PNHP

Drs. Claire Cohen and Marilyn Vaché on “Thinking Green”

Drs. Claire Cohen and Marilyn Vaché on “Thinking Green”

Longtime PNHP members Drs. Claire Cohen and Marilyn Vaché appeared on “Thinking Green,” a program of the New London Green Party on Connecticut Public Access Television, on January 11, 2022. They discussed the threat of for-profit entities in U.S. health care, from Medicare Advantage to the latest scam, Medicare Direct Contracting.

Dr. Cohen reminded us that commercial insurance companies “have their hand in the cookie jar and they’re leeching off the public’s money to make profit.”

For more information on Direct Contracting Entities, visit pnhp.org/StopDCEs.

California Single Payer: Lower Net Cost to Families

Summary: Last week saw the release of a tax plan to finance California’s single payer legislation, AB 1400. It was immediately attacked as a tax increase of $12,250 per family. Hey, wait, don’t premiums and cost-sharing disappear under single payer? Yes indeed! The typical family saves money. Health insurance guaranteed, with savings. And no more medical debt or bankruptcy.

ACA-11 Taxes to fund health care coverage and cost control, California Legislative Information, Jan. 5, 2022

This measure would impose … taxes at specified rates to fund comprehensive universal single-payer health care coverage … [under AB 1400]

(1) An annual excise tax … upon a qualified business … at a rate of 2.3 percent of the gross receipts … minus the first $2,000,000 in annual gross receipts.

(2) (A) A payroll tax … on every employer who pays … 50 or more resident employees … at a rate of 1.25 percent of wages or other compensation … [plus] 1 percent of wages or other compensation in excess of $49,900 per employee.

(3) (A) … a State Personal Income CalCare Tax:

  • $149,509 but not over $299,508 — 0.5% of the taxable income
  • $299,509 but not over $599,012 — 1% of the taxable income
  • $599,013 but not over $1,299,499 — 1.5% of the taxable income
  • $1,299,500 but not over $2,484,120 — 1.75% of the taxable income
  • $2,484,121 and above — 2.5% of the taxable income

California Considers Doubling its Taxes, Tax Foundation, Jan. 6, 2022, by Jared Walczak

A proposed constitutional amendment (ACA 11) in California would increase taxes by $12,250 per household …

Comment:

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

$12,250 per household in new taxes sounds like a lot. This plan includes a 2% payroll tax, a highly progressive income tax (starting at 0.5% at $150,000), and a business excise tax.

However — bottom line — the net savings for a typical middle-class family are highly attractive.

Currently, working families pay a lot for health care:

That’s $10,000, which under single payer disappears. Huge savings.

Plus, employers contribute $16,253 for premiums for family coverage. That high cost keeps wages low, so if it went away (the proposed payroll tax is about 90% lower), annual wages would rise by $10,000 or more.

Thus, for a working family, we’re into net financial gain territory.

And … the actual tax increase for a middle-class family would be way less than the $12,250 average. That’s because the tax plan relies on a very progressive income tax, $750 at $150,000 and really kicking in above $1 million in annual income.

Overall, single payer reduces costs for the vast majority of families, while providing guaranteed health care.

And: no more medical debts or bankruptcy. That’s a huge boost to financial security.

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

The Omicron surge makes the case for California’s single-payer healthcare proposal

By Rupa Marya, M.D.

There has never been a more urgent moment to reimagine healthcare. Two long years into the COVID-19 pandemic, more people are getting sick (thanks to Omicron) and staying sick (thanks to long COVID). A piece of legislation up for debate in the California Assembly on Tuesday, aiming to create single-payer healthcare in the state, couldn’t be more timely.

Assembly Bill 1400 would replace the state’s piecemeal approach to near-universal coverage with a system known as CalCare, making California the first state in the nation to adopt a unified government-funded approach to healthcare. The state would guarantee medical, dental, visual and long-term care for all Californians, regardless of age, employment, income level, marital status, documentation or tribal status. This could finally align our public health strategies, economic health and healthcare system.

The pandemic provides a powerful case study on the need for such an approach: More than 70% of the nation’s largest health insurers have ended their COVID treatment cost waivers, leaving even insured and vaccinated patients with potentially astronomical bills if they require treatment. And make no mistake, many people are going to need a lot of care. The Omicron variant of the coronavirus, responsible for the current surge, is infecting both the vaccinated and the unvaccinated, and we now know that even with mild illness, long COVID occurs in more than half of cases, with impacts across much of the body.

Without coverage like CalCare, this will be a recipe for the virus to go untreated or for patients to face financial ruin. Despite gains promised by the Affordable Care Act more than a decade ago, medical debt is still the leading cause of personal bankruptcy.

Rather than leaving individuals at risk like that, AB 1400 proposes to curb costs by eliminating administrative bloat and setting prices, which as the world’s fifth-largest economy, California can do. Further financing would come through new corporate and progressive taxation.

That’s the scale of systemic solution that is needed in this moment, because entire systems are suffering. As a hospital medicine physician at UC San Francisco, I am watching the pandemic crush our healthcare system and the people inside it, providers and patients alike. Since the beginning of the pandemic, more than 6 million people have had COVID in California alone, with a record half million cases added this last week thanks to Omicron. Beyond healthcare, look at the struggles for schools, travel and essential services.

A single-payer system will curb the influence of profit-seeking businesses that dominate the healthcare industry today. Too often, California’s pandemic response has been shaped not only by science but by healthcare executives protecting corporate interests. For example, elective surgeries have continued during surges to keep money flowing in, even though these procedures drain important pandemic resources and bring increased risk of virus spread in a hospital.

