PNHP

The Milliman Medical Index ($19, 393) in perspective

The Milliman Medical Index ($19, 393) in perspective

2011 Milliman Medical Index

Milliman
May 2011

The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider plan (PPO).

2011 cost is $19,393 (an increase of $1,319, or 7.3% over 2010)

83.1% – Actuarial value of an employer-sponsored PPO

Relative proportions of medical costs

59% ($11,385) – Employer contribution
24% – ($4,728) – Employee contribution
17% – ($3,280) – Employee out-of-pocket

http://publications.milliman.com/periodicals/mmi/pdfs/milliman-medical-index-2011.pdf

Under the Affordable Care Act (ACA) the largest sector of health care coverage – employer-sponsored plans – remains relatively unchanged. The Milliman Medical Index is a measure of health care costs in the employer-sponsored plan sector, so it is important to understand what the number – $19,393 – really means.

In 2011, $19,393 is the average amount paid for health care for a family of four insured by an employer-sponsored preferred provider organization (PPO). Keep in mind that this large sector is composed of members of the relatively healthy workforce and their young healthy families. It represents what we are paying for health care in the best of circumstances.

It is important to understand that the $19,393 is only the amount paid for actual health care and does not include the administrative costs of the insurers or the employers. It does not include the 15 or 20 percent of the premium that the insurer would consume under the ACA guidelines. However, the $19,393 does reflect the discounts that the PPO receives by contracting with the various providers, so list prices are not taken into consideration.

Milliman does split the costs into 1) the employer contribution to costs paid through insurance (which is not the same as the premium, as explained above), 2) the employee contribution to costs paid through insurance (ditto), and 3) the employee contribution to costs paid out-of-pocket (including deductibles, coinsurance, and co-payments).

Thus the employees’ average payment for actual health care costs is about $8000 or 40 percent of total average health care spending for a family of four. Yet these plans are better than the gold plans under ACA since they have an actuarial value of 83 percent (the insurance pays an average of 83 percent of the costs). Under ACA, most will purchase plans with actuarial values of 60 or 70 percent, so the patient will be responsible for even more of the costs (albeit with inadequate subsidies).

When you consider that the median household income is $50,221 (2009), $8000 is quite a bite out of the household budget, but most economists don’t buy this number. They calculate the employer contribution as having been paid by the employee in forgone wage increases. So it is the employee who is actually paying the full $19,393 in health care costs, plus the expenses consumed by the insurers that don’t appear in this number. Though an apples to oranges comparison, $20,000 in family health care costs and $50,000 median household income are not a dire prediction for the future. Those are today’s numbers!

In a society in which we have expanded the ongoing transfer of wealth up to the top of the chain, the only way we are going to be able to pay this staggering bill is through progressive financing. Middle-income individuals and families are no longer able to pay for their proportionate share of health care. We can do this simply, equitably, efficiently and transparently through the tax system (a tax-financed single payer system), or we can attempt to do it through a fragmented, inequitable, expensive, opaque, complex maze of private and public plans (ACA), acknowledging that we’ll fall far short of covering everyone while threatening hard working, middle-income Americans with financial hardship should they need health care.

So why isn’t this in the forefront of the national dialogue on health care spending? Do we really want the debate to be over slashing Medicare? That framing of the problem is getting us nowhere. Do we continue to let them control the framing as we stand on the sidelines taking potshots? Or do we finally take over the framing and debate the real issues that concern all of us? It’s our choice.

Clarification

In today’s message on the Milliman Medical Index, I stated, “Though an apples to oranges comparison, $20,000 in family health care costs and $50,000 median household income are not a dire prediction for the future. Those are today’s numbers!”

The “apples to oranges” referred especially to two issues: 1) the family of four with an employer-sponsored PPO is not necessarily the same as a median household, and 2) $11,385 in health care paid by the employer, according to the view of most economists, should be added to the household income, but to the household income of the family of four with an employer-sponsored PPO (a number that I don’t have) and not to the median household with an income of $50,221.

The numbers are still valid.

The average costs of health care, with insurance administrative costs added, is about $20,000 for a four person family in the workforce.

Median household income is about $50,000.

You can adjust these numbers all you want to try to align them better (sort apples from oranges), but you will still end up with the fact that middle-income Americans need more help with their health care costs.

Nine states appeal federal rule limiting health insurers' profits

By Julie Appleby, Kaiser Health News
McClatchy Newspapers, May 10, 2011

WASHINGTON — In a move that could absolve health insurers of paying more than $95 million in consumer rebates, nine states are pressing for relief from a federal rule limiting insurers’ profits and administrative costs.

State regulators say they fear insurers would flee their markets and leave some individuals without coverage options if the rule isn’t eased. But consumer groups say there’s little evidence insurers would bail out.

If the rule is relaxed, “the end impact will be to deny consumers the millions in rebates they expect to get on this year’s premiums,” says Carmen Balber, Washington director of the advocacy group Consumer Watchdog.

Under the 2010 federal health law, insurers must spend at least 80 percent of premium revenues on medical costs or quality improvements; the remainder can go toward administrative costs, sales commissions and profits. Plans that fail to meet the standard must pay rebates to policyholders.

Many health plans, but not all, already meet that target. Data provided by states seeking to relax the rule show a wide range of spending on medical care: Several insurers spend only slightly more than half of their premium revenues on care. Potential rebates across the nine states total more than $95 million for policies in effect this year.

The Department of Health and Human Services is expected to rule soon on requests from New Hampshire and Nevada to ease the rule. Other states that have applied are Florida, Kentucky, Louisiana, North Dakota, Georgia, Kansas and Iowa.

