High-deductible health plans on rise

By Tom Wilemon
The Tennessean, December 27, 2011

Corporate employers, small businesses and nonprofit organizations are increasingly requiring their workers to spend between $1,200 and $5,000 before filing a health insurance claim.

Nearly three in four employers will offer at least one of these plans next year, according to a survey by the National Business Group on Health, a nonprofit association that represents large employers.

Helen Darling, its president, predicts that by 2016 the majority of all health plans will have high deductibles.

http://www.tennessean.com/article/20111227/NEWS07/312270017/High-deductible-health-plans-rise

The National Business Group on Health (NBGH) is composed of the nation’s largest employers, predominantly Fortune 500 companies. They provide health coverage for over 50 million workers, retirees and their families. When NBGH’s president, Helen Darling, says that three years from now the majority of all plans will have high deductibles, you can bank on it.

Although this development is independent of the measures in the Affordable Care Act (ACA), it has greater consequences than any other feature of ACA, merely based on the number of people who will be impacted – not just the Fortune 500 company employees, but virtually everyone else as well.

Most workers and their families obtain their health care coverage through their employment. With large employers leading the way, high deductible plans will become the national standard. For median-income households, the deductible is large enough to create a financial hardship should a family member have significant health care needs. Thus, under-insurance is becoming the new norm, not only for employer-sponsored plans, but also for the low actuarial value plans to be offered through the state insurance exchanges.

The rationale usually given for high deductibles is to make patients more sensitive to the costs of health care so that they will use less of it. This has been shown not only to decrease the use of beneficial health care services, but it also potentially exposes people to financial hardship when they develop problems for which health care is absolutely essential.

So the question is, does this really save enough money to warrant these adverse consequences? Let’s look at the RAND HIE and also the experiences of other nations.

The RAND Health Insurance Experiment demonstrated that health care use was reduced by 30 percent in patients with cost sharing as compared to first dollar coverage, supposedly without resulting in harm (though low-income people were harmed). But that study was limited to healthy workers and their young healthy families during a few healthy years of their lives. It does not apply to the relatively unhealthy 20 percent of people who use 80 percent of our health care dollars – care that is not influenced by deductibles. Reducing spending by 30 percent on healthy people who use very little care – perhaps an office visit or two – is not going to reduce our national health expenditures significantly.

Many other nations have first dollar coverage with no deductibles, yet spend far less than we do, and with no evidence of significant overuse of medical services. There are far more effective and much more patient-friendly methods of controlling spending than the use of deductibles and other cost sharing, as these nations have demonstrated.

The Affordable Care Act is not providing us the framework that would ensure affordable care for everyone. Trying to modify the Act to make it work better won’t help because the financing infrastructure is so fundamentally flawed that legislative tweaking cannot repair it. Though getting rid of deductibles would be an improvement, it wouldn’t reduce our high costs, but would merely shift them, making insurance premiums even less affordable.

For this new year, we really have our work cut out for us. The public at large needs to understand the irreparable flaws in the ACA model of reform. People need to know that we can control spending while making health care accessible and affordable for everyone. We can do this by enacting a far better way to finance health care – a single payer national health program: an improved Medicare for all.

Medical Bill Problems Steady for U.S. Families, 2007-2010

By Anna Sommers, Peter J. Cunningham
Center for Studying Health System Change, December 2011

While problems paying medical bills stabilized in recent years, the proportion of Americans in families with medical bill problems remained significantly higher in 2010 compared with 2003 – 20.9 percent vs. 15.1 percent. And, in 2010, many people in families with problems paying medical bills continued to experience severe financial consequences, with about two-thirds reporting problems paying for other necessities and a quarter considering bankruptcy.

Underscoring uninsured people’s lack of financial protection from health care expenses, uninsured children and working-age adults in 2010 were more likely to have medical bill problems (31.5%) than their insured counterparts (20.2%).

http://www.hschange.org/CONTENT/1268/

Although the uninsured would be expected to have problems paying medical bills, we should be very concerned that one-fifth of insured individuals under age 65 also face significant medical debt.