No wonder the U.S. spends more money on healthcare per person than any other country in the world, yet has the lowest life expectancy compared with 11 other comparable nations. Healthcare expenditure is soaring because of higher administrative costs, not better or more services. Even nonprofit systems such as Kaiser have been accused of controlling costs by denying services.

Before the pandemic, corporate health systems closed hospitals to consolidate, leaving many rural Californians without vital services. Such moves have contributed to making healthcare services in California, even accounting for wage differences, among the costliest in the country. Although politicians have been slow to react, healthcare workers have voted with their feet. During the pandemic, staffing cuts to save health systems money left remaining nurses with inadequate support to care for their patients and themselves, driving many to quit. Almost 20% of healthcare workers have left their jobs, and hiring is a struggle. The workers who remain are overburdened.

In a desperate stopgap attempt to save a collapsing system, the California Department of Public Health announced on Saturday that healthcare workers who test positive for COVID but have no symptoms should keep going to work — without a quarantine period and without waiting for a negative test result. Public health officials are under pressure to keep the economy going, but we cannot have a healthy economy when workers are sacrificed and we are all being put at risk.

One can see why AB 1400 is endorsed by the California Nurses Assn.: The healthcare system needs more resources and less profit motive — exactly what CalCare aims to deliver.

Dr. Rupa Marya is an associate professor of medicine at UC San Francisco, founder of the Deep Medicine Circle and a co-author of “Inflamed: Deep Medicine and the Anatomy of Injustice.” She is a member of the Healthy California for All Commission.

https://www.latimes.com…

Understanding Insurer Profits: “4.5%” = 30%

Summary: Today we scrutinize health insurer profit margins. Magically, a modest apparent margin of 4.5% reveals itself upon closer inspection to be a ginormous 30%. Let’s call it what it is: excessive and extortionate.

Medicare Advantage Delivers Better Care and Saves Money: A Response to Gilfillan and Berwick, Health Affairs Forefront, Jan. 7, 2022, by George C. Halvorson

We can argue about whether 4.5 percent profit is a good number—but it’s clearly inaccurate to say that it is an “extraordinary number,” as Gilfillan and Berwick contend. Most businesses in most industries would see their stock prices dropping with only 4.5 percent profits.

The Medicare Advantage program: Status report, MedPAC, March 2021, p. 373

The most recent data available, from 2019, show that MA plans reported margins that averaged 4.5 percent.

Comment:

By Jim Kahn, M.D.

We read that health insurer annual profits are 4.5%. Less than many other industries, like pharmaceuticals, says Halvorson. A fair return, right?

Wrong. Real profits – net earnings divided by money invested – are 30%. Why? Because health insurers put so little money on the line.

A simple example illustrates.

$1000 spent for a health insurance policy results in:

$850 for medical care (known as the “medical loss”). This is money received as premiums and paid as reimbursements. No upfront investment required by the insurer: no cash outlays, no supplies, no manufacturing, nothing. Indeed, no real risk. Just hold the money a while, let it earn interest, and then pay it out.

$150 is the insurer portion:

  • $105 covers actual costs – product design, marketing, sales, contracts, authorizations, denials, payments, dispute resolution, etc. This is the cost of doing business, by staff and contractors. It’s the investment required.
  • The remaining $45 is profit.

So, profit = $45 / $150 = 30%.

Or, if you prefer, a yield of $45 on an actual outlay of $105, or 43% return on investment.

Is that a fair profit margin? I think not.

Single payer would, of course, have no private insurers extracting these massive profits from the health care budget using their life-threatening tactic of restricting access to care. Any wonder that they oppose single payer?

(p.s. more on the Halvorson blog in future)

http://healthjusticemonitor.org…

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Inequity and the Interstitium: Pushing Back on Disparities in Fibrosing Lung Disease in the US and Canada

By Adam W. Gaffney, M.D., M.P.H. and Anna J. Podolanczuk, M.D.
American Journal of Respiratory and Critical Care, January 6, 2022

If two patients, one poor and one wealthy, have the same fibrosing interstitial lung disease (fILD), could differential access to quality healthcare determine which one lives, and which one dies? A study published in this issue of the Journal suggests that it may — but also that such inequity is not inevitable.

In a provocative analysis, here, Goobie and colleagues provide the first transnational comparison of outcomes among individuals with this serious progressive condition, which requires multi-disciplinary evaluation, expensive therapies and vigilant monitoring.(1- 3) They assessed the effects of patients’ socioeconomic status — which they estimated based on a neighborhood-level metric of socioeconomic deprivation — on their outcomes, including mortality, lung transplantation, and lung function. Among US patients with fILD, they identified a striking mortality gap: death rates were 51% higher for those living in the most deprived quartile of neighborhoods relative to those in the least deprived quartile (95% CI 1.17, 1.95). No such disparity was present among Canadians with fILD. While lung transplant rates for all clinical conditions combined showed no consistent socioeconomic gradient in either nation, US patients with IPF residing in the most deprived quartile of neighborhoods were 64% less likely to have a lung transplant relative to those in the least deprived neighborhoods — a disparity that was not apparent among Canadians with IPF.

Continue reading…

https://doi.org/10.1164/rccm.202111-2652ED

Deception Comeuppance: Theranos & Privatized US Health Insurance

Summary: Yesterday Elizabeth Holmes was convicted of four counts of fraudulently representing the capabilities of Theranos, her incredibly hyped lab tech company. Good; that was long overdue. What’s even more overdue is holding to account those who keep telling us to trust that private for-profit health insurance will efficiently bring us healthcare.