The spending requirement, called the “medical loss ratio,” applies to all health plans, except those offered by self-insured employers. However, the exceptions sought by the states would affect only individual policies bought by people who don’t get coverage through their jobs. Nationwide, more than 18 million Americans purchase their own policies.

As many as 9 million Americans with individual policies and in group plans could be eligible for rebates, according to government estimates.

HHS already has approved Maine’s request to lower the target to 65 percent for each of the next three years. The state’s second-largest insurer — MegaLife, a subsidiary of HealthMarkets — had threatened to withdraw if the target isn’t reduced. The insurer, projected to spend 68 percent of its revenues on medical care this year, was facing an estimated $1.9 million in rebates to policyholders.

HHS officials said they granted Maine’s request because a pullout by MegaLife could have forced up to 13,700 policyholders to go uninsured or buy coverage from the other two insurers, which sell policies that are more comprehensive, but also much more expensive.

The insurance industry says the 80 percent rule, which went into effect in January, was adopted too quickly and that insurers should be allowed to ramp up over three years. By “going into effect overnight this year, it has the potential for some significant unintended consequences, including driving plans out of the marketplace,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.

But Balber counters that most insurers can already meet the standard and that the regulation will prod the rest to hold down costs. “Insurers can address this in a very simple way, by lowering premiums,” she said.

In deciding whether to lower the target in some states, the administration will weigh how many insurers might leave a market, how many people would be affected and whether policyholders have other options, such as special insurance pools for people with health problems, says Steven Larsen, deputy administrator of the Center for Consumer and Insurance Oversight at HHS.

He says deciding on the states’ requests is a balancing act: While insurers should be pushed to spend more on medical care, it “might not be in consumers’ best interest” to drive them out of the marketplace.

Because of that, some analysts predict that the administration will grant most of the states’ requests.

“The last thing the Obama administration wants is the Des Moines Register writing about 500 people who lost their health insurance in Iowa because of the Obama health plan,” says Robert Laszewski, a consultant to the health care industry and a former insurance executive.

While each state has its own issues, officials have some common concerns. They fear the threat of rebates will cause insurers to pull out of their markets, stop writing new policies, cut sales commissions for agents — or all three.

In Florida, officials want the target set at 65 percent of revenues for three years. Of the 21 insurers that sell individual policies, nine reported they expect to spend less than 80 percent on medical care and quality this year. Based on those reports, state officials estimate those insurers would owe at least $25 million in rebates to consumers, under the current rule.

Analyst Carl McDonald of Citi Investment Research wrote in a recent report that Florida’s request looks weak because “none of the six largest plans in the state will drop out” as a result. But if the requirement is softened, he says, it will boost insurers’ earnings. He suggested that HHS will take a lenient approach: If Florida is approved, “it’s hard to think of a situation where HHS doesn’t grant a waiver.”

In Georgia, regulators have asked for targets of 65 percent this year, 70 percent next year and 75 percent in 2013.

At least five of the 18 insurers included in the state’s request estimate they will spend less than 60 percent of their revenue on medical care and quality this year. Rebates could total more than $33 million this year without a waiver.

In its filing, Georgia officials say nearly 29 percent of the 344,000 people in the state who buy their own policies are in plans offered by insurers that might leave the state without an adjustment. Like some of the other states, Georgia does not have a high-risk pool, meaning there would be little choice for people with medical problems. A federal pool is available, but consumers would have to be uninsured for six months before qualifying, leaving them “at substantial financial and medical risk,” the filing says.

(Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn’t affiliated with Kaiser Permanente.)

http://www.mcclatchydc.com/2011/05/10/113996/nine-states-appeal-federal-rule.html

Obama Health Law Unlikely to Stem Medical Bankruptcies

By Steffie Woolhandler and David Himmelstein
CommonDreams, May 11, 2011

When President Obama kicked off his health reform push, he highlighted our research finding that 2 million Americans suffer medical bankruptcy each year, promising to end this disgrace. Our latest figures warn that his reform won’t stanch the flow of medical debtors.

The Affordable Care Act (ACA) passed by Congress in March 2010 was modeled after Massachusetts’ 2006 health reform plan – a plan that’s now been up and running for more than three years. So Massachusetts offers a preview of what to expect when the ACA is fully implemented in 2014.

Unfortunately, medical bankruptcies haven’t dropped much – if at all – in Massachusetts. When we surveyed bankruptcy filers there in August 2009, 53 percent cited illness or medical bills as a cause of their bankruptcy, a percentage that’s statistically indistinguishable from the 59 percent figure we found in early 2007. Indeed, because the total number of bankruptcies soared in 2009, the actual number of medical bankruptcies increased from 7,504 in 2007 to 10,093 in 2009.

Why are so many people still suffering medical bankruptcies despite Massachusetts’ health reform? While only 4 percent of the state’s residents remain uninsured, much of the new coverage is so skimpy that serious illness leaves families with crushing medical bills.

For instance, the cheapest (and most commonly purchased) coverage available to a 56-year-old Bostonian through the state’s health insurance exchange costs $5,616. Yet, if you’re sick the policy doesn’t start paying bills until you’ve paid a $2,000 deductible. And even after that you’re responsible for 20 percent of the next $15,000 in medical expenses.

Little wonder that many insured families hit by illness are pushed over the edge financially by the double whammy of lost income and medical bills; 89 percent of Massachusetts families who suffered medical bankruptcy had coverage.

The insurance required under the federal ACA is no better than Massachusetts’ bare-bones plans. And as employers emulate this inadequate coverage, the race to the bottom leaves an increasing number of Americans UNDER-insured. Public workers are just the latest group to see their coverage downsized. What used to be called “health insurance” is now labeled “Cadillac coverage” – and reserved for those who drive Mercedes.