Most of these individuals are insured through their work. Since the state insurance exchange subsidies for purchase of insurance and for out-of-pocket expenses will not apply to employer-sponsored plans, it can be anticipated that the Affordable Care Act will not reduce medical bill problems for a majority of our workforce.

When we know that the Affordable Care Act will fall far short of what we need to ensure financial security in the face of medical need, why aren’t we as a nation busy with efforts to enact a program that actually would work?

By Robert Kuttner
The American Prospect, November 7, 2011

The New York hotel workers’ plan provides comprehensive coverage at its own health centers, including full dental and optical care, with no deductibles or co-pays and a core philosophy that emphasizes primary care, wellness, and prevention.

In the office of Dr. Robert Greenspan, who has headed the plan for 12 years, hangs the official charter signed by New York Governor Thomas E. Dewey in 1949 authorizing Local 6 to operate the nation’s first medical practice run by a union.

The plan may well be the best in the nation at providing so much coverage while effectively constraining costs. All doctors are salaried, with general practitioners being paid slightly more than specialists, in order to reward primary care.

From a small clinic on Manhattan’s West Side, the plan has grown into five comprehensive health centers, serving approximately 88,000 hotel workers, their family members, and union retirees. Even those who’ve been laid off keep their health coverage. The plan boasts New York’s highest rate of patient satisfaction.

The plan’s sole out-of-pocket charge is for drugs. While ordinary prescriptions require a modest co-pay of $5 or $15 for non-generics, the charge is eliminated for patients on long-term treatments, such as for high blood pressure. “Bob [Greenspan] experimented with free drugs for patients who are chronically ill,” says union president Peter Ward. “He found that this dramatically reduced visits to the ER; there were fewer catastrophic events. So now, we waive all co-pays for patients on long-term drug therapy.”

“The difference isn’t just financial – it’s philosophical,” Greenspan says. “We want you to come in. We want unlimited access to primary care. It pays off over the long term. All of the co-pays and deductibles do the opposite of what is claimed. They don’t assure that scarce medical resources are used as efficiently as possible or deter excessive use. They are simply barriers to care. People say, ‘Maybe it will clear up by itself, so I won’t see the doctor,’ or ‘I’ll stretch out the medicine supply by taking less than the prescribed dose.’ All you are doing is inducing people not to be compliant with the medical program. Then you wonder why costs keep going up – it’s because people get sicker, and their eventual treatment is more expensive. We do just the opposite.”

Last year, the hotel workers’ health plan cost $411.24 a month for an individual and $1,027.56 for an average family. By comparison, Healthfirst, the cheapest HMO in New York City, cost roughly three times as much – $1,116 a month for an individual and $3,316 for a family – while it excluded many services offered by the union such as dental and optical care and piled on deductibles and co-pays. Factoring in benefits not provided by other plans, the typical commercial insurance package costs about four times as much as the hotel workers’ plan.

So why is the plan virtually unknown in the health-policy debate? For one thing, the union has emphasized publicizing the plan among New York hotel workers, and Greenspan has focused on improving care for members, not crusading for national reform.

Except for single-payer advocates, reformers have pursued cost-effective care within the context of an insurance-dominated system – something of a fool’s errand – whereas the hotel workers’ plan begins by dispensing with third-party insurers. To review all the ways that the hotel workers’ plan delivers better care more cost-effectively is to appreciate the vast inefficiency in the rest of America’s health system – and to see that cost-containment gurus are mostly looking in the wrong places for efficiencies.

For starters, by dispensing with insurance-company middlemen, the plan eliminates a whole layer of costs. A doctor treats the patient according to his or her best medical judgment. There is no army of staffers dealing with patient billing, claims, and insurance reimbursement; no arguing with insurance-company case reviewers.