The Epic Rise and Fall of Elizabeth Holmes, New York Times, Jan. 3, 2022, by David Streitfeld

In Silicon Valley’s world of make-believe, the philosophy of “fake it until you make it” finally gets its comeuppance.

For a decade, Ms. Holmes fooled savvy investors, hundreds of smart employees, an all-star board and a media eager to anoint a new star.

Ms. Holmes had many rules at Theranos: “I am never a minute late. I show no excitement. ALL ABOUT BUSINESS. I am not impulsive. I know the outcome of every encounter. I do not hesitate. I constantly make decisions and change them as needed. I speak rarely. I call bullshit immediately.” …

Whenever anyone — a regulator, an investor, a reporter — wanted to know a little more about exactly how the Theranos machines functioned, the company cried “trade secrets.” The real secret, of course, was that Theranos didn’t have any trade secrets because its machines didn’t work. But her answer worked for a long time. …

“We focused on creating a customized medicine tool that could be used in the home by every patient, so that every day, a patient can get real-time analysis of their blood samples.”

Who could not applaud such an invention? Theranos was making a messy, uncertain and time-consuming medical process into something effortless and painless.” …

This is a credulous age.

Comment:

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

Why is HJM noting a fraud conviction of the lab test huckster Elizabeth Holmes? Isn’t that just a Silicon Valley phenomenon? I wish …

The Holmes story, as nicely summarized in the NY Times, evokes the far larger deception being foisted on us with the increasing privatization of health insurance. The profiteers forge ahead relentlessly, perfecting business models that reap tens to hundreds of billions of dollars (far more than Theranos).

We are told repeatedly that private insurance is the path to health care efficiency and clinical effectiveness. Yet our health system performance is by far the worst in the wealthy world – the most expensive, with tenuous access to care, low life expectancy, and a unique American treat: massive medical debt.

Insurers and their political enablers say ignore those numbers, trust the secret sauce that we have (but can’t reveal the details of due to trade secrets).

We’re told that the next iteration of financial incentives to providers will improve quality and reduce costs. Data are delayed, deficient, and discouraging. But it’s ok, it’s working. Really.

Just like Elizabeth Holmes, the leaders of the dysfunctional private insurance edifice guide us down the primrose path.

Ms. Holmes was ultimately held to account. When will private insurers get their comeuppance?

http://healthjusticemonitor.org…

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

Jayapal Leads 50+ Democrats in Urging Biden to End Trump-Era Assault on Medicare

A Medicare privatization scheme launched in the final months of Trump's presidency poses a grave "threat to patient care and outcomes," lawmakers warned.

By Jake Johnson
Common Dreams, January 5, 2022

The physician-led effort to kill a Trump-era Medicare privatization scheme gained fresh momentum Wednesday as Rep. Pramila Jayapal—the chair of the Congressional Progressive Caucus—led more than 50 House Democrats in urging the Biden administration to cancel the Direct Contracting pilot program.

In a letter addressed to Health and Human Services (HHS) Secretary Xavier Becerra and Centers for Medicare and Medicaid Services (CMS) head Chiquita Brooks-LaSure, the lawmakers warned that the under-the-radar DC experiment poses a grave “threat to patient care and outcomes due to the encroachment of profit-driven organizations.”

Launched during the final months of the Trump administration, the pilot program is similar to Medicare Advantage in that it inserts a private middleman—be it a Wall Street-backed startup or a for-profit insurance giant—between traditional Medicare and healthcare providers.

Under the DC pilot, the middlemen are known as Direct Contracting Entities (DCEs), and they’re paid monthly by CMS to cover a specified portion of a patient’s medical care. DCEs are then allowed to pocket what they don’t spend on care, prompting concerns that Medicare recipients will see the quality of their coverage decline as private firms seek to boost profits.

“These models ultimately aim to privatize traditional Medicare by funneling beneficiaries, without their knowledge, into a DCE,” the 54 House Democrats wrote in their letter to the Biden administration on Wednesday. “Unfortunately for patients in these entities, DCEs are incentivized to funnel patients to providers within their networks to maximize profits which can limit patients’ care options.”

“These models transform the care of a traditional Medicare beneficiary to care typically seen in a private Medicare Advantage (MA) plan despite the fact that the patient chose not to enroll in an MA plan,” the lawmakers added. “We ask that you permanently end the programs and coordinate the transition of traditional Medicare beneficiaries currently in these programs back into the traditional Medicare model by July 1, 2022.”

Signatories to the new letter include prominent progressives such as Reps. Alexandria Ocasio-Cortez (D-N.Y.), Ilhan Omar (D-Minn.), Rashida Tlaib (D-Mich.), Cori Bush (D-Mo.), and Barbara Lee (D-Wash.) as well as more moderate members of the House Democratic caucus, including Reps. Don Beyer (D-Va.) and Jim Cooper (D-Tenn.).

Despite mounting pressure to cut off the legally dubious pilot program, the Biden administration has allowed much of it to proceed as planned.

The 54 House Democrats sent their letter weeks after a group of doctors with Physicians for a National Health Program (PNHP) traveled to Washington, D.C. in an attempt to bring lawmakers’ attention to the little-discussed DC pilot and demand that HHS stop the experiment in its tracks.

Thus far, the pilot includes 53 DCEs in 38 states, Washington, D.C., and Puerto Rico. A majority of the current DCEs—which are approved by CMS without input or oversight from Congress—are controlled by investors, not healthcare providers.

Physicians fear that if the Biden administration doesn’t act, the DC pilot could result in the full-scale privatization of Medicare by 2030—without so much as a vote in Congress.