Because the ACA left private insurers in charge, it can’t offer Americans real protection against financial disaster due to illness. Too much is squandered on insurers’ overhead and the bloated bureaucracy they impose on patients, doctors and hospitals. Hence, even if reform works as planned, millions of families will continue to purchase private insurance in good faith, only to discover, too late, that it’s a defective product – an umbrella that melts in a downpour.

And the administration is weakening the modest consumer protections the bill imposed on private plans. It’s waived the minimum coverage standards for 1,040 plans covering 2.6 million Americans, including thousands of McDonald’s workers whose insurance covers only $2,000 in medical expenses annually. (The worker pays a premium of $728 for this faux coverage.) Meanwhile, insurers in Maine have already been exempted from the ACA’s paltry requirement that they spend at least 80 percent of premiums on medical care, with eight more states in line for similar exemptions.

While the ACA can’t live up to its “affordable care” moniker, a single-payer reform could save $400 billion annually on administrative costs, enough to offer every American first-dollar, comprehensive coverage. While U.S. insurers fight tooth and nail against the 20 percent limit on overhead, Canada’s single-payer program runs for 1 percent. (U.S. Medicare’s overhead is 3 percent.) Bureaucratic savings are a key reason why Canada can cover everyone and provide care at least as good as that received by insured Americans, while spending half as much per capita as we do.

We’ve lectured at seminars attended by hundreds of U.S. bankruptcy judges, where our medical bankruptcy findings are greeted by nods of recognition and an avalanche of heart-wrenching anecdotes confirming our statistical findings. The reaction was quite different at a bankruptcy seminar in Toronto early this year. None of the Canadian judges in the room could recall a single case.

Dr. Steffie Woolhandler is a co-founder of Physicians for a National Health Program. She is professor of public health at the City University of New York and visiting professor of medicine at Harvard Medical School. She is also a primary care physician at Cambridge Hospital in Cambridge, Mass. She worked in 1990-91 as a Robert Wood Johnson Foundation health policy fellow at the Institute of Medicine and the U.S. Congress. Dr. Woolhandler is a frequent speaker and has written extensively on health policy. Dr. Woolhandler is a principal author of many PNHP articles published in the JAMA, the New England Journal of Medicine, and other professional journals. She has also testified before Congress numerous times.

Dr. David Himmelstein is a co-founder of Physicians for a National Health Program, co-edits PNHP’s newsletter and is a principal author of PNHP articles published in the JAMA and the New England Journal of Medicine in conjunction with Dr. Steffie Woolhandler. He is professor of public health at the City University of New York and associate professor of medicine at Harvard Medical School. He serves as the chief of the division of social and community medicine at Cambridge Hospital where he practices primary care internal medicine, and also serves as co-director of the Center for National Health Program Studies at Cambridge Hospital/Harvard Medical School.

http://www.commondreams.org/view/2011/05/11-6

We all pay for health care, single payer advocates tell City Club

By BENNETT HALL
Corvallis (Ore.) Gazette-Times, May 10, 2011

CORVALLIS, Ore. — After years of fighting for single-payer health care, Dr. Paul Hochfeld is trying to change the terms of the debate. These days, he favors the label “publicly funded” instead.

Both mean the same thing, the Corvallis emergency room physician said. But opponents of a government-financed health care system have succeeded in pushing single payer to the fringe of the health care reform discussion by stoking fears of socialized medicine.

“We believe the people who most need to listen to us talk about the health care conundrum don’t come because they think we’re wacko,” Hochfeld said. “It’s easy to be marginalized.”

Hochfeld and Dr. Mike Huntington, a retired radiation oncologist, were the guest speakers at Monday’s meeting of the Corvallis City Club. Both are members of Physicians for a National Health Program and are co-founders of the Mad As Hell Doctors, a touring group that tries to keep single payer in the public consciousness by organizing town hall-style rallies around the country.

They both played an active role in promoting House Bill 3510, an Oregon single-payer proposal that “got a very cordial hearing and then died in committee,” as Huntington put it.

Despite all the setbacks, however, they’re still convinced that single payer — or publicly funded — health care is the only approach that can solve the twin problems of rising costs and diminishing access to care.

Part of the problem, they argued, is a financing system that divides people up into multiple risk pools. Even with the new federal health reforms, many of the oldest and sickest Americans will still be covered by taxpayer-funded programs such as Medicare, Medicaid, the Indian Health Service and Veterans Affairs, leaving younger and healthier populations to private insurers.

“It’s estimated that we could save 15 to 20 percent of all health care costs if we put everybody in the same risk pool and paid for it with public money,” Hochfeld said.

But they also faulted the U.S. health care delivery system for relying on a profit-driven fee-for-service model that keeps people from seeking treatment until minor ailments have ballooned into major illnesses. That results in higher overall costs, excessive reliance on high-tech diagnostic equipment, overmedication — and worse outcomes for patients.

In an effort to bring the health care crisis a little closer to home for the audience, Huntington divided national statistics by the combined population of Corvallis and Albany to estimate the local impact of soaring insurance premiums and out-of-pocket costs.

Based on those numbers, he said, it’s reasonable to assume that 12 mid-valley residents died due to a lack of health insurance in 2009, while another 224 were forced into bankruptcy.

“Twenty percent of the population accounts for 80 percent of the health care costs,” Huntington said. “Each of us is only one illness away from bankruptcy.”

In response to a question about how to get involved in the fight for single payer, Huntington urged audience members to become better informed, take a public stand — and maybe even take to the streets, like the pro-democracy protesters in the Middle East.