Second, doctors are all on salary. So there is no incentive to undertreat or overtreat.

Further, the plan’s core principle is unlimited access to primary care, with all of the prevention and early-detection benefits that approach brings. In most systems, specialists drive costs. “We don’t waste specialists on routine cases,” Greenspan says. “We do want specialists to see appropriate cases, which is both more cost effective and more professionally challenging to the physician.”

The union, which knows something about negotiating, engages in hard bargaining with all of its vendors, from drug manufacturers to hospitals, and is relentless about eliminating middlemen. Most conventional health plans use “pharmacy benefit managers” who negotiate with drug companies on the plan’s behalf and, of course, take a cut for themselves. The union negotiates directly. It also dispenses with cadres of consultants, from human-resource departments to utilization reviewers and behavioral-health companies, all of which add costs under the guise of shaving costs.

In New York, some medical specialists in high demand have market power to raise prices. “Have you heard the term, RAPER?” Greenspan asks. “It stands for Radiologists, Anesthesiologists, Pathologists, and ER doctors.” Most New York hospitals now contract out these services to specialists’ groups who charge whatever the market will bear. In recent bargaining with one of its hospitals over a proposed rate increase, the hotel workers were told that the increase partly reflected higher charges billed by anesthesiologists. Greenspan requested the hospital to push back. Not our problem, the hospital contended; we don’t control these costs. “We told them, OK, next week our members stop using your hospital,” Greenspan says. The costs came down.

At some point, the public must realize that the choice is drastic reform or drastic cuts. More than any other in America, the hotel workers’ plan points the way to an efficient and humane system of health care.

http://prospect.org/article/model-health

Comment:

By Don McCanne, MD

New York’s Local 6 has achieved many of the goals of single payer reform by working from the bottom up. They are providing very comprehensive health care services at only about one-third of the costs of other New York plans, and with the highest patient satisfaction ratings.

The key is that they have been able to to create a health care delivery infrastructure dedicated to optimal patient care that is removed from our current dysfunctional system dominated by insurer middlemen. This was all about patients, not insurers.

One important example of the difference is that they recognized that co-pays and deductibles were barriers to care. As Dr. Greenspan says, “They do the opposite of what is claimed.” People should have unlimited access to primary care. To show how wrong the policy community is in their support of cost sharing, Dr. Greenspan’s group has eliminated these barriers, yet their costs are far less than New York’s least expensive HMO. You do not need deductibles and co-pays to control health care spending.

Although this was a bottom up success, it is improbable that it could be used as an insurance model for the rest of the nation. Their success was dependent on the unique efforts of a local union. Also their members have no coverage outside of their system. Our health care delivery systems and our health care financing systems are too fragmented to permit the creation of a nation of Local 6-type institutions, especially when the solidarity characteristic of unions is lacking in most other environments.

Although a top down approach contrasts sharply with what Local 6 has done, nevertheless, a well designed single payer model can accompli
sh the same results, with the added benefit of ensuring patient choice of their health care professionals and institutions. But we’ll have to get the private insurers out of the way. They would never accept a system with so little money in it.

A Model of Health

By Robert Kuttner
The American Prospect, November 7, 2011

The New York hotel workers’ plan provides comprehensive coverage at its own health centers, including full dental and optical care, with no deductibles or co-pays and a core philosophy that emphasizes primary care, wellness, and prevention.

In the office of Dr. Robert Greenspan, who has headed the plan for 12 years, hangs the official charter signed by New York Governor Thomas E. Dewey in 1949 authorizing Local 6 to operate the nation’s first medical practice run by a union.

The plan may well be the best in the nation at providing so much coverage while effectively constraining costs. All doctors are salaried, with general practitioners being paid slightly more than specialists, in order to reward primary care.