“HHS allows Direct Contracting Entities to keep as profit what they don’t pay for in medical services, establishing a dangerous incentive to ration and restrict seniors’ care,” Dr. Susan Rogers, president of the 24,000-member PNHP, said in a statement Wednesday. “If left unchecked, Medicare Direct Contracting will hand traditional Medicare to Wall Street investors, without input from seniors, doctors, or even Congress.”

“We applaud Rep. Jayapal and the more than 50 members of Congress who stood up to protect Medicare today and for future generations,” Rogers added.

https://www.commondreams.org…

Members of Congress Demand an End to Medicare Direct Contracting

In a letter to HHS Sec. Becerra, 54 members of Congress call for an end to the controversial Direct Contracting pilot program, which inserts profit-seeking middlemen into Traditional Medicare without seniors’ consent, funneling “taxpayer dollars into profits, not patient care”

For Immediate Release
January 5, 2022
Contact: Clare Fauke, Physicians for a National Health Program, clare@pnhp.org

Physicians for a National Health Program (PNHP), an organization of 24,000 physicians who support publicly financed Medicare for All, today applaud the 54 members of Congress who sent a letter to HHS Sec. Xavier Becerra demanding an end to the controversial Medicare Direct Contracting program. 

The letter, written by Rep. Pramila Jayapal (WA-07), was signed by several prominent members of Congress, including Rep. Rosa DeLauro (CT-03), Chair of the House Appropriations Committee and Chair of the Labor, Health & Human Services, and Education Appropriations Subcommittee; and Rep. John Yarmuth (KY-03), Chairman of the House Budget Committee. 

Direct Contracting is a pilot program launched late in the Trump Administration to change the way that Medicare pays for seniors’ care. Under this program, seniors who actively choose Traditional Medicare are automatically enrolled in third-party “Direct Contracting Entities (DCEs)” without their full knowledge or consent. Medicare then pays DCEs a lump sum to manage beneficiaries’ care, allowing DCEs to keep up to 40% of what they don’t pay for in medical services as profit — a dangerous incentive to ration and restrict care. Once a senior is auto-enrolled into a DCE, their only way out of the program is to change primary care providers. 

In the letter to Sec. Becerra, Rep. Jayapal and colleagues argue that “DCEs pose a threat to patient care and outcomes due to the encroachment of profit-driven organizations on their care,” noting that a majority of the 53 current DCEs are owned and controlled by investors such as private equity firms and large commercial insurers, not physicians. “This model disrupts the sanctity of traditionally public Medicare benefits by giving control of beneficiary care to private interests,” the letter reads.

“The Medicare Direct Contracting program is a threat to the health of seniors and to the future of Medicare itself,” said Dr. Susan Rogers, a retired internal medicine doctor and president of PNHP, noting that because Direct Contracting is a pilot program of the Center for Medicare and Medicaid Innovation, it can be scaled up to all of Medicare without Congressional approval. “If left unchecked, Direct Contracting will hand Traditional Medicare to Wall Street investors, without input from seniors, doctors, or even Congress. We applaud Rep. Jayapal and the 54 members of Congress for taking action to protect Medicare today and for future generations.” 

In late November, Dr. Rogers led a delegation of physicians to deliver a petition to Sec. Becerra, demanding an immediate end to Medicare Direct Contracting. 

Today’s LETTER is signed by: 

Alma Adams (NC-12)
Karen Bass (CA-37)
Donald S. Beyer Jr. (VA-08)
Earl Blumenauer (OR-03)
Suzanne Bonamici (OR-01)
Jamaal Bowman, Ed.D. (NY-16)
Cori Bush (MO-01)
Salud Carbajal (CA-24)
Andre Carson (IN-07)
David Cicilline (RI-01)
Yvette D. Clarke (NY-09)
Steve Cohen (TN-09)
Gerald E. Connolly (VA-11)
Jim Cooper (TN-05)
Jason Crow (CO-06)
Danny K. Davis (IL-07)
Peter A. DeFazio (OR-04)
Rosa L. DeLauro (CT-03)
Mark DeSaulnier (CA-11)
Debbie Dingell (MI-12)
Mike Doyle (PA-18)
Adriano Espaillat (NY-13)
Sylvia R. Garcia (TX-29)
Jesús G. “Chuy” García (IL-04)
Raúl M. Grijalva (AZ-03)
Jared Huffman (CA-02)
Pramila Jayapal (WA-7)
Mondaire Jones (NY-17)
John B. Larson (CT-01)
Barbara Lee (CA-13)
Mike Levin (CA-49)
James P. McGovern (MA-02)
Joseph Morelle (NY-25)
Jerrold Nadler (NY-10)
Joe Neguse (CO-02)
Marie Newman (IL-03)
Eleanor Holmes Norton (DC-00)
Alexandria Ocasio-Cortez (NY-14)
Ilhan Omar (MN-05)
Donald M. Payne, Jr. (NJ-10)
Mark Pocan (WI-02)
Katie Porter (CA-45)
Ayanna Pressley (MA-07)
Jamie Raskin (MD-08)
Jan Schakowsky (IL-09)
Robert C. “Bobby” Scott (VA-03)
Mary Gay Scanlon (PA-05)
Mark Takano (CA-41)
Dina Titus (NV-01)
Rashida Tlaib (MI-13)
Bonnie Watson Coleman (NJ-12)
Peter Welch (VT-At Large)
Nikema Williams (GA-05)
John B. Yarmuth (KY-03)

Physicians for a National Health Program (pnhp.org) is a nonprofit research and education organization whose more than 24,000 members support single-payer Medicare for All reform.