“Become an Egyptian,” he said. “Stand with a sign on the street corner. It may take that.”

http://www.gazettetimes.com/news/local/article_673ba352-7ad8-11e0-9562-001cc4c03286.html

Risk adjustment

Risk Adjustment Under the Affordable Care Act: A Guide for Federal and State Regulators

By Mark A. Hall
The Commonwealth Fund, May 2011

Abstract

To achieve the aims of the Affordable Care Act, state and federal regulators must construct an effective system of risk adjustment, one that protects health insurers that attract a disproportionate share of patients with poor health risks. This brief, which summarizes a Commonwealth Fund–supported conference of leading risk adjustment experts, explores the challenges regulators will face, considers the consequences of the law’s risk adjustment provisions, and analyzes the merits of different risk adjustment strategies. Among other recommendations, the brief suggests that regulators use diagnostic rather than only demographic risk measures, that they allow states some but limited flexibility to tailor risk adjustment methods to local circumstances, and that they phase in the use of risk transfer payments to give insurers more time to predict and understand the full effects of risk adjustment.

Conclusion

The Affordable Care Act presents an opportunity to make the health care system more accessible and affordable, especially for patients with preexisting or chronic health conditions. But accomplishing health reform’s goals requires effective risk adjustment to ensure that the highly skewed distribution of medical costs across any population does not destabilize insurance markets by favoring some insurers over others. Although risk adjustment may be the thickest of technocratic regulatory weeds, wading into this thicket is critical if insurance reforms are to succeed.

http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/May/1501_Hall_risk_adjustment_ACA_guide_for_regulators_ib.pdf

Comment: 

By Don McCanne, MD

Private health insurers, as businesses competing in the marketplace, have a responsibility to maximize profits and to maintain a competitive edge by offering insurance products with lower premiums. The surest way to do both is to enroll as many healthy individuals as possible while avoiding patients who have or may develop expensive health problems.

In a fragmented system of financing health care dependent on a multitude of private insurers, such as we have under the Patient Protection and Affordable Care Act, it is essential that policies be established to prevent insurers from basing their success on their ability to defeat the very purpose of insurance, which is to equitably shift the costs of health care from the few with greater health care needs to the many with fewer needs.

For an equitable, multi-payer health care financing system that theoretically covers everyone, not only must each insurer pool risks within their respective insurance pools, but regulators must have tools to redistribute funds from those pools comprised of mostly healthy individuals to those pools that have enrolled sicker patients who require more expensive care. This process of transferring funds from healthier pools to sicker pools is known as risk adjustment.

This twelve page Commonwealth Fund brief by Mark Hall is an excellent primer for trying to understand the processes and deficiencies of risk adjustment. Without going into any of the details, on reading this primer the conclusion can be reached that there are a multitude of opportunities for private insurers to game the system, and game it they will. We’re not talking about crooks. We’re talking about private businesses that have a duty to gain a competitive edge by exercising whatever innovations will give them that edge.

Although an inventory of gaming opportunities cannot possibly be provided in this comparatively brief message, a single example can demonstrate this problem.

One tool for adjusting risk is to use the diagnostic codes of the patients in the insurance pool. As the Commonwealth brief states, “Using diagnostic information will likely lead to some degree of upcoding (i.e., increased identification of higher-cost conditions), but some degree of increased diagnostic coding is desirable in order to correct for inaccurate or undercoding.”

Because of both patient confidentiality and the need to protect proprietary information, the coding is done by the insurer. Upcoding is a given since it rewards the insurer with transfers from pools with healthier diagnostic codes, but can you believe that the insurer would ever allow its employees to undercode?

Risk adjustment is important when risk is borne by third parties in multiple, fragmented pools. What would happen in a single payer system? Risk would be borne solely by the government, obviating the need for risk adjustment between pools.

That was the way Medicare worked until private Medicare Advantage plans were introduced. Although risk adjustment mechanisms have been introduced for these private plans, the insurers undoubtedly find ways to enroll the healthy while reporting them as being sick so that they benefit from risk adjustment.

Why have we not been apprised of this scandal? It is difficult for CMS to audit confidential, proprietary information that may have been manipulated in a manner that covers the trails that lead to results benefiting the insurers, especially when CMS is swamped with other work and is funded by austere budgets.

So this is one more reason to switch to an improved Medicare that covers everyone. It eliminates the need to attempt to accomplish the nearly impossible task of accurately adjusting for risk – a totally unnecessary task simply because the single government payer would bear all of the risk.

Cut Medicare? No Way! Make It 'Medicare for All'!

By John Nichols
The Nation, May 10, 2011

House Budget Committee chair Paul Ryan, R-Wisconsin, proposes to undermine the integrity of the Medicare and Medicaid programs, with an eye toward enriching the insurance companies that so generously fund his campaigns.

The American people are not amused. They have sent a clear signal that they want to maintain Medicare and Medicaid.

And rightly so. despite the battering they have taken from misguided and malignant policy makers, the Medicare and Medicaid programs still provide the rough outlines for a single-payer health care program that keep costs down while expanding access to prevention and treatment for millions of Americans.

So, instead of gutting Medicare, as Ryan proposes, why not expand on what works.

That’s what Vermont Senator Bernie Sanders is proposing.

“The United States is the only major nation in the industrialized world that does not guarantee health care as right to its people. Meanwhile, we spend about twice as much per capita on health care with worse results than others that spend far less,” Sanders explained Tuesday, as he announced plans to introduce the American Health Security Act of 2011, would provide federal guidelines and strong minimum standards for states to administer single-payer health care programs. “It is time that we bring about a fundamental transformation of the American health care system. It is time for us to end private, for-profit participation in delivering basic coverage. It is time for the United States to provide a Medicare-for-all single-payer health coverage program.”