From a small clinic on Manhattan’s West Side, the plan has grown into five comprehensive health centers, serving approximately 88,000 hotel workers, their family members, and union retirees. Even those who’ve been laid off keep their health coverage. The plan boasts New York’s highest rate of patient satisfaction.

The plan’s sole out-of-pocket charge is for drugs. While ordinary prescriptions require a modest co-pay of $5 or $15 for non-generics, the charge is eliminated for patients on long-term treatments, such as for high blood pressure. “Bob [Greenspan] experimented with free drugs for patients who are chronically ill,” says union president Peter Ward. “He found that this dramatically reduced visits to the ER; there were fewer catastrophic events. So now, we waive all co-pays for patients on long-term drug therapy.”

“The difference isn’t just financial – it’s philosophical,” Greenspan says. “We want you to come in. We want unlimited access to primary care. It pays off over the long term. All of the co-pays and deductibles do the opposite of what is claimed. They don’t assure that scarce medical resources are used as efficiently as possible or deter excessive use. They are simply barriers to care. People say, ‘Maybe it will clear up by itself, so I won’t see the doctor,’ or ‘I’ll stretch out the medicine supply by taking less than the prescribed dose.’ All you are doing is inducing people not to be compliant with the medical program. Then you wonder why costs keep going up – it’s because people get sicker, and their eventual treatment is more expensive. We do just the opposite.”

Last year, the hotel workers’ health plan cost $411.24 a month for an individual and $1,027.56 for an average family. By comparison, Healthfirst, the cheapest HMO in New York City, cost roughly three times as much – $1,116 a month for an individual and $3,316 for a family – while it excluded many services offered by the union such as dental and optical care and piled on deductibles and co-pays. Factoring in benefits not provided by other plans, the typical commercial insurance package costs about four times as much as the hotel workers’ plan.

So why is the plan virtually unknown in the health-policy debate? For one thing, the union has emphasized publicizing the plan among New York hotel workers, and Greenspan has focused on improving care for members, not crusading for national reform.

Except for single-payer advocates, reformers have pursued cost-effective care within the context of an insurance-dominated system – something of a fool’s errand – whereas the hotel workers’ plan begins by dispensing with third-party insurers. To review all the ways that the hotel workers’ plan delivers better care more cost-effectively is to appreciate the vast inefficiency in the rest of America’s health system – and to see that cost-containment gurus are mostly looking in the wrong places for efficiencies.

For starters, by dispensing with insurance-company middlemen, the plan eliminates a whole layer of costs. A doctor treats the patient according to his or her best medical judgment. There is no army of staffers dealing with patient billing, claims, and insurance reimbursement; no arguing with insurance-company case reviewers.

Second, doctors are all on salary. So there is no incentive to undertreat or overtreat.

Further, the plan’s core principle is unlimited access to primary care, with all of the prevention and early-detection benefits that approach brings. In most systems, specialists drive costs. “We don’t waste specialists on routine cases,” Greenspan says. “We do want specialists to see appropriate cases, which is both more cost effective and more professionally challenging to the physician.”

The union, which knows something about negotiating, engages in hard bargaining with all of its vendors, from drug manufacturers to hospitals, and is relentless about eliminating middlemen. Most conventional health plans use “pharmacy benefit managers” who negotiate with drug companies on the plan’s behalf and, of course, take a cut for themselves. The union negotiates directly. It also dispenses with cadres of consultants, from human-resource departments to utilization reviewers and behavioral-health companies, all of which add costs under the guise of shaving costs.

In New York, some medical specialists in high demand have market power to raise prices. “Have you heard the term, RAPER?” Greenspan asks. “It stands for Radiologists, Anesthesiologists, Pathologists, and ER doctors.” Most New York hospitals now contract out these services to specialists’ groups who charge whatever the market will bear. In recent bargaining with one of its hospitals over a proposed rate increase, the hotel workers were told that the increase partly reflected higher charges billed by anesthesiologists. Greenspan requested the hospital to push back. Not our problem, the hospital contended; we don’t control these costs. “We told them, OK, next week our members stop using your hospital,” Greenspan says. The costs came down.