Temporary & Tenuous Health System Boosts Don’t Cut it

Summary: The ACA is currently more generous and thus popular, but it’s time-limited. The “Build Back Better” bill proposes some incremental fixes, but they’re tenuous. Meantime individuals in medical and financial crisis resort to GoFundMe. Only in the US could the health care financing “system” so systematically fail.

If you haven’t already, see our Jan 1 post Single Payer Overview 2021 & 2022. Please email us with any further ideas to advance single payer in 2022, for an upcoming post.

On More Generous Terms, Obamacare Proves Newly Popular, The New York Times, Dec. 22, 2021, by Margot Sanger-Katz

A record number of Americans — 13.6 million — have signed up for health plans through the Affordable Care Act’s marketplaces for 2022. The major reasons for the rise appear to be: Congress lowered the cost of Obamacare insurance; the Biden administration increased advertising for the program; and the pandemic disrupted many Americans’ employer-provided coverage.

“What a great day it is to really see how the programs are working as they are intended,” Chiquita Brooks-LaSure, the administrator for the Centers for Medicare and Medicaid Services, told reporters on a conference call.

But those gains may be fragile. The enhanced subsidies are scheduled to expire at the end of 2022.

Congress is on the brink of an immense health policy failure, Vox, Dec. 20, 2021, by Dylan Scott

Covid-19 exposed many of the flaws in the US health care system. Congress might not do anything to fix them.

Comment:

By Don McCanne, M.D.

Can we begin the new year by celebrating success in increased health plan enrollment through a temporary government program that expires at the end of the year?

We will still have tens of millions who are uninsured, even greater numbers who are underinsured due to excessive deductibles, copayments, coinsurance, and lack of covered services; limited access due to narrow physician networks; high prices reflected in insurance premiums, cost sharing, and higher taxes; and profoundly excessive administrative costs and profits that are wasted on the medical-industrial complex rather than directed to patients, all resulting in the most expensive health care system in the world with one of the poorest performances of all modern nations. Is this really cause for celebration?

But what is making the health care news now? Proposals for minor tweaks to the Affordable Care Act, many of which are being rejected anyway. So what reform should we be supporting, and what is the opposition?

Shouldn’t we be supporting health care coverage for everyone? Shouldn’t the system be designed primarily to serve patients rather than private corporate interests? Who would be opposed to that, and why?

Shouldn’t the system be designed to be comprehensive so that it provides all reasonable health care needs? If not, why not?

Shouldn’t we increase the value of that coverage by reducing the administrative waste of the superfluous insurance intermediaries. Shouldn’t we use more efficient public administration such as with Medicare? Besides the insurance industry, who else would be opposed, and why?

Shouldn’t we use effective economic tools such as modern monetary theory and progressive taxes to publicly fund the system so that it would be equitable and affordable for each individual? Who would be opposed to that, and why?

Obviously, for the new year, if we want to fix our health care financing system so it works well for everyone, the Affordable Care Act won’t do it, and we need to replace it with a system that will. A single payer, improved version of Medicare that covers everyone is just what we would need to meet all of these requirements.

The problem is that people keep telling us that they are opposed, yet they haven’t explained why, at least in a manner that is satisfactory to us. Since the model would provide us with the changes that we need, they owe us an explanation as to precisely why they are opposed. Political rhetoric is not an explanation, not when you have millions with medical needs that are unmet merely because we have rejected a morally superior system based on health care justice that would take care of all of us.

On a personal note, my nephew has metastatic gastrointestinal cancer, and “Health insurance hasn’t been on his side,” so he is now on GoFundMe. I really need to hear a good explanation on why we should not have a system that works well for all of us, and GoFundMe isn’t it.

http://healthjusticemonitor.org…

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It’s time for you to care about Medicare

By George Bohmfalk, M.D.
The Aspen (Colo.) Times, January 2, 2022

My main area of advocacy is Medicare for All, which I believe to be the best solution to nearly all of our nation’s health care shortcomings. However, as of the last days of the Trump administration, Medicare itself is being subjected to a potentially fatal attack.

Without congressional authorization, bureaucrats in Trump’s administration developed a program openly designed to privatize Medicare. Called Medicare Direct Contracting (DC), this program allows commercial insurers and other for-profit middlemen to “manage” care for seniors enrolled in Traditional Medicare. This is in addition to the for-profit Medicare Advantage programs, which for years have cost taxpayers more than Traditional Medicare while restricting their choice of physicians and hospitals and providing no improvement in health care outcomes.

Slowly but surely, millions of seniors who deliberately chose Traditional Medicare are quietly being enrolled into Direct Contracting Entities (DCEs) without their full knowledge or consent.

Virtually any type of company can apply to be a DCE, including venture capital investors. There isn’t even a requirement that DCEs be majority-owned by health care providers, opening the door to ownership by profit-driven entities with no health care expertise whatsoever.

Traditional Medicare spends an impressive 98 percent of its budget on patient care. But DCEs are allowed to operate with very loose restrictions on how much of their revenues must go to patient care. This incentivizes them to limit payouts by rationing care and keep even more than the 15% that Medicare Advantage programs are allowed for their own profit and overhead. This detail alone should alarm taxpayers.

As this is a creation of the Center for Medicare and Medicaid Services’s “Innovation Center,” this pilot program can be scaled up to cover all of Medicare without so much as a vote or hearing in Congress. Very few Members of Congress appear to be even aware of its existence or its existential threat to Traditional Medicare.

To prevent Medicare from becoming completely and stealthily privatized, this program must be stopped in its tracks. The only way to stop it is by order of President Biden or insistence by enough Members of Congress.