Sanders’ plan is the right response to America’s health-care crisis — and any country where tens of millions of citizens lack health-care coverage, where tends of millions more lack adequate coverage and where costs are skyrocketing because of insurance-company profiteering has a crisis.

Don’t get the independent senator wrong. He voted for the health-care reform legislation that passed Congress last year and that was signed by President Obama. He even improved that legislation by fighting to include funding for public-health programs and community clinics.

But Sanders also recognizes flaws in the 2009 reform — which, reformers note, keeps the for-profit private health insurance industry at the center of the U.S. health system. And the senator argues that the ultimate cure for what ails American health care is a “Medicare for All” approach that ends the profiteering and focuses on prevention and treatment of disease.

And he is not alone.

Congressman Jim McDermott, the Washington Democrat who has for two decades been one of the House’s steadiest backers of real health-care reform, will introduce a parallel bill in that chamber. Says McDermott:  “The (2010)  health care law made big progress towards covering many more people and finding ways to lower cost. However, I think the best way to reduce costs and guarantee coverage for all is through a Single-payer system like Medicare. This bill does just that – it builds on the new health care law by giving states the flexibility they need to go to a single-payer system of their own. It will also reduce costs, and Americans will be healthier.

The Sanders-McDermott initiative in Washington, DC, comes as the Vermont Legislature has taken steps to make the senator’s homestate the first in the nation to develop what advocates desctibe as a state-based variation on the single-payer approach. Vermont. Sanders applauds the move, and thinks it could serve as a national model. Others agree, while noting that Medicare provides another model.

Sanders and McDermott were joined at the announcement of their new “Medicare for All” push by Arlene Holt Baker, executive vice president of the AFL-CIO; Jean Ross, co-president of the National Nurses United; and Greg Junemann, president of the International Federation of Professional and Technical Engineers. All three groups are encouraging this fight for real reform.

“Providing a single standard of high quality care for all is a priority for registered nurses who have seen their abilities to act as patient advocates made more difficult as for-profit interests control more patient care decisions,” says Ross,whose union has been in the forefront of the fight for single-payer. “We commend Senator Sanders and Representative McDermott for their vision and passion to help registered nurses create a more just healthcare system through the American Health Security Act and applaud our brother and sisters in labor for their support,”

Physicians for a National Health Program, the movement of doctors and medical students for real reform, welcomed the national legislation.

“At a time when the airwaves are filled with talk about cutting or even ending Medicare,” said Dr. Garrett Adams, PNHP president, “Senator Sanders has boldly stepped forward with the seemingly paradoxical proposition that the best way to financially strengthen the Medicare program is to upgrade it and expand it to cover everyone.”

http://www.thenation.com/blog/160572/cut-medicare-no-way-make-it-medicare-all

Risk adjustment

Risk Adjustment Under the Affordable Care Act: A Guide for Federal and State Regulators

By Mark A. Hall
The Commonwealth Fund, May 2011

Abstract

To achieve the aims of the Affordable Care Act, state and federal regulators must construct an effective system of risk adjustment, one that protects health insurers that attract a disproportionate share of patients with poor health risks. This brief, which summarizes a Commonwealth Fund–supported conference of leading risk adjustment experts, explores the challenges regulators will face, considers the consequences of the law’s risk adjustment provisions, and analyzes the merits of different risk adjustment strategies. Among other recommendations, the brief suggests that regulators use diagnostic rather than only demographic risk measures, that they allow states some but limited flexibility to tailor risk adjustment methods to local circumstances, and that they phase in the use of risk transfer payments to give insurers more time to predict and understand the full effects of risk adjustment.

Conclusion

The Affordable Care Act presents an opportunity to make the health care system more accessible and affordable, especially for patients with preexisting or chronic health conditions. But accomplishing health reform’s goals requires effective risk adjustment to ensure that the highly skewed distribution of medical costs across any population does not destabilize insurance markets by favoring some insurers over others. Although risk adjustment may be the thickest of technocratic regulatory weeds, wading into this thicket is critical if insurance reforms are to succeed.

http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/May/1501_Hall_risk_adjustment_ACA_guide_for_regulators_ib.pdf

Private health insurers, as businesses competing in the marketplace, have a responsibility to maximize profits and to maintain a competitive edge by offering insurance products with lower premiums. The surest way to do both is to enroll as many healthy individuals as possible while avoiding patients who have or may develop expensive health problems.

In a fragmented system of financing health care dependent on a multitude of private insurers, such as we have under the Patient Protection and Affordable Care Act, it is essential that policies be established to prevent insurers from basing their success on their ability to defeat the very purpose of insurance, which is to equitably shift the costs of health care from the few with greater health care needs to the many with fewer needs.

For an equitable, multi-payer health care financing system that theoretically covers everyone, not only must each insurer pool risks within their respective insurance pools, but regulators must have tools to redistribute funds from those pools comprised of mostly healthy individuals to those pools that have enrolled sicker patients who require more expensive care. This process of transferring funds from healthier pools to sicker pools is known as risk adjustment.

This twelve page Commonwealth Fund brief by Mark Hall is an excellent primer for trying to understand the processes and deficiencies of risk adjustment. Without going into any of the details, on reading this primer the conclusion can be reached that there are a multitude of opportunities for private insurers to game the system, and game it they will. We’re not talking about crooks. We’re talking about private businesses that have a duty to gain a competitive edge by exercising whatever innovations will give them that edge.

Although an inventory of gaming opportunities cannot possibly be provided in this comparatively brief message, a single example can demonstrate this problem.

