved state governments. The choice seems to be between bad and worse.
This should be a call for us to intensify our efforts to educate, to build coalitions, and to enlist the grassroots in support of health care justice for all. Not all of us will see the fruition of these efforts, but nothing will happen if we don’t step up the effort now. Some of us will have to be satisfied with seeing a good start, but that’s better than watching our elected officials continue to bow in obsequious servitude to the insurance oligarchy.

By Diana Gibson
Parkland Institute, April 2012

In Alberta and across Canada, the private for-profit healthcare sector is being positioned as a solution to wait times and the financial challenges facing the health care system. Consequently, for-profit delivery of healthcare is increasing.

(T)his report explores the delivery of clinical services, specifically arthroplasty or total hip and knee replacements, through private, for-profit clinics. It includes a case study of Calgary’s Health Resource Centre (HRC) that specifically examines the cost, quality, access and other implications of expanding this form of provision and places it in the context of national and international research. (The Health Resource Centre, based in Calgary and owned by Networc Health Inc., was Alberta’s flagship private surgical facility until it went bankrupt in 2010.) It also examines a wait-list reduction pilot project, the Alberta Hip and Knee Replacement Project, which includes for-profit and not-for-profit providers, allowing for a comparison of the two models.

The Alberta Hip and Knee Replacement Project

In 2004 the provincial government initiated a pilot project to address a myriad of challenges within the arthroplasty field. One of the key elements of this pilot project was to address wait times as directed by the Premier’s Advisory Council on Health and its Framework for Reform. A partnership was carved out between Alberta Health – which contributed $20 million in funding – three regional health authorities (and their clinical partners including HRC), the Alberta Orthopedic Society, the Alberta Bone and Joint Institute and physicians from across the province.

The trial illustrated that with improved management practices (such as centralized intake and assessment), realignment of resources, and collaboration and cooperation across the delivery path, costs can be reduced, wait times can be decreased and benefits to patients enhanced within the public, not-for-profit system. Specifically, the trial reduced overall wait times from family doctor through to surgery by 90 per cent (from 19 months to approximately 11 weeks).

Risks and Opportunities of HRC

The surgeries were more expensive, but came with significant risk in other areas as well: the dependency between the parties became detrimental to both; the relationship created expensive duplication of capital and lack of control over infrastructure planning; and the private contract meant a serious lack of accountability and transparency. Additional risks identified in international studies include lower quality of services and poorer articulation with the broader health community.

Comparing For-Profit to Non-Profit

The Alberta government acknowledged that the for-profit surgeries would cost more but justified this with the wait-time reductions were worth the cost. The examination of the performance of HRC in contrast with the public non-profit elements of the pilot project helps to illuminate the wait-list issue. The analysis above reveals that the public partners in the Alberta Hip and Knee pilot are still working well, with wait-time advances at lower cost than the HRC and without the risks.

The wait-list reduction achievements of this project were attained despite, not because of, for-profit involvement in the trial. It was the specialized or focused nature of the clinic, not the investor-owned nature, which increased patient access and enabled innovation. This is consistent with international evidence from Canada and abroad demonstrating that wait lists are actually lengthened as a result of the existence of for-profit entities delivering clinical health care services.

What advocates of for-profit delivery suggest is that the removal of patients from the public queue will shorten the queue. What they fail to note is that the removal of health professionals from the public delivery system will slow down the system and result in the queue growing even longer.

The Alberta Hip and Knee pilot project demonstrates the capacity of the public health system to evolve and innovate in such a way that costs are maximized, wait lists are reduced, and patient outcomes are improved. The pilot set the stage for province-wide learning and provided a platform for a revolution in hip and knee surgical practices. Gains from the pilot continue to be made through the Transformational Improvement Program (TIP), which specifically addresses wait lists. Results to date show improvements in length of stay at almost every site, as well as gains in other key indicators of quality such as patient satisfaction and early mobilization after surgery. The rewards are substantial. They include higher volumes of surgeries as more bed days become available, greater satisfaction as patients move more quickly from referral to surgery, and reinvestment of the efficiency savings in ways that can further improve care quality and safety. Our public health system is more than able to meet the needs of our citizens when the political will exists and resources are allocated.