Please make it your New Year’s resolution to help the millions of seniors and Americans living with disabilities who depend on Medicare, bring this nefarious program to a quick end. Please contact U.S. senators Hickenlooper and Bennet and your Congressional representatives and implore them to instruct Health and Human Services Secretary Xavier Becerra to terminate the Direct Contracting program immediately. The Capitol switchboard at 202-224-3121 can connect you with the office of any elected official.

Most seniors love Medicare. It is simple, efficient, and empowers them to manage their health. Traditional Medicare has proven its value for more than half a century. Rather than sell it off to the highest profit-driven bidder, we should strengthen and improve its benefits while working to expand it to cover every American.

Dr. George Bohmfalk is a retired neurosurgeon and a member of Physicians for a National Health Program.

https://www.aspentimes.com…

Medicare Advantage Overpayments

An unsustainable future

By Kip Sullivan, J.D.
Minnesota Physician, January 2022

This year marks the 50th anniversary of a law that permitted health insurance companies to participate in Medicare. The law, known as the Social Security Amendments of 1972, permitted what was then a new form of health insurance, the health maintenance organization, to enroll Medicare beneficiaries. The law explicitly stated that HMOs could not be paid more per enrollee than Medicare would have paid if the enrollee had remained in the traditional Medicare program. In fact, Congress expected HMOs to reduce Medicare costs because, unlike traditional insurance companies, HMOs used managed care tactics to reduce utilization of medical services. These tactics includes incentives to order fewer services, limiting patient choice of doctor and hospital and micromanaging doctors.

But the introduction of HMOs (and after 1997, all types of insurance companies) into Medicare did not cut Medicare’s costs. Throughout the half century during which insurance companies have participated in Medicare, they have raised Medicare’s costs. They have been paid more, at times much more, to insure their enrollees than if those enrollees had remained in the original Medicare program.

The Medicare Advantage program

Not surprisingly, the large overpayments have facilitated enormous growth in the Medicare Advantage program, the current name of the Medicare program in which insurance companies participate. Today, 46% of all Medicare beneficiaries in the country, and 56% of beneficiaries in Minnesota, are enrolled in one of the Medicare Advantage insurance companies. Minnesota’s rate is second only to the 57% rate for Hawaii. Ten giant insurance companies, led by UHC Healthcare, Humana and CVS Health Corporation, account for four-fifths of the enrollment in Medicare Advantage plans.

How did this happen? Medicare was enacted, after all, because the insurance industry did not want to insure the elderly. And HMOs were allowed into Medicare only because they were expected to lower Medicare’s costs. Why has Medicare overpaid insurance companies for half a century?

We can eliminate one explanation immediately: that Congress didn’t know about the overpayments. Beginning in 1980, analysts inside and outside the federal government regularly published research demonstrating that Medicare was overpaying HMOs. Note that the phrase fee-for-service (FFS) refers to the traditional Medicare program in which doctors and hospitals are paid a fee only after they render a service. In contrast, Medicare Advantage insurance companies are paid a lump sum per enrollee in advance. In a 1995 report to Congress entitled “Growing Enrollment Adds Urgency to Fixing HMO Payment Problem,” the US General Accounting Office (GAO) stated, “Medicare has paid HMOs more than it would have paid for the same patients’ care by fee-for-service providers.” In a 2005 report entitled “Payments Exceed Cost of Fee-for-Service Benefits, Adding Billions to Spending,” the GAO stated, “It is largely . . . excess payments, not managed care efficiencies, that enable plans to attract beneficiaries by offering a benefit package that is more comprehensive than the one available to FFS beneficiaries, while charging modest or no premiums. Nearly all of the 210 plans in our study received payments in 1998 that exceeded expected FFS costs….”

The explanation for the overpayments is two-fold: the insurance companies have always enrolled healthier beneficiaries (a problem known as favorable selection), but they have been paid as if they attracted beneficiaries of average health. For example, if the average annual cost of insuring a beneficiary in the traditional Medicare program was $10,000 and United Healthcare (UHC) enrolled healthier beneficiaries whose average cost was $9,000, it could be said UHC enjoyed favorable selection. If the Centers for Medicare and Medicaid Services (CMS, the current name of the agency that runs Medicare) were to pay United $10,000 for each enrollee, the overpayment would equal $1,000 per enrollee. The obvious solution would be for CMS to pay UHC a premium commensurate with the health status of its enrollees – in this case, $9,000. But CMS has never been able to reduce its payments to insurance companies to match the lower cost of the healthier beneficiaries they enroll.

There is no solution to either problem. The favorable selection problem will persist as long as a Medicare Advantage program exists alongside the traditional program. CMS’s effort to improve the accuracy of its payments to Medicare Advantage plans only made the problem worse.

Favorable selection

Medicare beneficiaries and Medicare Advantage plans both contribute to the favorable selection problem.

Medicare beneficiaries contribute because they vary in their willingness to give up choice of provider (doctor and hospital) in exchange for the extra services the Medicare Advantage plans can afford to offer (because they are overpaid). Sicker beneficiaries are less likely to want to join an HMO or any other type of insurance company that limits choice and attempts to influence physician-patient decisions.

The insurance companies aggravate favorable selection by their advertising and recruiting tactics (cherry-picking) and their treatment of the sicker enrollees they cannot avoid (lemon-dropping). Medicare Advantage plans are not allowed to refuse to enroll applicants, but they can encourage healthier beneficiaries to apply by their marketing tactics (where they market, what they say in their advertisements and what they cover at little or no expense to the enrollee), and they can encourage sicker enrollees to disenroll and return to traditional Medicare by denying or delaying services.