One tool for adjusting risk is to use the diagnostic codes of the patients in the insurance pool. As the Commonwealth brief states, “Using diagnostic information will likely lead to some degree of upcoding (i.e., increased identification of higher-cost conditions), but some degree of increased diagnostic coding is desirable in order to correct for inaccurate or undercoding.”

Because of both patient confidentiality and the need to protect proprietary information, the coding is done by the insurer. Upcoding is a given since it rewards the insurer with transfers from pools with healthier diagnostic codes, but can you believe that the insurer would ever allow its employees to undercode?

Risk adjustment is important when risk is borne by third parties in multiple, fragmented pools. What would happen in a single payer system? Risk would be borne solely by the government, obviating the need for risk adjustment between pools.

That was the way Medicare worked until private Medicare Advantage plans were introduced. Although risk adjustment mechanisms have been introduced for these private plans, the insurers undoubtedly find ways to enroll the healthy while reporting them as being sick so that they benefit from risk adjustment.

Why have we not been apprised of this scandal? It is difficult for CMS to audit confidential, proprietary information that may have been manipulated in a manner that covers the trails that lead to results benefiting the insurers, especially when CMS is swamped with other work and is funded by austere budgets.

So this is one more reason to switch to an improved Medicare that covers everyone. It eliminates the need to attempt to accomplish the nearly impossible task of accurately adjusting for risk – a totally unnecessary task simply because the single government payer would bear all of the risk.

Vermont Passes Universal Healthcare Plan

By Emily P. Walker
MedPage Today, May 6, 2011

WASHINGTON — The Vermont legislature has passed a bill to create a publicly funded health care system that aims to provide coverage to every Vermont resident by 2017.

The measure — which was originally touted as a single-payer plan, but has since been renamed a “universal and unified health system” — passed the Vermont House of Representatives on Thursday, after passing the state’s Senate last week. It now goes to Vermont Gov. Peter Shumlin, a Democrat, who is eager to sign it.

The bill enacts the state’s health insurance exchange, which is mandated under the Affordable Care Act (ACA). Vermont envisions that its exchange — which will go into effect starting Jan. 1 2014 — will be called Green Mountain Care and will eventually become a publicly financed plan available to all residents in the state.

However, residents don’t have to enroll in Green Mountain Care (but they do have to have insurance under the ACA). They can keep the insurance they have now, or they can enroll in Green Mountain Care and buy supplemental insurance from private health insurers.

The single-payer advocacy group Physicians for a National Health Program (PNHP) has said the plan is not a true single-payer model because it still allows a role for private insurance companies, and patients would continue to face copayments for medical treatments.

“We appreciate the enthusiasm for progressive health reform shown by Gov. Shumlin and the many dedicated single-payer supporters in Vermont,” the PNHP board said in a statement when Shumlin unveiled the legislation. “However, it is important to note that the bill passed by the Vermont House falls well short of the single-payer reform needed to resolve the health care crisis in that state and the nation.”

It’s not yet clear how the bill will be paid for.

http://www.medpagetoday.com/Washington-Watch/Reform/26337?pfc=101&spc=224

Vermont closer to universal health care

By Wendell Potter
Tucson Sentinel, May 9, 2011

While several states are suing the federal government to block health care reform and dragging their feet on implementing any part of it, Vermont this week will be taking a giant leap in the other direction—toward universal coverage and greater cost control—when Gov. Peter Shumlin signs legislation putting the state on the path toward a single-payer health care system.

The Vermont House last week voted 94-49 to approve legislation that has been years in the making. The Senate approved the measure a few days earlier. While it will not establish a government-run system right away, work will begin almost immediately to lay the groundwork to create a state health plan—called Green Mountain Care—that could be up and running as early as 2014.

Ironically, one of the reasons the state could not move any faster is because the federal health care reform law enacted last year will not allow it. In fact, the Affordable Care Act doesn’t permit states to do anything as far-reaching as what Vermonters want to do until 2017—although legislation has been introduced in Congress to move that date up by three years.  So Vermont lawmakers—with a lot of help from Shumlin’s office—had to craft a bill that wouldn’t run afoul of the feds but that would put the Green Mountain State on course for single-payer sooner rather than later.

Many hurdles remain—not the least of which is overcoming intense opposition from the health insurance industry and its corporate and political allies in the years ahead. For now, though, Vermont has done something no other state has been able to do.

To some extent, the stars simply aligned to make it happen. Democrats control both chambers of the Legislature, and Shumlin—himself a Democrat —was a vocal supporter of single payer during his campaign last year.

Single-payer missionaries

But while there is plenty of credit to go around (or blame, depending on your point of view), Shumlin undoubtedly would not have a bill to sign—and might not even be in the governor’s office— were it not for the tireless work of a couple of determined women, Dr. Deborah Richter and Dr. Ellen Oxfeld.

I met both of these 50-something women when I was in Vermont earlier this year just as the Legislature was beginning to hold hearings on the bill. It didn’t take me long to see why Vermont was getting so close to making history.

Richter, a medical doctor, has spent years not only seeing patients but studying and writing about health care issues. Oxfeld, a professor of anthropology at Middlebury College, is more of an organizer and activist. They’re both good storytellers and single-payer missionaries.

Richter told me about how angry and helpless she had often felt seeing the health of many of her patients deteriorate because they couldn’t afford health insurance. In many cases her patients were considered uninsurable—they couldn’t buy coverage at any price because of preexisting conditions. Several of her patients died because they simply could no longer afford the level of care she knew they needed.