At some point, the public must realize that the choice is drastic reform or drastic cuts. More than any other in America, the hotel workers’ plan points the way to an efficient and humane system of health care.

http://prospect.org/article/model-health

New York’s Local 6 has achieved many of the goals of single payer reform by working from the bottom up. They are providing very comprehensive health care services at only about one-third of the costs of other New York plans, and with the highest patient satisfaction ratings.

The key is that they have been able to to create a health care delivery infrastructure dedicated to optimal patient care that is removed from our current dysfunctional system dominated by insurer middlemen. This was all about patients, not insurers.

One important example of the difference is that they recognized that co-pays and deductibles were barriers to care. As Dr. Greenspan says, “They do the opposite of what is claimed.” People should have unlimited access to primary care. To show how wrong the policy community is in their support of cost sharing, Dr. Greenspan’s group has eliminated these barriers, yet their costs are far less than New York’s least expensive HMO. You do not need deductibles and co-pays to control health care spending.

Although this was a bottom up success, it is improbable that it could be used as an insurance model for the rest of the nation. Their success was dependent on the unique efforts of a local union. Also their members have no coverage outside of their system. Our health care delivery systems and our health care financing systems are too fragmented to permit the creation of a nation of Local 6-type institutions, especially when the solidarity characteristic of unions is lacking in most other environments.

Although a top down approach contrasts sharply with what Local 6 has done, nevertheless, a well designed single payer model can accomplish the same results, with the added benefit of ensuring patient choice of their health care professionals and institutions. But we’ll have to get the private insurers out of the way. They would never accept a system with so little money in it.

Highmark looks to expand hospital and physician ownership

By Emily Berry
amednews.com, December 26, 2011

Faced with a future where its home region’s largest health system could be outside of its network, Pittsburgh-based Highmark plans to buy and affiliate with more hospitals and physician practices.

Highmark’s June announcement that it would purchase West Penn Allegheny Health System established its first large-scale foray in the clinical side of the health care business. It also contributed to the deterioration of contract negotiations with the University of Pittsburgh Medical Center, which sees West Penn as a competitor.

Highmark’s new direction is similar to what other insurers are trying to do. Insurers, hospitals and physicians are merging, affiliating and contracting in new ways as they seek alternatives to fee-for-service payment arrangements and look ahead to a post-reform health system, said Kevin Ryan, a Chicago-based attorney.

During a conference call with reporters Dec. 8, Highmark Executive Vice President David O’Brien said the West Penn deal “is only a small part of our strategy going forward.”

“We are in discussions with physicians and hospitals,” O’Brien said. “We’re looking to expand our footprint in the provider world. We think the future for us strategically is being able to work closely with providers, to be in the provider space.”

UPMC sees Highmark’s strategy as aimed primarily at undercutting UPMC’s standing in the market so that Highmark can drive members of its health plan to cheaper care settings, UPMC spokesman Paul Wood said.

“What Highmark is doing is essentially transforming from a neutral insurer where every subscriber could go to any hospital, to a competing integrated delivery and financing system. That puts them in direct competition with UPMC,” he said. UPMC and Highmark are fighting in federal court over issues arising during contentious contract negotiations. UPMC’s contract with Highmark expires on June 30, 2012.

http://www.ama-assn.org/amednews/2011/12/26/bisb1226.htm

Highmark, a Blue Cross Blue Shield licensee in Pennsylvania and West Virginia, is “transforming from a neutral insurer where every subscriber could go to any hospital, to a competing integrated delivery and financing system,” according to spokesman Paul Wood of the University of Pittsburgh Medical Center (UPMC). Or as Highmark’s David O’Brien says, they are moving into “the provider space.” This is yet one more example of the insurers trying to take over the health care delivery system.