Dozens of studies published over the last half century have shown that insurance companies that participate in Medicare have enjoyed favorable selection. Here are five examples spanning the last 40 years.

A study published by Paul Egger in 1980 concluded that beneficiaries who joined Group Health Cooperative of Puget Sound (one of the nation’s oldest HMOs) “had a rate of hospital inpatient use over 50% below the comparison group” consisting of beneficiaries in traditional Medicare.

A 1988 report to the Health Care Financing Administration (the former name of the agency that runs Medicare) stated that the beneficiaries who enrolled in Medicare HMOs cost 21% less than those who stayed in traditional Medicare.

A study published in “Medical Research and Review” in 1997 concluded “in the six months prior to their enrollment, new HMO enrollees use on average 37% fewer services than do beneficiaries in traditional fee-for-service Medicare. Furthermore, HMO disenrollees use 60% more services in the six months after disenrollment than do fee-for-service beneficiaries.”

A study published in the “New England Journal of Medicine” in 1997 found HMO enrollees were much healthier than traditional Medicare beneficiaries when they signed up with HMOs, and those that later disenrolled from HMOs were much sicker. The authors reported, “Before their enrollment in HMOs, the HMO enrollees had a rate of hospital admissions that was two-thirds the rate in the fee-for-service group.The members of the HMO-disenrollment group had a substantially higher rate of [hospital] admissions than the fee-for-service beneficiaries…” The title of this article was, appropriately enough, “The Medicare-HMO revolving door: The healthy go in and the sick go out.”

A study published by the Kaiser Family Foundation in 2019 found that Medicare beneficiaries who enrolled in a Medicare Advantage plan were 13% less expensive than the average cost of a traditional Medicare enrollee. In 2016, beneficiaries who stayed in traditional Medicare incurred Part A (hospital) and B (physician) medical expenses of $9,362 on average, while those who signed up with a Medicare Advantage plan cost just $8,109.

Risk adjusting premiums accurately is impossible

If favorable selection and the overpayments have been obvious for four decades, why hasn’t CMS eliminated the overpayments? Why doesn’t CMS just reduce the premiums down to a level commensurate with the better health–the lower cost–of the insurance companies’ enrollees? Answer: because CMS sets the premiums prior to the year for which the beneficiaries are enrolled, and predicting what each insurance company’s pool of enrollees will cost the next year is a primitive science.

Between 1973 and 2004, CMS (and its predecessor, the Health Care Financing Administration) tried to risk adjust premiums downward using four factors: age, sex, Medicaid status and nursing home status. Although each of these factors is correlated with medical spending (80-year-olds typically cost more than 65-year-olds, for example), the correlation between these demographic factors and spending is very weak. They only predict one percent of the variation in spending. To explain what that means, let’s go back to the United Healthcare example. If UHC was overpaid by $1,000, CMS’s demographic risk adjuster would only call for reducing UHC premium payments by one percent, or $10, from $10,000 to $9,990. UHC would still be overpaid by $990.

In the Balanced Budget Act of 1997, Congress instructed CMS to improve the risk adjuster by adding diagnoses to the four demographic factors. It’s easy to see the logic in that proposal: People diagnosed with diseases and conditions cost more than people with no diagnoses, and people with serious diagnoses cost more than those with mild or temporary diseases or conditions. Medicare beneficiaries with diabetes, for example, cost 1.5 times as much as the average beneficiary; beneficiaries with a cancer diagnosis cost 1.7 times as much. CMS spent the next seven years preparing a new risk adjuster called the Hierarchical Condition Categories (HCC) risk adjuster. To the four demographic factors, CMS added 3,000 codes for diagnoses.

The addition of all those codes greatly improved the accuracy of the risk adjuster. The new HCC could predict 11%, and within a few years, 12% of the variation in spending between individual beneficiaries. But 12% is still negligible. To return to our United Healthcare example, now CMS can reduce UHC’s overpayment by 12% from $1,000 to $880. The overpayment is still immense. Twelve percent is obviously 12 times better than one percent, but it still gives Medicare Advantage plans an enormous incentive to continue cherry-picking and lemon-dropping.

Another way to illustrate the crudeness of the HCC risk adjuster is to demonstrate its disparate impact on the healthy and the sick. According to the Medicare Payment Advisory Commission (MedPAC, an agency created by the Balanced Budget Act of 1997 to advise Congress on Medicare), the HCC results in huge overpayments for the healthiest beneficiaries and enormous underpayments for the sickest. For example, looking at the healthiest 20% of beneficiaries; it overpays by 62% but for the sickest one percent, it underpays by 29%. MedPAC and researchers at CMS who were hired to develop the HCC have made it clear that for both technical and financial reasons it is not possible to improve the HCC by even a small amount.

The HCC was implemented between 2004 and 2007. It backfired immediately. It gave the insurance companies an incentive to make sure every disease and condition is listed in patients’ medical records (which is legal), as well as an incentive to add diagnoses to medical records that are inaccurate (they overstate the seriousness of the condition), inappropriate (the diagnosis was made by someone not authorized to make the diagnosis) or flat out fraudulent. Adding inappropriate or fraudulent codes is called upcoding. Both behaviors–more thorough listing of legitimate diagnoses and upcoding– increased CMS’s payments to the Medicare Advantage plans more than the increased accuracy of the HCC reduced them.