She had many sleepless nights because of what happened—or didn’t happen—to even some of her youngest patients. Two of her patients were siblings who had juvenile diabetes, a manageable disease if treated early. This brother and sister were not so fortunate, however, because they did not have health insurance. The young man went blind and died soon after his 21st birthday because of an infection. His sister died at 25 of a heart attack not long after giving birth to a premature baby; the baby also died. 

This brother and sister were patients of Richter’s when she worked at a clinic in Buffalo, N.Y. She decided while there to join Physicians for a National Health Program (PNHP), an organization that has long advocated for a single-payer system. She ultimately would serve a term as president of the group.

It soon became clear to her, however, that advancing the cause of reform in New York would be far more difficult than it might be in a smaller state, so she moved her family and practice to Vermont 12 years ago. Since then she has made hundreds of presentations at all kinds of forums, from town halls to Chambers of Commerce to House and Senate hearings.

Oxfeld got involved in the single-payer movement from a sense of social justice. She has traveled the world with her husband, Frank Nicosia, a professor at the University of Vermont. She has seen how other countries with single-payer systems do a much better job than the United States in making sure their citizens get the care they need.

Richter and Oxfeld teamed up a few years ago in an effort to spread the gospel of single payer health care and convince political candidates to embrace it. One of their converts was candidate Peter Shumlin. When Shumlin promised to work with the Legislature on enacting a single-payer bill, Richter and Oxfeld began working night and day to help get him elected.

The women wish their dream could come true much earlier. They were not happy with some of the amendments that were attached to the bill. And they know the insurance industry will do all it can next year to replace the Democrats who voted for the measure with Republicans who will seek to repeal it. But they’ll take this victory and continue to fight until every Vermonter is enrolled in Green Mountain Care. I’m confident they will be standing near the governor when he signs the bill into law this week.

Wendell Potter, a senior analyst at the Center for Public Integrity and a former insurance company executive, is the author of “Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans.”

http://www.tucsonsentinel.com/opinion/report/050911_potter_vermont_healthcare/vermont-closer-universal-health-care/

Sanders/McDermott single payer American Health Security Act of 2011

Single-Payer, Medicare-for-All Legislation Introduced

Senator Bernie Sanders
May 10, 2011

Sen. Bernie Sanders (I-Vt.) announced today that he introduced legislation to provide health care for every American through a Medicare-for-all type single-payer system.
 
Rep. Jim McDermott (D-Wash.) filed a companion bill in the House to provide better care for more patients at less cost by eliminating the middle-man role played by private insurance companies that rake off billions of dollars in profits.
 
The twin measures, both called the American Health Security Act of 2011, would provide federal guidelines and strong minimum standards for states to administer single-payer health care programs.
 
“The United States is the only major nation in the industrialized world that does not guarantee health care as right to its people,” Sanders said at a press conference on Capitol Hill. “Meanwhile, we spend about twice as much per capita on health care with worse results than others that spend far less. It is time that we bring about a fundamental transformation of the American health care system. It is time for us to end private, for-profit participation in delivering basic coverage. It is time for the United States to provide a Medicare-for-all single-payer health coverage program.”   
 
McDermott said, “The new health care law made big progress towards covering many more people and finding ways to lower cost. However, I think the best way to reduce costs and guarantee coverage for all is through a single-payer system like Medicare. This bill does just that – it builds on the new health care law by giving states the flexibility they need to go to a single-payer system of their own. It will also reduce costs, and Americans will be healthier.”

http://sanders.senate.gov/newsroom/news/?id=47d632b8-4a43-4d2b-b500-cb2c105e93ef

American Health Security Act of 2011:
http://thomas.gov/ (select bill number and insert S.915 or H.R.1200)

And…

Doctors’ group greets single-payer health bill in Senate

Physicians for a National Health Program
May 10, 2011

Physicians for a National Health Program says Sen. Bernie Sanders’ American Health Security Act would go far beyond federal health law, slash bureaucracy and lay the basis for universal, high-quality care.

https://pnhp.org/news/2011/may/doctors-group-greets-single-payer-health-bill-in-senate

Comment: 

By Don McCanne, MD

The single payer concept has not gone away. We really don’t have to accept the deficiencies of the Patient Protection and Affordable Care Act (PPACA): tens of millions uninsured, and under-insurance as the new standard. The low actuarial value plans being established by PPACA will create financial hardships for middle-income Americans who have significant health care needs.

What we do need is an America that understands what we can have in health care for everyone, but what we won’t be receiving if we simply sit back and let PPACA play out. It’s our job to get the word out.

Single payer health: it's only fair

U.S. health care is grossly distorted by waste and profit, while millions go uninsured. Americans deserve full universal coverage

By Bernie Sanders
Guardian, May 10, 2011

The United States is the only major nation in the industrialized world that does not guarantee health care as a right to its people. Meanwhile, we spend about twice as much per capita on health care and, in a wide number of instances, our outcomes are not as good as others that spend far less.
 
It is time that we bring about a fundamental transformation of the American health care system. It is time for us to end private, for-profit participation in delivering basic coverage. It is time for the United States to provide a Medicare-for-all, single payer health coverage program.
 
Under our dysfunctional system, 45,000 Americans a year die because they delay seeking care they cannot afford. We spent 17.6 percent of our GDP on health care in 2009, which is projected to go up to 20 percent by 2020, yet we still rank 26th among major, developed nations on life expectancy, and 31st on infant mortality. We must demand a better model of health coverage that emphasizes preventive and primary care for every single person without regard for their ability to pay.
 
It is certainly a step forward that the new health reform law is projected to cover 32 million additional Americans, out of the more than 50 million uninsured today. Yet projections suggest that roughly 23 million will still be without insurance in 2019, while health care costs will continue to skyrocket.
 