Besides providing a management that places it own business interests before all else, it also locks in the exorbitantly high administrative costs characteristic of these organizations. Even worse, patients already had lost provider choice when plans such as Blue Cross and Blue Shield switched from indemnity plans to preferred provider organizations with their restrictive provider networks, but now, by now becoming the actual providers, the plans will no doubt establish severe penalties (zero coverage?) for obtaining care outside of their own intrinsic health care delivery systems. How does that benefit patients?

Many do recognize that the private insurance model is no longer sustainable, and that it is only a matter of time before the switch to a single payer system becomes inevitable. The question is, what will we do with the private insurers once they are the health care delivery system? Scary thought.

Hospitals Adopt Drug Industry Sales Strategy

By Phil Galewitz
Kaiser Health News, December 13, 2011

The University of Chicago Medical Center is one of a growing number of hospitals nationwide hiring former drug and device sales representatives to visit doctors’ offices to persuade them to use their services over competing facilities.

In visits that can last five to 20 minutes, the reps may try to win doctors’ loyalty by helping them get better times on operating room schedules or easier patient referrals to hospital-based specialists. The sales reps can also carry messages back to the hospital, like a doctor’s request for a new medical device to be available in surgery.

While hospitals have always tried to woo doctors to refer patients to them, the institutions are growing more direct in their efforts. The hospitals mine data to see which doctors have the most profitable, well-insured patients, and then they assign those doctors to a sales rep.

HCA Inc., the nation’s largest for-profit hospital chain, has at least 150 employees who make physician visits – or about one per hospital, said spokesman Ed Fishbough.

Convinced the sales-call strategy is fueling higher admissions, Tenet Healthcare Corp., the nation’s third largest for-profit hospital chain, has doubled its sales force in the past two years. The company now has 152 “physician liaisons” at its 49 hospitals, most of which are in California, Texas and Florida.

About two-thirds of Tenet’s liaisons are former drug and device sales reps, and they can make tens of thousands of dollars in bonuses if doctors increase their referrals to the hospitals. “These people are really good and really assertive and very sophisticated,” said Stephen Newman, Tenet’s chief operating officer.

http://www.kaiserhealthnews.org/stories/2011/december/14/hospitals-adopt-drug-industry-sales-strategy.aspx?referrer=search

The for-profit hospital chains – HCA and Tenet – both infamous for prior ethical lapses, have instituted tarnished sales programs that are now being adopted by others, including the not-for-profit University of Chicago Medical Center. They are using “assertive” former pharmaceutical and medical device sales reps to siphon off the most profitable and best insured patients, by convincing physicians to change their hospital referral patterns.

This is not about making the best use of a region’s health care resources. This is about hospitals cherry picking the most lucrative physicians and their patients, while making other competing hospitals, which are often safety-net institutions, the victims of adverse selection. We are already witnessing the closure of some of these institutions because of the inability to meet their costs.

This strategy is working. Sales calls are fueling higher admissions. What does this say about the physicians who are complicit in this activity? Can we really expect them to support altruistic policies in support of more equitable health care in the community at large, when they are being offered lucrative opportunities to practice in a more physician-friendly environment?

Under a well designed single payer system, capital improvements would be based on regional planning and budgeted separately, providing the facilities and equipment appropriate for the needs of the community. Hospitals would be placed on global budgets, providing enough financial resources to fulfill their mission of health care. Passive investors would be removed by eliminating for-profit ownership of hospitals. This would change the hospitals’ primary mission of making the greatest profit that the market will bear, to one of simply serving the health care needs of the community.

A comment from a recent Quote of the Day on the social consequences of segregation of the affluent (Nov. 25) seems to be very appropriate here. I wrote, “As the more affluent members of our society continue to concentrate themselves in their upscale neighborhoods, they take our resources with them, including some of the best of our health care services. Not only do they leave behind fewer resources for low- and moderate-income families, they also leave behind the political will to do something about it.”