This conclusion is supported by the Medicare Advantage plans’ behavior following the implementation of the HCC. Medicare Advantage plans began to advertise richer benefits for lower premiums, and that in turn caused enrollment to soar–from 13% of all beneficiaries in 2005 to 46% in 2020. Congress has tried to address the upcoding issue by instructing CMS to reduce plan payments by a few percentage points each year, but that approach has not stopped upcoding or overpayments. Over the last several years, federal prosecutors have sued several of the larger Medicare Advantage plans for defrauding Medicare–UHC, Anthem and Kaiser Permanente (Kaiser)–for example. A complaint filed by the US Department of Justice against Kaiser last August stated that each additional diagnosis was worth $3,000 to Kaiser.

How much is enough?

Insurance companies cannot make a profit off Medicare beneficiaries if they are paid no more than what those beneficiaries would have cost had they remained in traditional Medicare. The reason is their high overhead.

UHC and all other Medicare Advantage plans incur administrative costs equal to about 15% of their total Parts A and B expenditures on average. Those costs include the cost of advertising, creating networks of providers that enrollees must use, influencing and overruling doctors, lobbying and profit. Profit constitutes a quarter to a third of that 15% figure. But insurance companies cannot cut spending on hospitals and clinics by 15%. Experts guesstimate they can only cut medical spending by about five percent. Research on how much Medicare Advantage plans reduce utilization of medical services is sparse and inaccurate because plans do not publish information on how they allocate their revenues. This means insurance companies must be overpaid by at least 10% in order to induce them to participate in Medicare Advantage. And since insurance companies need additional overpayments to finance the extra benefits, e.g., dental care, eye glasses, hearing aids, that lure beneficiaries out of the traditional program into Medicare Advantage, the overpayments must be even higher than 10%.

Bruce Vladeck, who administered CMS during Bill Clinton’s presidency, discussed this issue in an article he co-authored two decades ago for the journal “Health Affairs.”

Managed care plans do not have to be just more efficient than FFS Medicare,” he wrote, “they have to be a lot more efficient. With administrative expenses in the range of 8 to 25%, [plans] have to incur medical expenditures 10 to 20 % less than FFS…just to break even. In most markets…plans cannot attract enrollees unless they offer additional benefits, which also cost money…”

The subtitle of Vladeck’s article was “Theory meets reality, and reality wins.” That accurately sums up the problem: the theory that insurance companies could save Medicare money was always inconsistent with reality. It was based on hype, not evidence. If it wasn’t inconsistent with reality, why did Congress need to enact Medicare in the first place? Congress enacted Medicare because the insurance industry did not want to insure the elderly (or the disabled, who were added to Medicare in 1972). Overpayment is the reason 46% of all Medicare beneficiaries are insured by health insurance companies today, 50 years after Congress first allowed HMOs into Medicare. If they were paid no more than CMS pays for traditional beneficiaries–a requirement Congress wrote into the original 1972 law allowing HMOs into Medicare–they would not participate.

A deadline looms

Payments to Medicare Advantage plans (including the overpayments) are financed directly by taxpayers and indirectly by lower reimbursements to doctors and hospitals that treat Medicare patients. Taxpayers include: people of all ages who pay the Medicare payroll tax that funds Medicare’s Part A trust fund, all Americans who pay federal taxes and all Medicare beneficiaries who pay what are called Medicare Part B premiums. Thus, virtually all health care professionals and all Americans have a stake in terminating the Medicare Advantage overpayments.

It is true that people who enroll in Medicare Advantage plans are getting some of the benefit of the overpayments in the form of coverage for services they couldn’t get if they remained in traditional Medicare. But those services are being purchased by the taxpayer at an unnecessarily high price. Money spent on insurance company administrative costs would be far better spent extending coverage for those same services–dental, vision, hearing, etc.–to the 38 million beneficiaries in traditional Medicare. After all, those 38 million people paid the same taxes the Medicare Advantage enrollees paid to finance Medicare. Why shouldn’t they enjoy the same coverage? Alternatively, the money currently spent on insurance companies’ overhead could be used to raise reimbursements to doctors and hospitals or could be added back to Medicare’s trust funds to lower costs for future taxpayers and Medicare beneficiaries.

Congress will soon have an opportunity to debate the overpayments. Medicare’s trustees predict that the Part A trust fund (the one that funds hospital services) will run short of revenues beginning in 2026. Part A is financed by a payroll tax paid half by employers (1.45%) and half by employees (1.45%). Congress will be under great pressure to raise that tax as 2026 approaches. Medicare Advantage plans will probably not lobby Congress to raise the payroll tax (at least not openly), but we can be sure they will tell Congress not to reduce their overpayments.

Next steps

Taxpayers of all ages should let members of Congress know how they feel about the overpayments. Unfortunately, the American taxpayer is not represented by well-heeled organizations. But physicians and hospitals do have trade associations with a long history of representing their members in Congress. The American Medical Association, the American Hospital Association and the numerous other organizations that represent the professionals and institutions which treat patients insured by Medicare should speak out now in favor of terminating the overpayments to Medicare Advantage plans. They should also promote legislation that ensures that all Medicare enrollees have access to the extra benefits Medicare Advantage plans offer now, thanks to their overpayments. Doing so would undermine the counterargument we can expect from the insurance industry: That ending the overpayments means ending the extra services the overpayments finance. Change happens only when Congress feels pressure for change. The public and providers must let Congress know they want the overpayments stopped.

Kip Sullivan, J.D., is a member of the Health Care for All Minnesota Advisory Board. He was a member of Gov. Perpich’s Health Plan Regulatory Reform Commission. His articles have appeared in the New England Journal of Medicine, Health Affairs, and other peer-reviewed journals.

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