Twenty-three million Americans still without health insurance after health reform is implemented? This is unacceptable. And that is why, this week, Representative Jim McDermott and I are announcing the re-introduction of the American Health Security Act, recognizing health care as a human right and providing every U.S. citizen and permanent resident with health care coverage and services through a state-administered, single payer program.
 
Let’s face it: until we put patients over profits, our system will not work for ordinary Americans.
 
It is incomprehensible that drug companies still get away with charging Americans twice as much, or more, than citizens of Canada or Europe for the exact same drugs manufactured by the exact same companies. It is an outrage that insurers still often hike premiums 20 percent, 40 percent and 60 percent a year on individual policy holders; and some insurers still spend 40 cents of every premium dollar on administration and profits while lavishing multimillion-dollar payouts on their CEOs.
 
It boggles the mind that approximately 30 percent of every health care dollar spent in the United States goes to administrative costs, rather than to delivering care. We must do better. Taiwan, for example, spends only a little over 6 percent of GDP on health care, while achieving better health outcomes on some key indicators than we do; yet they spend a relative pittance on administrative costs.
 
I am very proud that my home state of Vermont is now taking big steps to lead the nation in health care by moving forward on a plan to establish a single payer health care system that puts the interests of patients over chasing profits. The American Health Security Act would make sure every state does the same – taking profits out of the equation by implementing a single payer system, but letting each state administer its own program, according to strict standards, in a way best suited to its needs.
 
The goal of real health care reform must be high-quality, universal coverage in a cost-effective way. We must ensure, to as great a degree as possible, that the money we put into health coverage goes to the delivery of health care, not to paper-pushing, astronomical profits and lining CEOs’ pockets.

Bernie Sanders is U.S. senator from the state of Vermont.
 
http://www.guardian.co.uk/commentisfree/cifamerica/2011/may/10/healthcare-congress

Doctors group greets single-payer health bill in Senate

Physicians for a National Health Program says Sen. Bernie Sanders’ American Health Security Act would go far beyond federal health law, slash bureaucracy and lay the basis for universal, high-quality care

FOR IMMEDIATE RELEASE
May 10, 2011

Contact:
Garrett Adams, M.D., president PNHP
Margaret Flowers, M.D., congressional fellow PNHP, margaret@pnhp.org
Mark Almberg, communications director PNHP, (312) 782-6006, cell: (312) 622-0996, mark@pnhp.org

A national doctors’ group welcomed the introduction in the Senate today of a single-payer health reform bill that it said moves in the direction of providing comprehensive care to everyone, reducing wasteful paperwork, reining in health costs, and delivering better medical outcomes.

This morning Sen. Bernie Sanders, I-Vt., announced the introduction of the American Health Security Act of 2011, S. 915, in the U.S. Senate. Significantly, at Sanders’ side for the announcement was Arlene Holt Baker, executive vice president of the AFL-CIO, among others.

“At a time when the airwaves are filled with talk about cutting or even ending Medicare,” said Dr. Garrett Adams, president of Physicians for a National Health Program, “Sen. Sanders has boldly stepped forward with the seemingly paradoxical proposition that the best way to financially strengthen the Medicare program is to upgrade it and expand it to cover everyone.”
 
Adams said that the improved-Medicare-for-all approach embodied in Sanders’ bill goes considerably beyond the Obama administration’s health law, which keeps the for-profit private health insurance industry at the center of the U.S. health system. This sacrifices universal coverage, efficiency and cost containment, he said.

“In contrast, Sanders’ legislation would cover nearly all 51 million people who currently lack coverage and improve benefits for everyone by eliminating co-pays and deductibles and restoring free choice of physician,” Adams said. “By slashing private insurance overhead and bureaucracy in doctors’ offices and hospitals, S. 915 would recapture about $400 billion annually that is currently wasted on unnecessary paperwork. That money, in turn, would be channeled back into high-quality clinical care.”

“Further, by using a single-payer system’s bargaining power, we would be able to negotiate lower prices for pharmaceuticals and other goods and services, allowing us to rein in rising health care costs,” he said.

Adams, a pediatric infectious disease specialist in Louisville, Ky., continued: “We are confident that Sen. Sanders’ bill will spur the drive for the only national reform that the evidence shows will work and that poll after poll shows the public supports.”
 
“To be sure, the bill can still be improved upon,” he said. “For example, the program should cover all residents of the United States, including undocumented immigrants. That’s the right thing to do and it’s also good medicine. Similarly, the bill should exclude for-profit hospitals and other investor-owned providers such as dialysis clinics from the new system. Research has shown for-profit institutions deliver inferior care at inflated prices.”

“That being said, the introduction of this bill is good news for the nation’s health,” he said. “We salute Sen. Sanders for his consistently outstanding leadership on this issue.”

Sanders, who serves on the Senate Committee on Health, Education, Labor and Pensions, is a longtime advocate of fundamental health reform. His bill draws heavily on single-payer legislation introduced by the late Sen. Paul Wellstone, D-Minn., in the early 1990s, and closely parallels similar legislation pending in the House, H.R. 1200, introduced by Rep. Jim McDermott, D-Wash. The program would be federally funded, but administered by the states.

Sanders is also working to get expedited waivers from the federal health law permitting states, including his home state of Vermont, to experiment with their own models of health reform.

A single-payer bill introduced by Rep. John Conyers Jr., D-Mich., H.R. 676, obtained 87 co-sponsors in the House during the last session. It has been reintroduced in the 112th Congress as the Expanded and Improved Medicare for All Act with the same bill number.

******

Physicians for a National Health Program (www.pnhp.org) is an organization of 18,000 doctors who support single-payer national health insurance, an improved Medicare for all. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.