Conclusion

It matters who delivers clinical services. The spectacular fall from grace of HRC is a fascinating study in the ills of health care privatization, the risks to patient care, and the need to reiterate the importance of our publicly financed and delivered health care system. The case study of HRC is very consistent with international studies, validating the conclusion that for-profit incursions into the health care system are risky, costly and lack the accountability Canadians expect, demand and deserve.

The success of the public partners in the pilot project on wait-time reductions in Alberta clearly shows that public solutions can achieve the same wait-list targets at less cost and much less risk to the public.

http://parklandinstitute.ca/downloads/reports/HRC-Report.pdf

And…

Neat, Plausible, and Wrong: The Myth of Health Care Unsustainability

Canadian Doctors for Medicare
February 2011

Which Costs Are Rising?

While the cost of Medicare has not grown as a percent of GDP over the last 35 years, there have been significant increases in total health care system costs over the same period, and those increases have accelerated in the last decade. Overall health spending in Canada has risen from about 7% of GDP in 1975 to about 10.7% in 2008. In 2010, heath care spending was estimated to be about 12% of GDP.

If Medicare costs are stable, and public sector costs are rising slowly, why are total health care costs increasing rapidly? The real cost driver is precisely the thing that critics of Medicare tout as the solution: private health care.

Currently 30% of all health care spending is in the private sector, up from 24% in 1975. That growth is the result of significant increases in costs in the private health care sector, including out-of-pocket spending and the costs of private insurance.

http://www.canadiandoctorsformedicare.ca/images/stories/Neat_Plausible_and_Wrong.pdf

Comment: 

By Don McCanne, MD

In spite of the overwhelming body of evidence to the contrary we still hear over and over again that the private sector always produces higher quality at lower costs – whether in health care financing through private insurers, or in health care delivery through investor-owned facilities. Canada has provided us with yet another real
-life experiment that confirms, once again, that the opposite is true.

The Alberta government understood that private care would cost more than in the public sector, but they agreed to it in an effort to reduce wait times. However, not only did the private sector provide care at higher costs, they had intruded into the loosely-integrated public system, creating the potential of increasing wait times in the public sector (explained above).

Fortunately, with a coordinated effort to attack this problem – coordination that only happens in the public sector – Alberta was able to reduce its wait times for orthopedic procedures from 19 months down to 11 weeks – in spite of, rather than due to, involvement of the private sector.

Also, quite ironic but very instructive, not only did care cost more when delivered by the private, for-profit Health Resource Centre, the extra costs were not enough and the business model failed – ending in bankruptcy.

In health care financing and delivery, public and non-profit institutions can always provide greater value and efficiency than the for-profit private sector, but it requires a government that is supportive of their public financing system.

In 2005, Conservative Premier Ralph Klein of Alberta wrote in the Calgary Herald, “Let me be blunt. We have unacceptable waiting lists in our publicly funded, rationed health-care system, and all the money in the world is not going to eliminate them… In simple terms it means that if you are in pain or suffering and cannot wait in line, you should be able to buy the health care you need.”

The Calgary Herald published my response which stated, “Ralph Klein states that ‘all the money in the world’ is not going to eliminate waiting lists, unless the source of the funds is private instead of public. What nonsense. Excessive queues are eliminated by making minor, selective adjustments in the system’s capacity. Responsible stewards of any health-care system, public or private, will make these adjustments. The difference is the public system would be adapted to accommodate everyone, whereas private systems accommodate only those who can pay.”

Of course, Alberta didn’t listen to me and continued on with its efforts to privatize. However, they did involve the public sector in queue reduction, with considerable success. But by including the private sector, the experiment was much more expensive, and resulted in further losses through the HRC bankruptcy.

Although these reports are about Canada’s Medicare system, the conclusions could apply to our Medicare as well, if we expanded it into a single payer national health program. It would be less expensive and more effective than what we have, provided we also elect stewards who believe in and support public systems.